8 takeaways from NCUA's 3Q state-level data

December 20, 2020 9:30 PM

The credit union industry is staring down a wave of negative financial trends.

The National Credit Union Administration released more data last week on the industry’s third-quarter performance. This data, which looked at the median percent change from the third quarter of 2019 at the national and state level, showed that credit unions are dealing with a glut of deposits while lending declines.

Credit unions in areas such as New Jersey and Washington, D.C., fared worse while institutions in other states, including Alaska and Idaho, continue to perform better.

Read on for highlights from the latest NCUA state-level data. A look at macro-level third-quarter trends can be found here.

Aaron Passman contributed to this report.

Earnings slide

The number of institutions turning a profit continues to fall, dropping to 82% of all federally insured credit unions at the end of the third quarter — a 7-point decline from the same period last year.

At least 65% of credit unions in every state and Washington, D.C., reported positive net income during the first three quarters of the year, down from 70% for the same period in 2019.

Oregon and Washington saw the highest percentage of profitable credit unions, at 98% and 96%, respectively, while Washington, D.C., (67%), and Nebraska (69%) reported the lowest share. Washington, D.C., also ranked near the bottom of the list during the third quarter of 2019.

The most recent quarter was notable also for the fact that no states reported 100% positive earnings, compared with five states during that period last year.

ROA takes a hit

Return on average assets also took a hit. For the first three quarters of the year, the median for this metric was 0.42%, down from 0.65% for the same period in 2019.

Credit unions in Idaho, at 85 basis points, and Oregon, at 82 basis points, managed to maintain the highest ROA for the first three quarters of 2020.

In contrast, institutions in Washington, D.C., did the worst, with an ROA of 15 basis points, followed by those in Massachusetts at 24 basis points.

Loan growth falters

In the third quarter, loans outstanding fell 0.6% at the median from the same period in 2019, according to NCUA data. From the third quarter of 2018 to the third quarter of 2019, the median loan growth was 3.8%.

Earlier this month, NCUA released industry-wide data on lending, which showed that loan growth was concentrated at the largest credit unions. Institutions with at least $1 billion of assets reported a rise in loans while every other size category reported a decline.

Credit unions in Wyoming fared the best and reported a 7% increase in loans at the median. That was followed by Idaho at 6.2%.

New Jersey credit unions reported a median decline of 7% for loans, followed by those in Delaware and Pennsylvania, which had a 4% drop.

Membership slips

Although membership at federally insured credit unions increased in the third quarter from a year earlier, the median membership fell 0.4%. That means roughly half of credit unions had fewer members at the end of the third quarter than they did a year earlier. In the third quarter of 2019, the median membership had remained flat from a year earlier.

The institutions with declining membership continue to be small — roughly 65% had less than $50 million of assets, NCUA said.

Twenty-six states and Washington, D.C., reported a drop in median membership. New Jersey had the steepest decline at 1.9% while Massachusetts and Pennsylvania both posted a 1.3% decrease.

Credit unions in Alaska, at 3.9%, and Idaho, at 2.6%, had the largest jump in median membership.

Flooded with funding

Credit unions have been flooded with deposits this year and that’s reflected in the NCUA data. Nationwide, the median increase in shares and deposits for the third quarter was 13.4% from a year earlier. For the same period ending in the third quarter of 2019, shares and deposits rose 1.5% at the median.

Alaska had the biggest jump in deposits at 19.3% while Maine had an increase of 19.2%.

Shares and deposits ticked up 9% at the median for credit unions in Arkansas and by 9.2% for institutions in Louisiana and Washington, D.C.

Liquidity not a problem

The excess funding credit unions have dealt with this year can be seen in the median loan-to-share ratio for the third quarter. This metric fell to 62%, down from 71% a year earlier.

Credit unions in Idaho had the highest ratio at 80% while Utah and Vermont institutions had a loan-to-share ratio of 78%.

New Jersey and Delaware institutions struggled the most with liquidity and had a loan-to-share ratio of 44%, followed by Hawaii at 46%.

Assets skyrocket

In the third quarter, the median asset growth was 12%, according to the NCUA data. That’s up from 1.9% a year earlier.

Alaska reported the highest median asset growth at 17.8%, followed by Arizona at 17.6%. Credit unions in Washington, D.C., grew their assets at the slowest rate at 7.5%, followed by Arkansas at 7.7%.

Credit quality holds up

Despite the economic challenges credit unions have faced in 2020, the median delinquency rate fell 14 basis points from a year earlier, to 0.47%. Some experts have predicted that credit quality could worsen in the coming months.

Oregon and Utah had the best median delinquency rate at 21 basis points, followed by New Hampshire at 22 basis points.

At 1.2%, New Jersey had the highest delinquency rate at the median. Mississippi had the second highest at 0.79%.