A recession is now in the cards, and the duration of the downturn will be modest, according to analysis provided in the January 2008 Credit Union Trends Report  (363 KB/8 pages) newsletter.

Expected fiscal and monetary stimuli will help hold down the length of the recession, barring additional shocks to the economy, reports the monthly newsletter, published by CUNA Mutual using data compiled through November 2007.

“Prior to the December employment report [released in November], I believed the U.S. economy would narrowly escape the recession declaration,” says CUNA Mutual Chief Economist Dave Colby. “[But] a few sectors of the economy and a few regions of the country are already experiencing recessionary conditions. I now believe a modest downturn will be difficult to avoid.”

Colby added, “So let’s slap the ‘recession’ title on this one, and then get on with business.”

Other report highlights for credit unions:

• Loan growth stood at 6.8% year to date (7.3% year-over-year), despite unusual market conditions. “Given that over 75% of the annual gain was attributable to 11.1% growth in real estate-secured loans, portfolio expansion at this rate is not sustainable,” Colby advises.
• First-mortgage portfolio gains have accounted for 59% of total loan growth over the past year and 64% of the growth over the past three months. Second-mortgage growth of 15.4% contributed 20% of annual loan growth.
• Loan-to-share and capital-to-asset ratios were strong at 83.6% and 11.5%, respectively, at or above prior year levels. Loan delinquencies have risen 53%, but remain manageable at 0.9% overall.
• At $776 billion, assets have risen 7% over the past year. “November’s deposit/asset surge is temporary, but we are seeing a cyclical upturn in growth due to economic uncertainty,” Colby notes.
• There were 8,443 credit unions at the end of November, a net loss of 245 over the past year—a pace that puts 2007 consolidation below the historical average.
• Total credit union membership stood at 89.5 million amid lowered estimates. The annual gain is expected to top 1.2 million, the report notes.

Despite the prediction of a recession, “Credit unions begin from a position of strength and should be able to reach out and help more members through challenging times,” Colby says. “The good news is that some of the unrealistic competition has disappeared.”

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