CUNA Economic Update

December 2018

Mike Schenk

Chief Economist

CUNA Economic Update is sponsored by

1.3%

1.6%1.4%

0.7%

1.5%

2.1%

2.5%

3.1%

3.5%

4.1% 4.1%

4.4%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yr

9/18

12-Month U.S. CU Membership Growth(Source: NCUA & CUNA)

1.3%1.3%

1.4%

0.9%

1.3%1.3%1.2%

0.8%

1.4%

Sep 18Jun 18Mar 18Dec 17Sep 17Jun 17Mar 17Dec 16Sep 16

Quarterly U.S. CU Membership Growth(Source: NCUA & CUNA)

6.5% 6.7%

1.2%

-1.2%

1.2%

4.8%

7.3%

10.4% 10.5% 10.6%10.0%

9.3%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yr

9/18

12-Month U.S. CU Loan Growth(Source: NCUA & CUNA)

4.4%

5.3%

6.3%

8.0%

8.8%

9.7%

10.5%

< $20Mil

$20-$50

$50-$100

$100-$250

$250-$500

$500-$1B

> $1 Bil

U.S. CU Loan Growth in Year Ending

September 2018 - by CU Asset Size(Source: NCUA & CUNA)

7.9

10

.0

20

.9

12

.9

9.1

1.3

12

.4

6.1

8.5

16

.0

12

.7

10

.3

3.5

12

.4

7.9

7.3

16

.8

12

.4

9.8

3.5

14

.4

9.1

8.5

13

.1

10

.2

10

.1

7.0

14

.0

8.4

6.0

12

.5

9.8

9.8

6.5

10

.9

Credit Cards Other Unsecured New Auto Used Auto 1st Mtg. HEL/2nd Mtg. MBLs

Broad-Based CU Loan Growth12-month % Change in Balances Outstanding

2014 2015 2016 2017 YOY 9/18

5.1%

6.9%

10.3%

4.4%

5.2%

6.1%

3.6%

4.5%

6.8%

7.6%

6.0%

5.0%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yr9/18

12-Month U.S. CU Savings Growth(Source: NCUA & CUNA)

0.2%0.4%

3.9%

0.9%

0.6%0.6%

4.4%

1.5%

1.8%

Sep 18Jun 18Mar 18Dec 17Sep 17Jun 17Mar 17Dec 16Sep 16

Quarterly U.S. CU Savings Growth(Source: NCUA & CUNA)

10

.3

-1.3

-2.0

3.1

8.0

14

.5

0.4

-0.3

5.7

9.6

2.5

5.0

1.9

7.5

11

.8

9.5

6.2

-0.6

4.0

7.0

6.5

8.7

-0.8

1.0

5.8

Share drafts Certificates IRAs Money market shares Regular shares

CU Savings Growth12-month % Change in Balances Outstanding

2014 2015 2016 2017 YOY 9/18

72.376.1

79.5

73.771.1 71.3

74.6

79.582.3 83.4 83.2

76.372.2

69.4 68.671.0

75.177.7

79.882.8

85.2

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sept.

18

U.S. CU Loan-to-Savings Ratios(Source: NCUA and CUNA)

0.93%

1.37%

1.82%1.75%

1.60%

1.15%

1.01%

0.85%0.81% 0.83% 0.81%

0.67%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

U.S. CU Loan Delinquency Rates(Source: NCUA & CUNA)

0.51%

0.84%

1.21%

1.14%

0.91%

0.73%

0.57%

0.49% 0.48%

0.55%0.59% 0.57%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

Ann.

U.S. CU Loan Net Chargeoff Rates(Source: NCUA & CUNA)

0.64%

0.31%

0.18%

0.50%

0.68%

0.84%

0.77%0.80%

0.75% 0.76% 0.77%

0.96%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

U.S. CU Loan Return on Average Assets(Source: NCUA & CUNA)

11.4%

10.8%

9.8%

10.0%

10.2%

10.4%

10.8%

11.0% 10.9% 10.9%11.0%

11.2%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

Ann.

U.S. CU Net Worth Ratios(Source: NCUA & CUNA)

11,22510,862

10,53610,206

9,8989,574

9,2098,877

8,5358,268

7,9667,708

7,4867,236

6,9566,680

6,3986,143

5,9065,684 5,548

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sept.

18

Credit Union Consolidation(Source: NCUA and CUNA)

11,22510,862

10,53610,206

9,8989,574

9,2098,877

8,5358,268

7,9667,708

7,4867,236

6,9566,680

6,3986,143

5,9065,684 5,548

10,46410,222

9,9049,614

9,354 9,181 8,976 8,833 8,680 8,5348,305

8,0127,658

7,3577,083

6,8126,509

6,1825,913

5,670 5,477

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sept.

18

Credit Union and Bank Consolidation(Source: NCUA and CUNA)

U.S. CUs

U.S. Banks

2.78%

2.41%

1.73%

1.21%

0.92%0.72%

0.59% 0.54% 0.52% 0.52% 0.56% 0.64%

4.36%

2.52%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

U.S. CU Dividend & Interest Cost of

Assets Haven’t Followed Market Rate

Increases Up(Source: NCUA & CUNA)

CU Funding Costs

2-YR Treasury Yield

3.10%

3.14%

3.18%

3.25%

3.12%

2.90%

2.78%

2.83%2.85%

2.87%

2.97%

3.10%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

U.S. CU Net Interest Margin as a

Percent of Average Assets –

Increasing Due to Strong Loan Growth(Source: NCUA & CUNA)

Liquidity pressures may cause CUs to increase deposit rates…putting the squeeze on interest margins

0.49% 0.50%

0.41%

0.55%0.57%

0.71%0.68% 0.68%

0.71%0.75%

0.73%

0.80%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 9/18

Mortgage sales have helped to boost

U.S. CU “Other Non-Interest Income”(Percent of Avg. Assets. Source: NCUA & CUNA)

Higher interest rates & recent press clippings may put the squeeze on non-interest margins

$12.90

$8.95

$3.52

Credit Union

Members

Bank Customers Thrift Customers

Average Monthly Service Charge

Payments on Checking Accounts(Charges include account maintenance fees,

minimum balance fees, overdrafts, ATM charges

and other regular service fees. Source: Moebs

Financial)

1.5

6

1.5

4 1.5

6

1.5

6

1.5

6 1.5

8

1.5

7

1.5

7 1.5

9

1.5

9

'10 '11 '12 '13 '14 '15 '16 '17 9/18

U.S. CU Salary and Benefit Expense as a % of

Average Assets(Source: NCUA and CUNA)

CU Employee Turnover Trends

2013 12%

2014 12%

2015 13%

2016 16%

2017 16%Source: CUNA Turnover/Staffing

Survey.

Salary & benefit expenses generally equal about half of all

credit union operating expenses!

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