ALEXANDRIA, Va. – Credit unions continued to strengthen their balance sheets in the second quarter of the year, reporting a 1.7% growth in loans, the highest quarterly growth in lending since 2008, NCUA reported this morning.
Second quarter loan growth compares to a 1% expansion for the first quarter this year and 0.7% growth for the second quarter last year.
Total loans by credit unions have increased for five consecutive quarters, according to NCUA. The industry generated increases in all but one lending category in the second quarter. Loans for first mortgages increased by 1.7%, while new and used auto loans each rose by 2.8%
During the second quarter, member business lending increased by 1.2%. Additionally, short-term small loans, generally payday loans, grew by 24%.
“Lending is the investment needed to support a recovering economy,” said NCUA Chairman Debbie Matz. “So, the largest quarterly increase since the fall of 2008 demonstrates that credit unions are playing an important role in efforts to create jobs, stimulate small businesses, and revitalize communities.”
Membership also continued to grow at a healthy pace, with credit unions adding more than 640,000 members for the period, making more than 1.3 million new members for the first six months of the year, a record pace. The additional members translated into $2.7 billion in new savings for the quarter. The total of $43 billion of new shares for 2012 already exceeds the $41 billion of new shares added in all of 2011.
The industry’s return on average assets ratio, an important measure of industry earnings, was 86 basis points for the quarter. ROA rose by one basis point over the prior quarter.
The industry’s ROA has grown 70 bps from a low of just 18 bps at December 31, 2009, the depths of the economic crisis.
The credit union results compare to a 99 bps ROA for banks, and a 1.4% growth for bank loans in the second quarter.
Asset quality continued to improve for credit unions, with the delinquency ratio falling 24 bps to just 1.2%. A majority of the drop likely resulted from the implementation of a new NCUA rule allowing credit unions to modify loans without having to classify troubled debt restructurings as delinquent until the credit union receives payments over a six-month period. The charge-off ratio also declined slightly to 0.75%.