Looking Forward to 2010: A Reflection on Credit Union Lending

Credit unions grabbed record market share in autos, mortgages, and credit cards the first half of 2009. Learn how the industry’s role as ‘first-responders’ to their member needs helped them find record lending success in 2009.


In the past twelve months, credit unions have redefined what it means to be a cooperative. The focus has been not on "what makes us different" but rather "the difference we make." Credit unions have reached record levels of lending and are stepping in to fill the void left by the changing financial services landscape.

 A Reflection on 2009 Credit Union Industry Lending
Credit unions originated a record $144.2 billion in loans in the first six months of 2009, grabbing record market share in autos, mortgages and credit cards. As competing institutions dramatically tightened lending standards, credit unions stepped up to fill a void for consumers. Despite the strong loan origination activity, growth in loans outstanding is slowing. The growth rate of loans on the balance sheet fell to 4.1 percent over the past 12 months, down from 7.7 percent a year ago.

This is largely driven by two factors, both related to first mortgages, the single largest driver of loan volume in the first half of 2009. First, historically low mortgage rates are driving members to refinance existing mortgage loans, simply replacing existing volume. Second, credit unions sold a record $30.8 billion of first mortgage loans on the secondary market as of June. These sales keep the long-term, low interest rate loans off balance sheets, an A/LM consideration.

While portfolio growth was slower, all loan categories have grown since June 2008 except for new auto loans. The largest component of the $578.2 billion portfolio is real estate lending. Outstanding first mortgages are responsible for 72 percent of total loan growth since June 2008. Key categories such as credit cards and used auto loans are also growing at rates faster than the overall portfolio. Member business loans posted the fastest year-over-year growth rate, up 14.4 percent since June 2008. The increase in real estate lending combined with double-digit growth in the member business loan portfolio to increase the average loan balance to $12,649 in June.

 Personal Reflection from Cathie Tierney
Community First Credit Union ($1.3B, Appleton, WI) CEO Cathie Tierney took time recently to discuss the opportunity for credit unions in lending moving into 2010:

"Despite challenges, credit union lending continues to move in the right direction. As an industry we've captured 20% of the auto lending market. With real estate lending, the industry has set a goal of 10% market share and we've achieved almost 6%, up from the 2% share we held not so long ago. I believe we will continue to move closer to that 10% mark. There has never been a better time to increase our market share in this area, to make certain that, in these turbulent economic times and during this recent period of financial institution stress, members realize the value they receive from their credit union – not only when it comes to service (we're local, easy to deal with, and do the right thing) but also when it comes to the better rates & fees we provide.

We are also moving in the right direction with respect to technology. Lending, especially real estate lending, is becoming more transparent. Members — and the real estate community — can track the progress of their applications. A number of credit unions are delivering totally paperless mortgage loans. This improves efficiency (fewer phone calls with questions) and raises satisfaction.

We should continue to reach. Perhaps there will come a day when we can offer mobile mortgages, members taking their low-rate mortgages with them if they move (rather than applying for a new higher rate mortgage). We also should work towards credit unions doing their own bundling and securitizing for sale of mortgages on the secondary market. With for-profit corporations cutting back, I think the CU industry could do well in warehouse lines of credit because we have a reputation of doing things right. In addition, some time in the future I'd like to see loans individually tailored to fit a member rather than making loans to fit 'traditional' rules. This is ambitious, but I really don't see auto lending and other consumer lending being able to sustain us as they have in the past; we are going to have to do more."

 The Complete Credit Union Industry Story
Record levels in lending are just one of the successes for credit unions in 2009. Looking forward to 2010, credit unions are positioned to continue to support their members' interests. Continuous efforts to serve members are creating the foundation for greater success in lending in the upcoming year.

Learn from several credit union leaders, understand the industry's successes, and help your credit union energize 2010 initiatives with the 2010 Credit Union Directory. Learn more now.