Third Quarter Data Reveals CUs Positioned for Growth in 07

While growth remains a challenge is some areas, there are other areas in which credit unions are outperforming the market.


Credit union membership surpassed 84.4 million and assets reached $716.9 billion in the third quarter.  Although both represent new highs for the industry, growth remains a challenge for credit unions.  Share balances have risen 2.9% and membership 0.9% since last September.  Lending remains the driver of balance sheet growth, rising 8.1% over the past year.

While some of the “headline” results convey an industry that is struggling, there are areas in which credit unions are outperforming the market.  Real estate lending continues to be solid despite a slowing housing market, with both first mortgage and other real estate loan balances growing at a double digit pace.  Credit cards are growing at more than twice the rate of banks.  Business loans continue to grow at more than 20% annually.  And longer-term savings accounts – certificates and IRAs – are posting annual increases in balances of 23.9% and 6.8%, respectively.

Highlights include:

  • Real estate lending continues to be the primary driver of loan portfolio growth in credit unions, rising $28.3 billion, or 13.0%, for the past year.  First mortgage loans outstanding reached $161.4 billion as of September 2006, up 10.8% for the past 12 months.  Other real estate loan balances are rising even faster, up 17.3% for the past year to reach $84.8 billion.
  • Credit unions have recaptured momentum in credit card lending.  Outstanding balances reached $25.2 billion as of September, rising 9.5% from one year ago.  This growth rate is more than double the 4.0% rate posted by banks and thrifts for the past year. 
  • With the Big Three auto manufacturers working to return to profitability in 2006, incentives have been reduced and there have been no “Employee Pricing” type promotions offered.  No major incentive program has meant no major boost for auto sales nationally.  The resulting slower new car market led to new auto loan balances in credit unions rising only $1.6 billion in the third quarter of 2006, a 78% decline from the growth posted in the third quarter one year ago. Used auto lending has also slowed, with balances up just 0.6% since September 2005 to $90.0 billion.
  • Business lending continues to post the fastest growth rate of any loan category.  Business loan balances have risen 24.0% during the past year to reach $18.6 billion.
  • Total income is up 14.5% versus the first nine months of 2005, driven by higher loan and investment portfolio yields.
  • More aggressive dividend payments have meant a tighter net interest margin.  The 3.20% margin through September is down seven basis points from this time last year but is unchanged from mid-year results.
  • ROA is at 88 basis points, up one basis point versus second quarter results.

Although credit union growth is not at the level it was at the beginning of the decade, the industry is managing quite well through historical changes in the interest rate environment and a slowing economy.  Margins and ROA are stable, and capital levels continue to rise.  Net income has declined slightly, but this is due to credit unions returning more to members via higher dividend payments.  With income rising at a double digit pace and operating expense growth under control, credit unions are fundamentally sound and positioned for growth as 2007 approaches.

To learn about other trends from the third quarter, join us for our complimentary Trendwatch Call.




Nov. 27, 2006


  • When we are outperforming the market on these kinds of measures, then why is our growth not in line with that? Are we not communicating our performance enough? Is our focus on current members preventing us from attracting new members? I'm a little disturbed by any interpretation that the industry is "struggling" . . . especially when we've got some real sucesses on our hands. Instead of acknowledging any struggle, we should be focused like a laser on what we're doing right.
  • Let's face it - As an industry, we have learned (and continue to learn) through the school of hard knocks on minimizing risks. Management is not rewarded for taking on higher risk credit. Are we willing to reach out - NO. The regulators talk a good game on this but when they see the results, they are more than happy to come in and give you lots of "help."