Report: Credit unions improve financial standing in 2018

CREDIT UNIONS, such as Greenwood Credit Union in Warwick – Rhode Island’s third-largest credit union, improved their financial standing as a whole nationwide in 2018. Shown here, Greenwood employees celebrate during the PBN 2014 Best Places to Work event. / PBN FILE PHOTO/RUPERT WHITELEY

PROVIDENCE – Citing recently released data from the National Credit Union Association, BauerFinancial Inc. reported credit unions had a mostly positive year in 2018, including the finding that the aggregate capital adequacy ratio for all federally insured credit unions increased to 11.3 percent from 10.95 percent a year earlier.

More than 98 percent of credit unions reported a capital ratio of 7 percent or greater; more than 83 percent reported ratios greater than or equal to 9 percent; and 71 percent reported ratios of 10 percent or more, according to BauerFinancial, which provides ratings and analysis of banks and credit unions nationwide. A measure of a financial institution’s health, the capital ratio is calculated by dividing an institution’s capital by its risk-weighted assets.

Total loans from credit unions increased by $86 billion, or 9 percent, last year and loan quality improved. The delinquency rate of 71 basis points in the fourth quarter 2018 was down from 81 basis points a year earlier. The net charge-off rate was also down slightly to 58 basis points from 60 points, BauerFinancial reported.

The net interest margin (as a percentage of average assets) improved to 3.13 percent at the end of last year from 2.99 percent a year earlier.

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In addition, membership at federally insured credit unions increased by 4.9 million customers during last year, reaching 116.2 million at year-end, the firm said.

“But here’s the rub,” BauerFinancial opined. “The biggest are getting bigger and the smallest are struggling.”

According to the firm, there are currently 308 credit unions nationwide topping $1 billion in assets. They account for two-thirds of the system’s assets. Those credit unions reported loan growth of 12.9 percent and net worth growth of 12.9 percent, as well as a 9.85 percent increase in membership.

At the other end of the spectrum, there were 1,421 federally insured credit unions with less than $10 million in assets at year-end, down from 1,533 a year earlier. As a group, those credit unions reported a 2.2 percent decline in loans; an 8 percent drop in membership; and a 2.9 percent decrease in net worth. At 16.02 percent, however, they also reported the best capital ratio, according to Bauer.

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.