1Q First Look: Credit Unions Continue to Grow Despite Signs of Member Economic Strain

First Look March credit union data shows that credit unions are continuing to experience growth, but there are emerging signs that members are beginning to feel economic strain.


Credit unions continue to see momentum in membership growth. Credit Unions participating in Callahan & Associates First Look Program posted an increase of 4.36 percent since 1Q 2007 verses 4.0 percent over the previous 12-month period. First Look credit unions currently account for $173.5 billion in assets, approximately 22 percent of the industry, with an average asset size of $667 million. The results from these credit unions will be higher than the total industry average, but are a good early indicator of industry-wide trends.

Lending Practices Contribute to Member Growth
One of the factors that has led increased member growth is the consistent credit union approach in the current economic environment. According to the Federal Reserve Board's January Senior Loan Officer Opinion Survey, 61percent of banks have tightened their mortgage lending standards. In 2007, credit unions outpaced banks in 1 st mortgage originations, HELOCs, and credit card loans and this trend seems to be continuing in 2008.

The average loan balance per member increased 4.4 percent over the previous 12 months to $13,601.Total loans outstanding at First Look credit unions have risen 8.7 percent since 1Q 2007, largely driven by a strong 47.8 percent increase in 1st mortgage originations. Credit union lending practices are helping to differentiate them from banks, and it doesn't seem to be lost on consumers, who are actively borrowing more from credit unions.

One Indicator Suggests That Members Are Beginning to Feel Financial Strain
Credit unions are performing well overall, but there are a few indicators suggesting that members are experiencing increased financial hardship. While the amount of unsecured credit card loans grew 16.3 percent over the previous 12 months, this is a slower pace than the year before. Over the same period, the delinquency rate on these loans rose to 1.4 percent from 1.0 percent in 1Q 2007. Together, this suggests that members are cutting back on spending and having a tougher time paying off credit card debt due to the economic slowdown.

With members facing greater economic pressures, it is more important than ever for credit unions to make an extra effort to work with their members. Ron Burniske, CEO of Chartway FCU, underscored this approach, “The current environment is a wonderful opportunity for credit unions to step forward and provide credit with our excess liquidity. We are able to help people who have good credit but are in a bad situation. While the environment is negative, our marketing is positive. Right now, no one wants to offer solutions. The solution is credit unions.”

Related Resources
To participate in our complementary First Look Program and get a glimpse at credit union first quarter results, click here .




May 5, 2008


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