The possibility of a recession becomes more likely with a U.S. economy that is extremely fragile, according to analysis provided in the December 2007 Credit Union Trends Report  (330 KB/8 pages) newsletter.

Most economic observers continue to warn of the increasing chances for a recession, and those in the investment community are more pessimistic. That points to more capital-market fallout in the months ahead, reports the monthly newsletter, published by CUNA Mutual using data compiled through October 2007.

“The crisis in the credit markets has yet to significantly impact the credit union industry, but we are unlikely to come away unscathed,” says CUNA Mutual Chief Economist Dave Colby. “Through October, credit union income-statement and balance-sheet results remain positive.”

Other report highlights for credit unions:

• Annual loan growth improved to 7.2% in October, based on very good first- and second-mortgage results. “Unless CUs increase loan sales in the last two months of the year, annual growth will exceed 7%,” says Colby.
• Real estate-secured loans have supplied almost 75% of the loan portfolio’s annual gain in 2007, while vehicle loans have contributed just 5%.
• Loan-to-share and capital-to-asset ratios grew to 84.3% and 11.6%, respectively. Loan delinquencies are on the rise but remain below 0.9%.
• There were 8,463 credit unions at the end of September, a net loss of 253 over the past year—a pace that could hold the decline below 300 for the first time since 1998.
• Total credit union membership stood at an estimated 90.2 million, a “strong growth trend” of 2.1 million over the past year, the report notes.

Looking ahead to 2008, Colby predicts significant growth and bottom-line challenges. “Once again, we are entering uncharted waters, but from a position of strength,” he says.

View the three most recent monthly Credit Union Trends Report newsletters.