While many institutions have backed away from lending due to both economic and institutional challenges, one segment of the financial services market is on pace for record loan volume in 2008: credit unions. Over $200.2 billion in new loans have been originated by credit unions through the first nine months of the year. The total loan volume is on pace to surpass the previous high reported during the refinance boom of 2003.
YTD Loan Originations | For all U.S. Credit Unions at Sept. 30, 2008
Source: Callahan's Peer-to-Peer
Growth is seen in key results across credit unions. Loans outstanding are up 7.2 percent over the past year to $568.7 billion. Share balances have grown 5.8% to $679.4 billion. Membership has increased by 1.3 million to 89.9 million.
Beyond the dollar amounts, the impact of credit unions is seen in the more than 14.7 million member loans that have been funded through September. The industry is reaching all-time highs in its national share of first mortgage volume, auto loans and credit card balances in 2008. Credit unions are also investing in the communities they serve in other ways. Over 400 new branches have been opened and over 4,000 new employees have been hired this year.
Credit unions continue to post positive earnings, with $3.0 billion in net income through September 30th. The capital base has grown over $3.8 billion during the past year to top $94.5 billion. The industry’s net worth ratio stands at 11.2 percent at the end of the third quarter.
These results indicate credit unions are the one segment of financial services that has continued to function normally in the current environment. Although delinquencies are rising and net income is below 2007 levels, these results reflect the realities of serving consumers during an economic downturn. Providing affordable credit to consumers when they cannot otherwise attain it is the role credit unions were first designed to play, and the numbers indicate the industry is doing just that.
Mortgages Driving Loan Growth
Credit unions continue to provide financing for members’ homes. First mortgage volume is up 26 percent to $56.5 billion through the first nine months of 2008 versus the same period a year ago. The amount is the second highest on record, below only 2003’s historic volume. The growth in volume comes as U.S. first mortgage volume has declined 20 percent according to the Mortgage Bankers Association. As a result, credit unions’ share of the first mortgage market reached 3.9 percent through the third quarter. The industry’s market share is up from 2.5 percent a year ago and nearly double the 2.1 percent share recorded through the third quarter of 2006.
On the balance sheet, first mortgages outstanding reached $208.0 billion, up 15.8 percent over the past 12 months. Credit unions are holding a slightly larger amount of first mortgage originations on their books this year than in 2007. Sales of first mortgages to the secondary markets totaled $13.4 billion through September, accounting for 24 percent of originations versus 27 percent a year ago.
12-month Loan Growth | For all U.S. Credit Unions at Sept. 30, 2008
Source: Callahan's Peer-to-Peer
Balances of other real estate loans, primarily home equity, are up 6.3 percent versus a year ago. Originations have declined along with home values, with year-to-date volume of $24.4 billion below September 2007 results by 13.7 percent.
Credit union efforts to let the communities they serve know they are operating ‘as usual’ is a key part of their loan growth. Recent letters from CEOs to members have touted not only the safety and soundness of credit unions but also the ability to lend. Member One FCU ($358M, Roanoke, VA) has advertised that they have ‘$50 Million to Lend’ on billboards in their market. Seminars have been held throughout the year by many credit unions looking to help consumers better understand their home financing options. These actions provide a foundation for long-term relationships with members looking for a true financial partner.