The number of credit unions decreased by 88 to 9,488 in the first quarter of
2004. Credit unions collectively added $17.7 billion in assets as the industry
now holds $640.8 billion. With loan balances increasing only 1.1%, or $4.2 billion,
in the first quarter, the majority of those new assets came in the form of cash.
Credit unions, unable to generate new loans and weary of a potential rise in
interest rates, increased their cash and cash equivalent holdings over 20%,
or $10.5 billion.
First quarter share growth of 2.9% did outpace loan growth in the first quarter.
This share growth, however, is low by historical standards, and down from a
5.5% rate a year ago. Credit unions rely heavily on growing share balances in
the first quarter of the year when deposit activity tends to be robust.
With interest rates still extremely low in the first quarter, and credit unions
staying short in their investment portfolio, total income decreased 0.6% as
compared to the first quarter of last year. Interest income had been on the
decline throughout 2003, however, large gains in service revenue, much of which
resulted from the sale of mortgages on the secondary market, aided credit unions'
top lines throughout 2003. Service revenue in the first quarter of 2004 made
less of an impact. These factors helped contribute to the decline in earnings
among credit unions of 6.5% resulting in a 0.90% ROA. Still, credit unions maintain
a net worth to asset ratio at a healthy 10.6%.