Membership in 2004 Makes a Slight Comeback as Credit Union Count Ends Year on a Decline

Loan Growth Sees Highest Upswing since 2000 as Loan-to-Share, Capital-to Assets See Strong Improvements. MADISON, Wis. – It’s been four years since credit unions have seen a 10% increase in the growth of their loan portfolios. This, according to CUNA Mutual Group’s December 2004 Credit Union Trends Report. Credit unions achieved 10.4% total loan growth in 2004, an increase not seen since 2000. At $429 billion, CUs had a net increase of $40.6 billion in total loans outstanding. These results were attained despite an estimated $18-$20 billion in first mortgage loan sales and numerous CUs selling their credit card portfolios. On an annual basis, all major loan portfolio segments showed positive results, according to the report. The big growth contributors in 2004 were adjustable rate first mortgages at 26.4% of the total loan increase; new vehicle loans contributed 18.4%; and home equity loans with an 18.3% share of the gain. The report also revealed more proof that member business lending continues to grow. Early estimates show member business loans grew by 37% and accounted for almost 9% of all loan growth. CUNA Mutual has forecast “less aggressive” member borrowing and CU loan holdings constrained by asset increase, which could lead to slower loan growth in 2005, said Dave Colby, CUNA Mutual chief economist. “Credit unions finished 2004 on a strong financial footing, but will be challenged in 2005 to balance the need for gross spread with the need for liquidity,” Colby said. Meanwhile, the industry finished the year with an estimated 9,368 credit unions, which represents a net decline of 341 CUs during 2004. Colby said CUNA Mutual’s forecast understated market contraction by 17 credit unions. “Competitive pressures, high costs to meet member demand for multiple product and delivery channel choices, plus a declining spirit of volunteerism, are key factors driving consolidation,” Colby said. “The impacts of these factors are felt most on CUs with assets under $20 million.” Colby said looking forward, CUNA Mutual is anticipating market contraction in the 3.5% to 3.6% range, meaning the industry may see a net decline of more than 650 credit unions through 2006. By the start of 2007, more than 8,700 credit unions are predicted to be around, he added. Membership, on the other hand, made a slight comeback for the year, according to the report. In 2004, 1.3 million members joined credit unions but the numbers were the smallest increase since 906,000 joined in 1991. There are currently 82.6 million members. “Even our conservative forecast overstated actual results,” Colby noted. “We had factored in natural growth, growth from field-of-membership expansions and new members from indirect lending programs. We continue to believe there is a good supply of new members, but the combined effects of more accurate data processing systems (counting members not accounts) and cleansing the rolls of inactive low-balance members, are reducing existing membership estimates.” Right now, the “data `noise’ is masking true trends,” Colby explained. NCUA 5400 data through the end of the third quarter of 2004 showed that 1,378 credit unions reported membership declines of 100 or more. These credit unions held 18% of all assets. “Our outlook indicates better times ahead for net membership growth,” Colby said. “We should expect gains in excess of 1.4 million members per year. This forecast generates a membership base above 89 million at the start of 2007.” In other areas, assets reached $665 billion, but growth was decelerating, up just 5.7% for the year, according to the report. Savings were up 5.0%, although second half growth was less than 1%. Both the loan-to-share ratio (75.0%) and the capital-to-asset ratio (10.9%) improved over the course of 2004. -