Improving Loan Losses, New Auto Loan Growth Fuel Strong CU Earnings—CUNA News Now, Mar. 5

The National Credit Union Administration's just-released 2012 credit union data confirm that the trends the Credit Union National Association had reported on throughout 2012 continued in fourth quarter, and that 2012--from almost every vantage point--was the best year for credit unions since before the start of the Great Recession in 2007, according to a CUNA economist.

Loan originations and new-auto loans saw dramatic increases, and loan-loss provisions declined last year, Mike Schenk, CUNA vice president of economics and statistics, told News Now.

"Overall, credit union loan originations totaled a record $329 billion in 2012--a 27% increase over 2011," Schenk said. "Strong mortgage refinancings helped to drive those results. In addition, new auto balances increased dramatically--reflecting a resurgent auto industry and lots of pent-up demand."

The average age of U.S. cars was near record highs in 2012--at nearly 11 years, he added. The 8.6% increase in new auto loans was the first annual increase since 2006 --when credit union new-auto loan balances rose 5.5%.

Another highlight of the NCUA report was that credit union loan-loss provisions declined 14 basis points because of an improving economy and falling credit union chargeoffs, Schenk said.

"All in all, most of the metrics we follow show that overall credit union operating results have returned very close to normal," Schenk explained. "However, the results are not uniform--not all credit unions are benefiting to the same degree from the improving economy and improving labor markets. In particular smaller credit unions are showing results that lag the movement-wide norms. For example, smaller institutions are more likely than their larger counterparts to have reported weak earnings and relatively low loan and membership growth."

CUNA released its January Monthly Credit Union Estimates on Monday. Credit union loans outstanding increased 0.1% during January, compared with a 0.1% decrease the same period last year. Adjustable-rate mortgages led growth with a 1.4% rise, followed by new auto loans (0.8%), other mortgages and auto loans (both 0.6%), and unsecured personal loans (0.4%). Home equity loans decreased 2.1%, along with credit cards (1.3%) and fixed-rate first mortgages (1%). Credit union loans totaled $613.6 billion, compared with $586.7 billion in January 2012.

"The January MCUE indicates that the robust new auto-loan growth that was reported in 2012, continued into the new year," Schenk said. "On an annualized basis, new-auto loans grew by more than 9% in January."

Credit union savings balances held steady during January at $900 billion. Individual retirement accounts, money market accounts, and regular shares increased 0.7%, 0.5%, and 0.2%, respectively. One-year certificates remained constant, while share drafts decreased 1.8%. Credit union savings totaled $899.6 billion in January--or $56.7 billion more than $842.9 billion in January 2012.

For credit union asset liquidity, the loan-to-savings ratio has remained at 68% for the past three months. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--is 18%.

Total credit union membership grew 0.1% to 97 million. Membership grew 2.7% last year.

The movement's overall capital-to-asset ratio remained at 10%. The total dollar amount of capital is $110 billion.