Growing signs of concern in loan performance, capital, and earnings as deposit levels have dropped are among the takeaways cited by the board chairman of the federal credit union regulator as his agency released mid-year financial performance numbers for the institutions late Thursday.
In a statement, National Credit Union Administration (NCUA) Board Chairman Todd M. Harper said challenges persist across the system and at specific institutions, even though he said credit unions are stable and “relatively resilient.”
“While interest rate and liquidity risks have ebbed recently, we are seeing growing signs of concern in loan performance, capital, and earnings as deposit levels have dropped,” Harper said. “Credit union managers must continue to monitor their institution’s performance and balance sheets and act expeditiously to prevent small anomalies from growing into big problems.”
In a release on the second-quarter financial performance results for federally insured credit unions, the agency noted that total assets at credit unions rose by $79 billion, or 3.5%, over the year ending in the second quarter of 2024 to $2.3 trillion.
However, the release also pointed out that the delinquency rate at the credit unions was 84 basis points (bp) in the second quarter of 2024, up 21 bp compared with the second quarter of 2023. The provision for loan and lease losses or credit loss expense, the agency also said, increased $3.8 billion, or 41.4%, over the year to $13.0 billion at an annual rate in the first half of 2024.
Net income at the institutions in the first half of the year was down $1.8 billion, or 10.1%, to $15.7 billion at an annual rate from the first half of 2023, the agency reported.
Harper also zeroed in on the experience of “an increasing segment” credit union members, who he said were experiencing financial strain. He said that was evidenced by a steady increase in loan delinquency rates, charge-offs, and borrowing using the NCUA’s payday alternative loan product.
However, other statistics released by the agency showed some brighter signs for credit unions, at least regarding net worth and income. The NCUA said:
- Credit unions’ 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.
- 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, which NCUA said largely reflected an increase in other non-interest income.
Credit Union Assets and Loans Grow, Delinquencies Increase, Net Income Down