The economic rollercoaster continues its wild ride, and mostly it’s headed downhill. During the past month, observes CUNA Mutual Chief Economist Dave Colby, venerable American financial institutions have disappeared, and a massive $700 billion bailout plan has been signed into law.

“Coordinated global efforts are also underway, but these are uncharted waters,” Colby says in the October 2008 Credit Union Trends Report  (508 KB/8 pages) newsletter. “Risks remain weighted on the downside, and maybe the biggest wild card is, who will be asked to hold the checkbook after the presidential election?”

The monthly report, published by CUNA Mutual using data compiled through August 2008, also notes that total credit union loans were revised down by $5.4 billion at midyear, knocking a whole percentage point off previously reported estimates. The bulk of the revisions were in real estate-secured lending ($4.5 billion), but vehicle loans were also lowered following CUNA’s semi-annual benchmarking with midyear NCUA Call Report data.

“The downward revision in vehicle loans is and will continue to be a drag on credit union lending performance,” Colby advises.

Year-to-date through August, total loans are up 5.4% with nearly two-thirds of the gain occurring in the past three months. Annual growth held at 7.5%

Other report highlights for credit unions:

• Over the past year, real estate loans have accounted for 90% of all loan growth, including a contribution of almost 53% from fixed-rate first mortgages. “Given the economic environment and the rising share of credit union loans secured by real estate, we question the sustainability of the 13.3% real estate growth,” Colby says. 
• The loan-to-share ratio (83.0%) and the capital-to-asset ratio (10.9%) were revised lower, but remain strong. 
• Credit quality measures continue to show moderate erosion with delinquencies now equal to 1.038% of all loans.
• At $823 billion, total assets are up 7.3% from a year ago. “Both savings and asset growth remain solid, but we have yet to see a ‘safe haven’ deposit surge due to economic and equity market uncertainty,” Colby explains.
• There were 8,224 credit unions at the end of August 2008, a net loss of 278 over the past year.
• Total credit union membership was estimated at 90.8 million in August. “Membership was restated 801,000 lower, but annual growth remains above trend,” Colby notes.

“While the current economic situation is by no means comparable to the Great Depression, some conditions in consumer finance are similar to those that helped create the Federal Credit Union Charter in 1934,” Colby observes. “Our goal now is to justify all credit union charters by assisting member households through these difficult times.”
 
View the three most recent monthly Credit Union Trends Report newsletters.