Credit union shares, deposits increase nearly 15 percent in 3Q

Total assets in federally-insured credit unions increased nearly 13 percent in 3Q 2021 to more than $2 trillion, according to the latest financial performance data released Monday by the National Credit Union Administration

Credit unions experienced other strong growth signs: Net income for federally insured credit unions was $21.5 billion, at an annual rate, a $10.6 billion increase — 96.2 percent — from the third quarter of 2020. The return on average assets for federally insured credit unions was 112 basis points in 3Q 2021, increasing from 65 basis points in 3Q 2020. Federally insured credit unions added nearly five million members over the year, and membership in those institutions reached nearly 129 million in 3Q 2021. Commercial loans, not including unfunded commitments, increased 16 percent or $14.6 billion, over the year to $105.8 billion in the third quarter of 2021. The credit union system’s net worth increased by $20 billion or 10.7 percent, over the year to $206.6 billion. Total outstanding loans increased $67.1 billion or 5.8 percent from last year, to $1.22 trillion. Credit union loan balances also grew in most substantial categories, compared to one year ago.

“Federally insured credit unions, as a whole, continued to perform well in the third quarter,” said NCUA Chairman Todd M. Harper. “Lending has increased 5.8 percent compared to this point a year ago, and delinquency and charge-off rates are down. And, nearly five million new members have joined a federally insured credit union in the last 12 months.”

Still, Harper said credit unions “should brace for potential challenges ahead like inflation and interest rate risk. They should also prepare for increases in credit risks now that many pandemic-relief programs have ended.” 

The number of credit unions continued to decline, decreasing to less than 5,000 in the third quarter from 5,133 one year ago. “In the third quarter of 2021, there were 3,122 federal credit unions and 1,868 federally insured, state-chartered credit unions,” according to the NCUA. “The year-over-year decline is consistent with long-running industry consolidation trends.” 

Those profit increases come as community banks continue pushing back against the tax-free status of credit unions and their ongoing growth. The number of federally insured credit unions with at least $1 billion in assets increased to 395 in the third quarter from 364 a year ago. Credit unions with between $500 million and $1 billion also increased from 272 to 290. 

In Wisconsin, bankers and credit unions are sparring over Assembly Bill 478, which would allow credit unions to issue subordinated debt, which is often used in acquisitions. It would also allow credit unions to lend to non-members, which circumvents the “public policy rationale between which the tax exemption is given,” said Wisconsin Bankers Association President and CEO Rose Oswald Poels in testimony to state lawmakers. A bill before Congress, the Member Business Loan Expansion Act, exempts credit unions from the 15-year Federal Credit Union Act, allowing them increased flexibility on loan terms. The credit union lending gap also would increase to $100,000 from $50,000; currently, loans under $50,000 do not count toward the 12.25 percent limit on commercial loans by total assets. Both moves would make it easier for credit unions to make commercial loans. 

The banking system has also seen recent growth and remains strong despite pandemic-related challenges, as evidenced by the Federal Reserve’s most recent semiannual 2021 supervision and regulation report. Banks have seen a record increase of deposits since the beginning of 2020, up about $4 trillion or 27 percent. Loan delinquency rates fell, bank profitability grew, and loans in forbearance dropped.