ALEXANDRIA, Va.— Even with assets growing, net income ($15.7 billion) at federally insured credit unions was down $1.8 billion, or 10.1%, in the first half of 2024, compared with the first half of 2023, NCUA’s Quarterly Credit Union Data Summary shows.
During a call with the press, NCUA Chairman Todd Harper attributed some of the decline to CUs increasing loan loss reserves.
NCUA’s data also show the delinquency rate at federally insured credit unions was 84 basis points in the second quarter of 2024, up 21 basis points from one year earlier. The net charge-off ratio was 79 basis points, up 26 basis points compared with the second quarter of 2023. Insured shares and deposits rose $36 billion, or 2.1%, over the year ending in the second quarter of 2024, to $1.76 trillion.
Harper acknowledged the net income drop is “concerning.”
“However, some of it is the result of greater reserving for losses, which has decreased income,” Harper said. “But it's something that we have to watch quite carefully.”
Similarly, Harper also said the agency is watching the increase in delinquencies, noting the delinquency ratio is the highest since 2014, adding that auto loan delinquencies are up 16 basis points, year over year, to 83 BPs.
Overall, total assets in federally insured credit unions rose by $79 billion, or 3.5%, over the year ending in the second quarter of 2024, to $2.3 trillion, according to NCUA, which also acknowledged that the industry is facing some balance sheet challenges.
'Largely Stable'
Consistent with long-running trends, credit unions with assets of at least $1 billion reported the strongest growth in loans, membership, and net worth over the year ending in the second quarter of 2024, NCUA’s Quarterly Credit Union Data Summary shows.
“The credit union system overall remains largely stable in its performance and is relatively resilient against potential economic disruptions. However, challenges persist across the system and at specific institutions,” Harper said in a statement.
Harper also reminded the latest data include overdraft reporting.
“This is the second quarter in which NCUA has collected data on overdraft and non-sufficient fund fees for credit unions with assets of above $1 billion,” Harper said. “For these institutions, the total amount of overdraft and non-sufficient fund fees collected year to date is $1.8 billion, representing just 3% of total revenue. But averages can be deceiving. Some of these billion-dollar-plus credit unions charge no overdraft or non-sufficient fund fees, while others are much more reliant on such income in a marketplace where such fees are falling. Credit unions need to adjust their strategies or risk losing market share to other financial providers.”
Harper added that NCUA's Office of the Chief Economist is working on a research note to better detail issues related to overdraft fees and non-sufficient fund fees and will release that report soon.
Overall Performance
Total loans outstanding increased $56 billion, or 3.6%, over the year, to $1.62 trillion. The average outstanding loan balance in the second quarter of 2024 was $18,222, up $693, or 4.0%, from one year earlier, the report states.
The loan to share ratio stood at 84.0% in the second quarter of 2024, up from 83.2% in the second quarter of 2023. The return on average assets for federally insured credit unions was 69 basis points at an annual rate in the first half of 2024, down from 80 basis points in the first half of 2023. The median annualized return on average assets across all federally insured credit unions was 61 basis points, down 6 basis points from a year earlier, NCUA said.
Performance by Asset Category
According to the data released by NCUA:
■ The number of federally insured credit unions with assets of at least $10 billion declined to 21 in the second quarter of 2024 from 22 in the second quarter of 2023. These 21 credit unions held $573.0 billion in assets, or 25% of total system assets. Credit unions in this category reported loan growth of 3.6% over the year. Membership rose 4.5%. Net worth increased 3.4%.
■ The number of federally insured credit unions with assets of at least $1 billion but less than $10 billion increased to 421 in the second quarter of 2024 from 399 in the second quarter of 2023. These 421 credit unions held $1.2 trillion in assets, or 52% of total system assets. Credit unions in this category reported loan growth of 6.4% over the year. Membership rose 5.6%. Net worth increased 9.4%.
■ The number of federally insured credit unions with assets of at least $500 million but less than $1 billion declined to 276 in the second quarter of 2024 from 287 in the second quarter of 2023. These 276 credit unions held $199.5 billion in total assets, or 9% of total system assets. Credit unions in this category reported a 5.5% decline in total loans outstanding over the year. Membership declined 7.5%, and net worth fell by 3.5%.
■ The number of federally insured credit unions with at least $100 million but less than $500 million in assets fell to 1,058 in the second quarter of 2024 from 1,060 in the second quarter of 2023. These 1,058 credit unions held $243.0 billion in total assets, or 11% of total system assets. Credit unions in this category reported a 0.2% increase in total loans outstanding over the year. Membership declined 2.1%, while net worth rose 3.5%.
■ The number of federally insured credit unions with at least $50 million but less than $100 million in assets declined to 622 in the second quarter of 2024 from 653 one year earlier. These 622 credit unions held $44.9 billion in total assets, or 2% of total system assets. Credit unions in this category reported a 5.2% decline in total loans over the year. Membership declined 6.1%. Net worth rose 0.4%.
