Despite credit quality data showing gradual deterioration, US credit unions are shifting more of their asset mix into loans.

Balance sheet changes

Total loans and leases were $1.575 trillion at June 30, up $30.01 billion or 1.9% from March 31, according to S&P Global Market Intelligence data. Growth has slowed in 2023 relative to 2022, when the quarterly rates ranged from 3.4% to 6.5%.

Even with the recent slowdown, loans are becoming a more dominant feature of credit union balance sheets. The gross loans to assets ratio was 70.4% at June 30, up 1.2 percentage points sequentially and up 10.6 percentage points from the cyclical trough at March 31, 2021.

In the second quarter, loan growth came from several different categories, including $6.88 billion from junior lien one- to four-family real estate, $5.93 billion from hybrid first mortgage, $4.43 billion from net member business loans and $4.20 billion from unsecured loans and lines of credit. On the other hand, fixed-rate first mortgages with a maturity of 15 years or less declined $2.57 billion.

Sacramento, Calif.-based Golden 1 CU led the way with a 5.9% increase in total loans and leases. Vienna, Va.-based Navy FCU, the nation's biggest credit union, reported 4.2% growth.

Among the 20 largest credit unions by total assets at June 30, just three reported a linked-quarter decrease in total loans and leases.

For the second time in the last three quarters, total shares and deposits contracted at US credit unions. The June 30 total was $1.895 trillion, down $14.45 billion or 0.8% from March 31 and representing the most severe decline in nearly 15 years. Customers have been shifting away from money market deposit accounts, which were down $18.42 billion sequentially.

– Download a template for a credit union financial performance report. – Read some of the day's top news and insights from S&P Global Market Intelligence.

The majority of the top 20 credit unions reported lower shares and deposits at June 30. Declines of at least 2.5% were seen at Tukwila, Wash.-based Boeing Employees' CU; Raleigh, NC-based State Employees CU, which named a new CEO in June; and Jacksonville, Fla.-based VyStar CU. Going in the opposite direction, Chicago-based Alliant CU reported 2.6% growth.

Credit quality trends

Delinquency and net charge-off (NCO) ratios were in an uptrend, although they were considerably below peak levels in 2009 to 2010.

Delinquencies as a percentage of total loans rose to 0.63% at June 30, up from 0.52% at March 31 and 0.48% in the year-ago quarter. The 15-year high is 1.83% at the end of 2009.

State Employees had the highest delinquency ratio, 1.65%, and the largest quarterly increase in that ratio, 68 basis points, among the top 20 credit unions. Only two of the largest credit unions — San Antonio-based Security Service FCU and Caledonia, Mich.-based Lake Michigan CU — reported a quarter-over-quarter decline in delinquency ratio.

NCOs to average loans were 0.54% in the second quarter, up 2 basis points from the first quarter and double the ratio from the fourth quarter of 2021. The peak during the last 15 years is 1.32% in the fourth quarter of 2009.

Most of the largest credit unions reported higher NCO ratios. VyStar and North Liberty, Iowa-based GreenState CU had the most significant increases in the group at 40 basis points and 24 basis points, respectively. Six of the 20 credit unions, including State Employees and Security Service, were able to lower their NCO ratios.