With one of the more volatile quarters for the economy at-large and financial markets passing, second quarter results show credit unions achieving steady growth across the board and maintaining strong asset quality. Whether it be record low housing numbers, another mortgage broker filing for bankruptcy, or problems persisting in the credit markets, financial institutions have had plenty on their minds over the last quarter.
With 8,410 credit unions reporting for the second quarter, assets totaled $757.4, growing at a 6.2% pace over the past year. Members grew at 1.4% over the past year, at a similar rate as last quarter, to 88.3 million. For the 8,615 FDIC-insured institutions, assets grew at 6.4% YOY (year-over-year) to $12.3 trillion.
Growth Points to Increased Market Share
Growth in loans and shares remained strong for credit unions, as both posted over 6% growth. Loans grew at a 6.2% rate over the past year to $517.7 billion. When looking at credit card and real estate lending, credit unions posted strong results when compared with banks. Credit cards grew at 12.2% YOY while first mortgages grew at 7.5% for credit unions.
Due to decreased asset quality among banks, lending standards tightened significantly. Because of this, growth across the loan portfolio is down. Credit card lending for banks decreased 0.4% over the past year, while 1-to-4 family residential mortgages grew at a slow 1.5% rate. Credit unions can look to pick up market share in both of these areas.
Credit union share growth continued to increase, as they grew at 6.1% over the year, up from 5.3% last quarter. Deposits for banks grew at 7.0%. But looking closer, the majority of growth came from foreign deposits, as foreign deposits grew at 25.8% and domestic deposits only grew at 4.0%. Again, credit unions continue to grow shares at a steady pace and look to pick up deposit market share across the country.
Asset Quality Remains Strong
Asset quality remains high for credit unions when compared with the rest of the financial services industry. Overall reportable loan delinquency (those loans greater than 60 days delinquent) stands at 0.69%, up from 0.58% this time last year. A major focal point of the quarter, real estate delinquency, was at 0.44% for the second quarter, up from 0.26% a year ago.
While this is a noticeable increase, compared to banks, quality remains high. Noncurrent real estate loans (loans 90 days or more delinquent) had the largest quarterly increase since the fourth quarter of 1990 and stood at 1.01% of all real estate loans as of the second quarter. The overall noncurrent loan rate stood at 0.90%, up from an all-time low of 0.70% one year ago for banks.
Margins Widen Slightly for Credit Unions
Margins for credit unions showed improvement in the second quarter. In part due to a more upward-sloping yield curve during the majority of the second quarter before long-term bond yields began to fall, the net interest margin increased three basis points from the first quarter to 3.12%. Because of the increased margin, ROA also saw an increase of three basis points over the quarter to 0.75%. These are both below their respective values of a year ago of 3.19% and 0.86%.
Banks have followed a similar trend. With net interest margin at 3.33% and ROA at 1.21%, both are similar to their values of a quarter ago and significantly below those of a year ago.
Overall, second quarter results point to strong credit union performance as loan quality remains higher than that of other financial institutions and higher growth leads to possible increased market share in both loans and shares. As the mortgage market fall out continues, further opportunities will exist for credit unions to increase market share and their presence in the financial services market.