■ The number of federally insured credit unions with assets of at least $10 million but less than $50 million declined to 1,236 in the second quarter of 2024 from 1,320 in the second quarter of 2023. These credit unions held $32.4 billion in assets, or 1% of total system assets. Credit unions in this category reported a 3.2% decrease in loans over the year. Membership declined 6.2%, while net worth rose 0.4%.
■ The number of federally insured credit unions with less than $10 million in assets declined to 899 in the second quarter of 2024 from 945 in the second quarter of 2023. These credit unions held $3.8 billion in assets, or 0.2% of total system assets. Credit unions in this category reported a 0.5% decrease in loans over the year. Membership declined 2.8%. Net worth grew 1.8%.
Assets
■ Cash increased by $41.9 billion, or 28.4%, to $189.6 billion.
■ Total investments fell $30.6 billion, or 7.3%, over the year to $387.9 billion in the second quarter of 2024.
• Investments with maturities less than or equal to one year rose $6.5 billion, or 6.7%, to
$103.0 billion.
• Investments with maturities of one to three years declined $6.5 billion, or 5.8%, to $104.6 billion.
• Investments with maturities of three to five years fell $7.8 billion, or 9.5%, to $74.2 billion.
• Investments with maturities of five to 10 years declined $18.1 billion, or 17.3%, to $86.8 billion.
• Investments with maturities greater than 10 years declined $4.7 billion, or 19.7%, to $19.3 billion.
■ Total loans outstanding increased $56.1 billion, or 3.6%, over the year to $1.62 trillion. Growth across major categories was mixed, the report shows.
• Loans secured by 1- to 4-family residential properties increased $40.1 billion, or 5.9%, to $724.9 billion in the second quarter of 2024.
• Auto loans fell $7.6 billion, or 1.5%, to $490.1 billion. Used auto loans were little changed at $321.2 billion, while new auto loans declined $7.5 billion, or 4.3%, to $168.9 billion.
• Credit card balances grew by $5.5 billion, or 7.1%, to $82.0 billion.
• Non-federally guaranteed student loans edged down $0.3 billion, or 4.0%, to $7.1 billion.
• Commercial loans excluding unfunded commitments increased $15.9 billion, or 10.7%, over the year to $164.4 billion in the second quarter of 2024.
■ The delinquency rate at federally insured credit unions was 84 basis points in the second quarter of 2024, up 21 basis points compared with the second quarter of 2023.
• The delinquency rate on non-commercial real estate loans was 61 basis points in the second quarter of 2024, 17 basis points higher than in the second quarter of 2023.
• The credit card delinquency rate rose to 198 basis points from 154 basis points one year earlier.
• The auto loan delinquency rate increased 16 basis points over the year to 83 basis points in the second quarter of 2024.
• The delinquency rate for commercial loans excluding unfunded commitments was 94 basis points in the second quarter of 2024, up 52 basis points from a year earlier.
■ The net charge-off ratio for all federally insured credit unions was 79 basis points in the second quarter of 2024, up 26 basis points compared with the second quarter of 2023.
Liabilities and Net Worth
■ Total shares and deposits rose by $49.0 billion, or 2.6%, over the year to $1.93 trillion in the second quarter of 2024. Regular shares declined by $50.0 billion, or 8.1%, to $564.1 billion. Other deposits increased by $105.8 billion, or 12.0%, to $985.7 billion, led by share certificate accounts, which grew $123.8 billion, or 30.6%, over the year to $528.2 billion, the report shows.
■ The credit union system’s net worth increased by $13.3 billion, or 5.6%, over the year to $249.0 billion. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.84% in the second quarter of 2024, up from 10.62% one year earlier. Note that beginning in 2023Q1, this ratio excludes the CECL transition provision.
• The net worth ratio for prompt corrective action was 11.07% in the second quarter of 2024. This ratio considers the CECL Transition Provision, as applicable. The calculation can be found on Schedule G of the 5300 Call Report; see Account 998.
Income Statement Details
■ Net income for federally insured credit unions in the first half of 2024 totaled $15.7 billion at an annual rate, down $1.8 billion, or 10.1%, from the first half of 2023. Interest income rose $19.9 billion, or 21.6%, over the year to $112.3 billion annualized. Non-interest income rose $2.6 billion, or 10.6%, to $27.1 billion annualized, largely reflecting an increase in other non-interest income, the report shows.
■ Interest expense totaled $42.7 billion at an annual rate in the first half of 2024, up $16.5 billion, or 63.1%, from one year earlier. Non-interest expense grew $3.9 billion, or 6.1%, over the year to $67.9 billion annualized in the first half of 2024. Rising employee compensation and benefits, which were up $2.2 billion, or 6.6%, over the year, accounted for more than half of the increase in non-interest expenses.
■ The aggregate net interest margin widened by $3.4 billion, or 5.1%, over the year to $69.5 billion annualized in the first half of 2024.
■ The credit union system’s provision for loan and lease losses or credit loss expense increased $3.8 billion, or 41.4%, over the year to $13.0 billion at an annual rate in the first half of 2024.