NCUA Chairman: Q4 Stats Show Strong CU System, But Also Reveal Risks

Agency releases system performance data for the final quarter of 2022.

Federal credit unions closed out 2022 on a strong note, but financial institutions must stay focused on a rapidly changing economy that poses risks, NCUA Chairman Todd Harper said Wednesday.

“Federal credit unions remained on a solid footing at the end of 2022,” Harper told reporters during a press conference, as the agency released its asset, share and deposit statistics for the fourth quarter of last year.

According to the report, total shares and deposits increased by $61.3 billion, or 3.4%, over the year to $1.85 trillion in the fourth quarter of 2022.

Potential Risks Cited

Harper said that credit unions must plan ahead for any possible liquidity problems. “You don’t want your pipes to freeze,” he said, noting that the issue is particularly serious at credit unions with under $250 million in assets, since Congress failed to renew pandemic-related provisions that allowed access to the agency’s Central Liquidity Facility.

He said further that credit union officials also must focus on interest rate risks, adding that while financial institutions must offer competitive products, high interest rates could pose problems.

Fewer Credit Unions, More Members

The report showed that the number of federally insured credit unions declined to 4,760 in the fourth quarter, down from 4,942 in the fourth quarter of 2021. In the fourth quarter of 2022, there were 2,980 federal credit unions and 1,780 federally insured, state-chartered credit unions.

Harper noted that the decrease continued a three-decade decline in the number of credit unions and that the NCUA is attempting to make it easier to start a credit union by streamlining the process. Additionally, the agency is exploring how to issue provisional credit union charters to make it easier for groups to raise capital.

The chairman also emphasized the need for credit unions to have a succession plan, adding that often is the cause for credit union mergers.

Even with the decline in the number of credit unions, federally insured institutions added 5.8 million members last year, bringing membership in those credit unions to 135.3 million at the end of the fourth quarter of 2022.

What Else Was in the Report?

In its fourth quarter report, the NCUA additionally revealed that:

–Total assets in federally insured credit unions increased by $108 billion, or 5.2%.

–Insured shares and deposits grew by $50 billion, or 3.1%, to $1.68 trillion.

–The return on average assets for federally insured credit unions was 89 basis points in 2022, down from 107 basis points in 2021.

–Total loans outstanding increased by $251 billion, or 20.0%, over the year to $1.51 trillion. The average outstanding loan balance in the fourth quarter of 2022 was $17,141, up $1,022, or 6.3%, from one year earlier.

–The delinquency rate at federally insured credit unions was 61 basis points in the fourth quarter of 2022, up 12 points from one year earlier. The credit card delinquency rate rose to 148 basis points, up from 96 points a year ago.