Asset quality remains high

Strong labor markets, higher take-home pay, record levels of household net worth, and low debt holdings mean credit union asset quality should remain strong. Of course, continued healthy loan growth also will play a role.

Overall, credit union delinquencies have eased of late, with 60+-day delinquencies falling from 0.81% at the end of 2017 to 0.67% at midyear 2018. Five of the six portfolios CUNA tracks reflected declining delinquencies, both relative to year-end 2017 and to year-ago results.

The exception was agricultural business loans, which experienced an increase from 1.07% at year’s end 2017 to 1.67% at midyear 2018.

Net charge-offs are virtually unchanged and remain about 10 basis points higher than recent cyclical lows. Full-year credit union net losses in 2017 were 0.59% of average loans outstanding, and the annualized total came in at 0.60% during the first half of 2018.

Bankruptcies per 1,000 members also inched up from 1.52 in 2017 to 1.71 (annualized) for the first half of 2018.

CUNA economists expect delinquencies to finish the year at 0.75%, then drift up to 0.85% by year-end 2019.

Net charge-offs should move modestly in the same direction, averaging 0.60% in full-year 2018 and rising to 0.65% in 2019.

MIKE SCHENK is CUNA’s deputy chief advocacy officer for policy analysis and chief economist.