The coverage ratio, which measures the total allowance for loan loss balance relative to delinquent loans outstanding, rose to 117.0% in the fourth quarter. This means that credit unions have reserved $1.17 for every $1 in delinquent loans that they have on their books. If all the delinquent loans as of December 31 went bad, credit unions would be able to cover those loans without falling back onto other reserves.
The coverage ratio has risen in 2012 even as total allowance for loan losses has dropped. This is a result of improved asset quality at credit unions. As the high delinquency that came with the recession declines, credit unions are comfortable decreasing the amount they have set aside for potential loan losses, but the industry remains well protected.
COVERAGE RATIO & TOTAL ALLOWANCE FOR LOAN LOSSES
DATA AS OF DECEMBER 31, 2012
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