MADISON, Wis. (11/2/12)--Credit unions reported strong financial performance, mostly driven by declining loan-loss provisions in September, according to a Credit Union National Association (CUNA) economist's analysis of September's monthly sample of credit unions.
"Net income as a percentage of average assets (return on assets) came in at 0.85% in September and 1.06% for the third quarter," Steve Rick CUNA senior economist, told News Now
. "This is significantly better than the 0.72% reported in the third quarter of 2011.
"Earnings rose year over year despite a slight drop in the loan-to-savings ratio, which fell to 68.4% in September from 69.6% in September 2011. The rise in earnings will allow credit union to compete more effectively in the credit market place as banks begin to loosen the underwriting standards and pursue loans more aggressively," he said.
"The 34-basis point rise in earnings was mainly driven by falling provisions for loan losses," Rick continued. "Loan charge-offs and delinquency rates have fallen significantly over the last year. We expect credit unions to charge off 73 cents for every $100 in loans this year, down from 90 cents last year. We expect this charge-off ratio to fall to 0.65% in 2013. It will take a few more years before this ratio reaches the 0.5% considered normal for credit unions and banks."
Credit union loans outstanding grew 0.3% in September 2012, up from 0.5% growth in
August. Credit union loans totaled $605.4 billion in September, compared with $582 billion in September 2011. Fixed-rate mortgages led loan growth with a 2.1% increase, followed by new- auto loans and used-auto loans, which grew at 1.2% and 0.9% respectively. Credit card loans remained flat during September, while home equity loans fell 0.6%, adjustable-rate mortgages fell 1.2% and unsecured personal loans fell 2.3%.
Credit union savings balances fell 0.6% in September, compared with a 1.2% increase in
August. Credit union savings in September totaled $885.2 billion--or $48.4 billion more than the $836.8 billion in September 2011. Individual retirement accounts led savings growth with a 0.8% increase, followed by regular shares (0.4%) and money market accounts (0.1%). One-year certificates and share drafts fell 0.8% and 4.6% respectively.
Regarding asset quality, credit unions' 60-plus-day delinquency improved slightly from 1.2% in August to 1.1% in September.
"The credit union loan delinquency ratio also fell significantly over the last year," Rick said. "Credit unions reported that 1.14% of all loans were delinquent in September, down from 1.59% in September 2011. The decline in the loan delinquency ratio was caused by a 25% drop in the dollar amount of delinquent loans (the numerator of the ratio) and a 4% rise in total loans (the denominator of the ratio). These dynamics resulted in the almost 29% drop in the delinquency rate over the last year. This is the biggest one-year drop since the delinquency rate hit its high-water mark of 1.88% in January of 2010. We are forecasting the credit union loan delinquency rate to fall to 0.90% in 2013, slightly above the 0.80% long-run average," Rick said.
The loan-to-savings ratio remained constant in September at 68%.
The movement's overall capital-to-asset ratio is 10%. Credit unions have a total of $107 billion in capital.