Credit quality improves at US credit unions YOY in Q4'21

Credit quality improved year over year at U.S. credit unions in the fourth quarter of 2021 as net charge-offs and nonperforming assets both fell, according to S&P Global Market Intelligence data.

Credit unions vs. community banks

The credit union industry's nonperforming assets ratio and net charge-off ratio both dropped 9 basis points year over year to 0.32% and 0.26%, respectively, but were up slightly quarter over quarter following normal seasonal patterns.

Aggregate nonperforming assets at U.S. credit unions dropped 13.1% year over year to $6.59 billion, while net charge-offs fell 21.2% to $816.9 million in the fourth quarter.

Meanwhile, U.S. community banks under $10 billion in assets reported a 0.56% nonperforming assets ratio at Dec. 31, down 27 basis points year over year and 8 basis points quarter over quarter. The net charge-off ratio for U.S. community banks was 0.11% in the fourth quarter, down 10 basis points compared to the year-ago quarter, but up 3 basis points over the third quarter of 2021.

Seasonal patterns drive delinquencies higher QOQ

Aggregate delinquent loans at U.S. credit unions fell to 1.18% of total loans and leases at the end of 2021, down 15 basis points since year-end 2020, but up 26 basis points compared to Sept. 2021.

Credit quality at the top 20 credit unions

Nonperforming loans as a percentage of total loans and leases improved year over year at 16 of the 20 largest U.S. credit unions by loans as of Dec. 31. Vienna, Va.-based Navy FCU, the U.S.'s largest credit union by loans, reported that its NPL ratio dropped to 0.91% in the fourth quarter from 0.96% at the end of 2020, but its NCO ratio rose to 1.02% from 0.83%.

Raleigh, N.C.-based State Employees CU, the country's second-largest credit union by loans, reported the highest delinquency ratio among the 20 largest credit unions at 1.39%, although that was an improvement from the 1.50% ratio reported at the end of 2020.