Credit unions are posting outstanding results in 2012. Membership has increased for six consecutive quarters. Core deposits are rising and now account for two-thirds of total share balances. Lending activity is at a record pace through midyear. Asset quality is returning to levels closer to historical norms as the economy gets back on track. Earnings are the highest in seven years.
This performance is the result of credit union success in building member relationships. Consumers are responding to the cooperative values of credit unions, their focus on service, and their ties to and knowledge of their community whether defined by geography or sponsor group. Cooperative values often translate to value for consumers through better rates and fees. But for many credit unions, their cooperative values go beyond price.
The United Nations has declared 2012 the International Year of Cooperatives, and the cooperative principles are resonating with consumers today perhaps more than ever. Even consumers that are not explicitly aware of the principles notice that the notions of equitable contributions by participating members, emphasis on education, and concern for community are a part of credit unions DNA but are often absent in competitors. In an environment in which consumers are looking for a better way, credit unions are standing apart.
As the credit union reach extends to more than 94 million Americans, the core values embodied in the cooperative principles must continue to play an important role in the industry’s future. Credit unions, whose asset base now tops $1 trillion, are increasingly in the media, community, and political spotlight. It is not the size that validates the industry’s success, however, it’s the measurable impact they are making in each member’s life. That impact is what keeps members coming back to their credit union and bringing others with them.
QUARTERLY CHANGE IN NET NEW MEMBERSHIP
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Membership Gains Lead To Accelerated Growth In Key Measures
- More than 1.3 million net new members joined a credit union in the first six months of 2012
- The average member relationship was up $434 over the past year
Credit unions’ key annual growth rates picked up versus mid-2011 results. Loan balances, share balances, and membership each grew at a faster rate than one year ago. Loan and share growth rates both exceeded the growth rates posted by FDIC-insured institutions over the past year. The increase is driven by a 2.3% membership growth rate that is almost four times the 0.6% rate posted at June 2011. It’s also the highest 12-month growth rate at midyear since 2001.
More than 1.3 million net new members joined a credit union in the first six months of 2012. What’s more, credit unions have posted an increase in membership of at least 230,000 each quarter for six consecutive quarters. Bank Transfer Day in November helped credit unions add more than 400,000 new members during fourth quarter 2011, but it is now clear those gains were not a one-time boost. After adding more than 700,000 members in the first quarter of this year, credit unions added another 600,000 in the second quarter. The second quarter increase is more than double the number of members added in the second quarter of 2011.
These new members are not just opening a regular share account to get an auto loan, though. They are bringing their financial relationship to the credit union. The number of checking accounts in the past 12 months grew 6.3%, nearly three times the new member growth rate. The average member relationship, including both loan and share balances, was $15,201 as of June 30. That is up $434 over the past year an outstanding result given the time it typically takes to develop new member relationships.
The key question for credit unions is: Why now? Is it a response to competitor missteps? Is it the lower rates and fees credit unions generally offer, especially now with free checking going by the wayside at many banks? Is it the local ties credit unions have with their communities and sponsor groups, which larger competitors have lost? Is it the cooperative idea that each member matters, which is often reflected in credit union service? Is it the increased marketing and media coverage, which is leading consumers to investigate credit union options, in many cases for the first time?
The answer, likely, is a combination of these factors. Consumers are recognizing the value of credit unions as an alternative to traditional banking institutions. Each credit union needs to connect with new members to better understand why they are joiningand moving their financial relationships. The answers will give credit unions an indication of how they can build on this positive growth trajectory.
CREDIT UNION LOAN GROWTH RATE
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Fastest Loan Growth Since 2009
- New auto loan balances were up nearly 1%, reversing an 18-month trend
- The annual growth rate in the credit card portfolio more than doubled to 4.7%
Outstanding loan balances at credit unions topped $589 billion as of June 30, growing 3.1% over the past year. After declines in balances during 2010 and 2011, balance sheet loan growth is picking up momentum in 2012.
The growth momentum is not concentrated in a single product; it is across the loan portfolio. First mortgage, auto, credit card, and member business loan balances all increased at a faster rate over the past 12 months than at midyear 2011. Other real estate loans was the only category that posted a decline, which could be the result of members refinancing and consolidating home equity lines into their first mortgage loan.
The biggest turnaround in lending results is in new auto loans. In June 2011, new auto loan balances continued their 18-consecutive-quarter decline, dropping more than 12% from the previous June. That trend ended in the second quarter of this year. At midyear 2012, new auto loan balances increased nearly 1%. Although the gain is modest, it is significant given the importance of auto lending for credit unions.
CREDIT CARD BALANCES AT U.S. CREDIT UNIONS
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