PLANO, Texas–An analysis of CU industry performance through the third quarter of 2016 suggests credit unions continue to struggle from the lack of any broad-based growth despite the reported improvement in loans and shares balances, according to one economist.
Brian Turner, president and chief economist with Meridian Economics, said the Q3 data show credit unions’ 8.1% annualized asset growth during 2016 is on pace to exceed 2015’s 7.3%, while the 8.1% annualized increase in shares exceeds 2015’s 6.9%.
“However, liken to the old proverb, the devil appears to be in the details,” wrote Turner in a recent analysis. “Most of 2016’s loan and share growth is being realized by less than 10% of the number of credit unions in the industry – those with $500 million or greater in assets. This group of 493 credit unions account for roughly 73% of total industry assets but account for only 9.9% of the number of credit unions. Through the first three quarters of 2016, loans outstanding and shares at these institutions are increasing at a 13.0% and 11.1%, respective annualized pace. This suggests that 90% of the industry, or remaining 5,346 institutions, collectively experienced a more modest 1.8% increase in loans and 0.7% increase in shares.”
Still, there is a bit of good news, said Turner, explaining that those numbers actually reflect improvement by what he dubbed the “90-percenters” from last year’s 0.4% increase in loans and 0.6% decline in shares.
“They have also been able to retain a 60% average loans-to-asset ratio while maintaining an allocation profile of 38% in vehicle loans and 44% in real estate loans,” he said. “This compares with the ‘10-percenters’ loan portfolio profile with a 33% allocation in vehicle loans and 52% allocation in real estate loans.”
Turner noted that credit unions did experience a more broad-based improvement in its liquidity profile as the average short-term funding ratio increased from 13.5% to 14.4%, which he said should benefit from any pending rise in targeted overnight rates through 2017.