Loan growth at federally insured credit unions reached a nine-year high in the fourth quarter of last year, while membership soared past the 99-million mark, according to a new report from the National Credit Union Administration (NCUA).
Outstanding loan balances at federally insured credit unions jumped by 10.4% between the end of 2013 and the end of 2014, the largest year-over-year percentage increase since the end of 2005. The size of total loans reached $712.3 billion.
Assets, deposits and net worth also saw continued positive growth in the fourth quarter of 2014, NCUA added, while net interest margins "held steady" from the previous quarter and were "slightly higher" than the figure reported at the end of 2013.
"2014 was a very productive year for America's credit unions," NCUA board chairman Debbie Matz said in a statement. "As economic growth stimulated loan demand, credit union loans met the needs of millions of members, strengthened their communities and created jobs that will further boost the economy. Loan growth also helped credit unions reduce reliance on long-term investments to generate income."
However, she warned that credit unions "must remain prepared when interest rates rise."
With respect to loans, NCUA detailed, they grew across all asset sizes and in every major category. For example, total first mortgage loans outstanding reached $292.2 billion, up 2% from the prior quarter and up by 8.8% from the fourth quarter of 2013. Fixed-rate first mortgage loans represented 59.6% of first mortgage loans outstanding at the end of 2014.
The volume of second-mortgage loans reached $72 billion, up 0.7% from the previous quarter and up 2.3% from the end of 2014.
Also, new auto loans climbed to $86.3 billion, up 4.8% from the prior quarter and up almost 21% from the fourth quarter of 2013. Used auto loans surged to more than $143.7 billion, up 2.4% from the previous quarter and up 12.8% from the fourth quarter of 2013.
Net member business loan balances rose to $51.7 billion, up 2.8% from the previous quarter and up 12.4% from the fourth quarter of 2013.
The size of non-federally guaranteed student loans jumped to $3.1 billion, up 2.7% from the previous quarter and up 20.1% from the fourth quarter of 2013. Payday alternative loans outstanding rose to $37 million, up 16.0% from the previous quarter and up 36.2% from the fourth quarter of 2013.
As a result of healthy loan volume growth, the overall loans-to-shares ratio reached 74.9%, the highest such level since the end of 2009.
The return on average assets ratio at federally insured credit unions remained at 80 basis points at the end of 2014, a "slight decline" from the previous quarter but two basis points higher than at the end of 2013.
Year-to-date net income totaled $8.8 billion in the fourth quarter of 2014, an increase of $648 million, or 8%, from the fourth quarter of 2013.
The aggregate net worth ratio stood at 10.97% as of the end of the fourth quarter, up 20 basis points from the end of 2013 and the highest such level since the third quarter of 2008.
NCUA also reported that the overwhelming majority of federally insured credit unions remain well-capitalized, with 97.7% reporting a net worth at or above the statutorily mandated 7.0% leverage ratio.
The agency added that long-term investments by federally insured credit unions fell over the course of 2014 with only investments with maturities between one and three years increasing. Investments declined in all other categories.
Total investments fell to $276 billion at the end of 2014, a slip of 3.5% from the end of 2013. Investments with maturities greater than 10 years plunged by 21.6% from the end of 2013, to $5.6 billion.
Asset growth at federally insured credit unions reached $1.12 trillion in 2014, while total assets grew by $60 billion, or 5.7%, for the year. On the whole, share and deposit accounts at federally insured credit unions increased $11.7 billion during the fourth quarter of 2014 to $951 billion, versus a figure of $910 billion at the end of the fourth quarter of 2013.
Delinquency and net charge-off ratios for federally insured credit unions remained largely unchanged from the end of the previous quarter and improved since the end of 2013. The delinquency ratio dropped to 0.85% from 1.01% at the end of 2013. The net charge-off ratio during the fourth quarter of 2014 came in at 49 basis points year-to-date, a fall of seven basis points from the end of 2013.
Also, the percentage of loan charge-offs due to bankruptcy in 2014 — 19.3% — fell by 112 basis points below the end of the fourth quarter of 2013.
The strong performance of credit unions last year was dominated by the larger institutions — those with assets of at least $500 million. These 450 credit unions, with $781 billion in combined assets, represented almost 70% of all total assets at the end of the year.
On average, the largest credit unions posted net worth growth of 9.7%, loan growth of 12.6% and membership growth of 6.0% in 2014 — all topping other asset-size categories.
However, the smallest credit unions — those with assets of less than $10 million — reported higher net worth ratios and higher loan growth than they recorded in 2013. "These credit unions rebounded from the end of 2013 in return on average assets but saw membership decline," NCUA noted.
Meanwhile, membership in federally insured credit unions grew by more than 551,000 in the fourth quarter of 2014 and by 3 million for the year, reaching a new high of 99.3 million by the end of the year.
While loan volumes and membership continue an upward climb, the phenomenon of consolidation led to an ever-dwindling number of federally insured credit unions — down to 6,273 at the end of the fourth quarter, 77 less than at the end of the third quarter, a decline of 1.2% in the quarter and 4.3% for the year.
"The decline is consistent with longstanding trends in the financial services industry," NCUA commented.