Negative economic news continues to batter the nation: gasoline at $4 a gallon; five consecutive months of job losses, flooding across the Corn Belt. Will there ever again be positive news?

The answer, according to CUNA Mutual Chief Economist Dave Colby, is yes. “The simple fact that we are weathering all of these significant downside events speaks well of our nation’s economic resiliency,” Colby reports in the June 2008 Credit Union Trends Report  (477 KB/8 pages) newsletter.

"By no means are we ‘out of the woods,’ and the risks remain high,” he warns, “but I am more optimistic about recovery than I was just three months ago.”

The monthly report, published by CUNA Mutual using data compiled through April 2008, notes that credit union lending growth is holding up well despite economic and credit market environments. “With an annual gain at 7.5% in April, current growth is just 1.1 percentage points below its long-term-trend rate of increase,” says Colby.

Other report highlights for credit unions:

• Real estate-secured loans remained the primary source of loan growth, accounting for 93% of growth over the past year. First-mortgage loans increased 16.8% in the same period. “Given the unfolding events in the U.S. housing and credit markets and further price erosion predicted by almost all forecasters, we are concerned about the risks and sustainability of this loan-growth source,” says Colby. “The alternative would be to put a hold on real estate and business lending and thus lose relevance with members.”
• The loan-to-share ratio rose to 81.0% in April, and the capital-to-asset ratio was unchanged at 11.1% with capital growth slowing to 4.9%. “Both key measures will decline in May due to a deposit surge,” observes Colby.
• The delinquency rate moved fractionally above 1% with further deterioration expected.
• Total assets are up 7.7% over the past year, totaling $812 billion.
• There were 8,297 credit unions at the end of April 2008, a net loss of 99 for the year and 307 over the past year.Total credit union membership hit 90.5 million in April with year-to-date gains of 1.2 million members, but downward revisions are expected.

“Credit unions are in the business of lending and will only succeed by continuing to lend,” says Colby. “Strict adherence to solid underwriting fundamentals and rigorous loan portfolio management will enable credit unions to navigate our current environmental challenges.”

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