1. Credit Union Trends CUNA Management School – 2nd Year
July 22th, 2015 • Madison, Wisconsin
Mike Schenk
Vice President, Economics & Statistics
Credit Union National Association
Telephone: Facsimile:

2. Credit Union Trends Very strong membership growth
High and increasing loan growth
Low savings growth
Vastly improved asset quality
Lower earnings (with low and declining interest margins)
Tremendous variation

3. Very Strong Membership Growth (Source: NCUA and CUNA)

4. High & Increasing Loan Growth (Source: NCUA and CUNA)

5. Broad-Based Loan Increases (Source: NCUA and CUNA)

6. Light Vehicle Sales (Cars + Light Trucks. Source: BEA)
18.3 Million

8. Low Savings Growth (Source: NCUA and CUNA)

9. Three Key Risks
Credit Risk – likelihood members don’t pay their loans when they promised to do so.
Interest Rate Risk – likelihood earnings (or capital) changes when market interest rates change.
Liquidity Risk – likelihood you won’t be able to pay creditors (i.e., depositors or others) when you need to do so.

10. Liquidity (Total Loans/Total Savings. Source: NCUA and CUNA)

12. Asset Quality: Delinquency (Percent of Total Loans
Asset Quality: Delinquency (Percent of Total Loans. Source: NCUA and CUNA)

13. Asset Quality: Net Chargeoffs (Percent of Average Loans
Asset Quality: Net Chargeoffs (Percent of Average Loans. Source: NCUA and CUNA)

14. Interest Rate Risk (Net Long Term Assets as a % of Total Assets)
Real estate loans that do not reprice, refinance or mature within 5 years;
Member business loans;
Investments that mature in more than 3 years;
NCUSIF deposit;
Land and building;
Other fixed assets

15. Interest Rate Risk (Net Long Term Assets as a % of Total Assets
Interest Rate Risk (Net Long Term Assets as a % of Total Assets. Source: NCUA and CUNA)
Real estate loans that do not reprice, refinance or mature within 5 years;
Member business loans;
Investments that mature in more than 3 years;
NCUSIF deposit;
Land and building;
Other fixed assets

16. High Earnings (Net Income as a Percent of Average Assets
High Earnings (Net Income as a Percent of Average Assets. Source: NCUA and CUNA)

17. US CU Earnings Performance
(With Stabilization Expense - % of Average Assets)
Source: NCUA and CUNA
 First Quarter ’15
 2014
Basis Point Change
Asset Yield
3.33%
3.36% -3
- Int./Div. Cost
0.51%
0.54%
= Net Int. Margin
2.82%
2.83% -1
+ Fee/Other Inc.
1.31%
1.34%
- Operating Exp
3.08%
3.10% -2
- Loss Provisions
0.28% NC
= Net Inc. (ROA)
0.78%
0.80%
10-Year Treasury Average
1.97%
2.54%
-0.57%
Federal Funds Rate Average
0.11%
0.09%
+0.02%
Difference
1.86%
2.45%
-0.59%

18. Net Interest Margin & Operating Expenses (Basis Points of Average Assets. Source: NCUA and CUNA)

19. Non-Interest Income (Basis Points of Average Assets
Non-Interest Income (Basis Points of Average Assets. Source: NCUA and CUNA)

20. Market Interest Rates & CU ROA
Source: BLS.

21. Credit Union Credit Quality Trends (As a % of Loans
Credit Union Credit Quality Trends (As a % of Loans. Source: NCUA and CUNA)

22. CU Net Worth/Assets (Source: NCUA and CUNA)

24. 4. Mergers/Consolidation
Consolidation: a long-term trend
Losing roughly one CU per business day
NOT failures
Trends are similar in banking industry
Why?
Opportunities abound

25. Number of US CUs (Source: NCUA and CUNA)

26. Change in Number of U.S. CUs (Source: NCUA and CUNA)

27. Average Annual Change in Number of U. S
Average Annual Change in Number of U.S. CUs By Decade (Source: NCUA and CUNA)

28. Average Annual Percentage Change in Number of U. S
Average Annual Percentage Change in Number of U.S. CUs By Decade (Source: NCUA and CUNA)

29. WHY? Compliance and regulatory burden Continuity Collaboration
Capital/Competition

30. Size Matters (Source: NCUA and CUNA)

31. Collaboration Anyone?

32. Competitive Landscape
Larger, more aggressive & gaining market share
Banker attacks continue
Focus on service to low income
Going after individual institutions
Value proposition and strategy more important than ever
Consumer perspective
Shocks/disruptive life events
Basic literacy
Retirement
Education

33. U.S. Bank and Credit Union Size Comparisons
Year-End 2014
Banks
Credit Unions
Total industry assets
JP Morgan Chase total assets
Bank of America total assets
Wells Fargo Bank total assets
Citibank total assets
$15.6 trillion
$2.1 trillion
$1.6 trillion
$1.5 trillion
$1.4 trillion
$1.1 trillion
Average institution asset size
Median institution asset size
$2.3 billion
$ 181 million
$173 million
$25 million
% of institutions with $25 million or less in total assets 3%
50%
% of institutions with $100 million or more in total assets
71%
24%
Sources: FDIC, NCUA, CUNA.

34. Credit Unions (1992 market share = 5.6%; 2014 market share = 6.7%))

36. $7.1 Billion

37. $97.1 billion over nine years!

39. WPCU also does a member-level “report card” showing what members save – and what they could save if they did more business with the CU….

40. WPCU uses the information on billboards & in full-page newspaper ads…