From Main Street to Wall Street to Capitol Hill, one subject has been paramount over the past year: credit. Tighter lending standards by many financial institutions has played a significant role in reducing consumer and business economic activity, leading in the fourth quarter of 2008 to the largest decline in GDP since 1982. Expanding the credit markets is the primary focus of the Federal Reserve, Treasury Department and Congress. The CEOs of the nation's largest banks appeared in front of the House Financial Services Committee in February to answer one question: 'What are you doing to increase lending?'
While Washington debates programs to get credit flowing again, credit unions continue to do what is needed in the communities they serve. The two most important numbers from the industry's 2008 results are the 19.3 million member loans originated that totaled over $253 billion in credit granted. The loan volume is the fourth highest on record for the industry and a critical success, given the 'credit crisis' conditions across the country. On the balance sheet, loans grew 6.7 percent during the year to $575 billion. Outstanding loans at credit unions actually grew at a faster pace in 2008 than the 6.5 percent posted in 2007. By contrast, loans outstanding at FDIC-insured institutions declined by 0.4 percent over the past year.
The primary driver of outstanding loan growth at credit unions was the 11.5 percent growth in real estate loans, including 14.8 percent in first mortgages. First mortgage volume was up 16.9 percent across credit unions in 2008, an incredible result given the 24.3 percent decline nationally reported by the Mortgage Bankers Association. Credit unions' share of the U.S. first mortgage market reached an all-time high of 4.0 percent as a result of this activity. In addition, credit unions modified over 10,000 mortgages for members during the year.
The Other Focus: Capital
The other key focus across financial institutions is capital. While some of the largest institutions struggle to raise capital and the government takes an increasingly larger ownership stake, credit unions added over $4 billion in capital in 2008, all self-funded through their cooperative structure. The capital-to-asset ratio for the industry ended the year at 11.7 percent, strong by any measure.
These results highlight credit unions' strengths - strengths that become most apparent in the most difficult environments. This is not to say that the industry is not facing challenges: the delinquency rate rose to 1.37 percent at year-end, return on assets declined to 31 basis points in 2008 and some credit unions are measurably impacted by the economic conditions affecting their members. However, the industry continues to offer its members what they need most today: a sound and trusted financial institution that is there to assist them when others cannot or will not.
Given the industry's actions, is it any surprise that credit union membership grew at the fastest rate in five years in 2008?