Midyear 2008 results indicate that credit unions are expanding member relationships at a time when many financial institutions are pulling back from the market. Annual loan and share growth rates have accelerated from a year ago. Membership growth is holding steady but that can also be considered positive, given that indirect loan volumes are lower across the industry. Average loan and share balances reached new highs of $12,385 and $7,701 respectively, with each rising over five percent over the past year.
The industry’s momentum continued strong through June. Three important trends to take away from the results are:
- Lending remains robust. Credit unions recorded an all-time high for loan volume in the first six months of the year. The $134.2 billion in activity is a nine percent increase from a year ago and surpasses the previous high posted during the refinance boom in 2003. As in 2003, mortgage lending is a key driver of volume with $40.6 billion in first mortgage originations through June. It is interesting to contrast the credit union results with the recently released Federal Reserve quarterly Senior Bank Loan Officer Opinion Survey, in which 75 percent of banks indicated they had tightened standards on prime mortgage loans and 30 percent indicated they experienced weaker demand for these loans.
- Members are saving. Share balances grew $43.4 billion over the past twelve months, the highest rate of savings growth since 2003. Certificates and money market balances are leading the rise with each up over $18 billion since June 2007. IRA and regular share balances also increased over this period. Share drafts are the only category that did not see an increase over the past year but are essentially flat. Total share balances reached a new high of $688.2 billion as of June 30th.
- Credit unions are financially sound. The net worth to assets ratio is 11.0 percent for the industry at midyear, well above the 7.0 percent regulatory ‘well capitalized’ level. In addition, credit unions are adding about $1 billion to capital balances each quarter. In terms of asset quality, although delinquencies are rising, over 99 percent of credit union loans are being paid on time by members.
Overall, the midyear results show credit unions are building member relationships at a critical time. With others pulling back just as consumers are being pinched by lower home values and rising inflation, credit unions are demonstrating that they are with their members for the long-term. This is a key credit union difference that is clearly visible today, providing a strong foundation for lifetime member relationships.