The bad news continues to outweigh the good news, and it appears the toughest economic times are still ahead, according to CUNA Mutual Chief Economist Dave Colby.

“If we are lucky, the next several months will be the most challenging any of us has ever faced,” warns Colby. “If we are not lucky, this will be the most challenging several quarters any of us has ever managed through.”

Colby cites the government takeover of Fannie Mae and Freddie Mac, and the fallout among a few large banks and brokerage houses, and he points out the repercussions throughout the financial services industry. “Credit unions are not immune to the broader credit market and real estate sector problems,” he notes in the September 2008 Credit Union Trends Report  (410 KB/8 pages) newsletter. “I still believe we are about halfway through this cycle, and the most difficult half is ahead.”

The monthly report, published by CUNA Mutual using data compiled through July 2008, reports that credit unions continue to generate solid lending volumes under current conditions. At the end of July, total loans were up 5.3% year-to-date, including 1.2% in July.

Other report highlights for credit unions:

• Total loans have increased 8.5% from a year ago. 
• First mortgages account for 78% of loan growth this year and 70% over the past year. “With first mortgage originations up 42% and loans sold as a percent of originations down, this portfolio segment will once again drive total loan growth through year-end,” Colby advises.
• Home equity loans, second mortgages, and credit cards posted solid growth results. Vehicle loans finally made a small positive contribution in July, and member business loans showed a 10.8% annualized gain.
• The loan-to-share ratio rose to a solid 83.0%, and the capital-to-asset ratio held at 10.9% although capital growth continues to slow.
• The delinquency rate stood at 1.05%.
• At $822 billion, total assets are up 8.4% from a year ago. “Both savings and assets declined again in July as the drawdown of fiscal stimulus payments continues,” notes Colby.
• There were 8,223 credit unions at the end of July 2008, a net loss of 296 over the past year.
• Total credit union membership was estimated at 91.3 million in July, “but we will see downward revisions in member counts,” Colby says.

“Most credit unions are financially stronger than their members and should be in a good position to make a difference,” says Colby. “What we do now will define us going forward.”

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