Billion-Dollar Credit Union Membership Drop Mirrors Declines Felt by Smaller Credit Unions
Like some of the smaller credit unions, the bigger, billion-dollar ones are feeling the sting of a drop in membership.
The latest data from CUNA Mutual Group's September "Credit Union Trends Report" showed that while CUs reporting membership declines were predominately at smaller institutions, with 58% of them under $50 million in assets falling in that category, 20% of the billion-dollar plus CU segment also experienced membership drops.
CUNA Mutual Chief Economist Dave Colby noted initial estimates through July, the latest period tracked, showed membership up 65,000 for the month. This reflects an 845,000 member gain year to date. There are now an estimated 92.9 million members being served by CUs.
Still, not all credit unions are growing their membership base. Just-released data based on NCUA 5300 Call Reports showed 53% or 4,036 CUs reported membership declines between June 2009 and June 2010. These CUs held roughly 30% of industry assets.
Colby said Call Report data also showed the 369 CUs with more than $500 million in assets accounted for 91% of all membership gains between June 2009 and June 2010. These larger institutions now hold 51% of all members. The $167 billion-dollar plus CUs hold 36% of industry membership.
Meanwhile, CUs can continue to address the financial issues of greatest concerns to their members.
"Most importantly, when consumer credit is tight, credit unions can help members and their bottom line by adding well underwritten, fairly priced loans to their books," Colby said. "Credit unions will need to employ aggressive-disciplined strategies to search for members to help."
One sliver of good news is credit unions are replenishing capital during difficult times, Colby noted. He said while there is room for improvement in expenses and solid opportunities to be had, the worst of the downward pressure from credit quality may be behind the industry.
Strong lending could be the area where CUs shine in helping members even as portfolio numbers look bleak. At $582 billion, total loans were down 0.9% year to date and 0.7% over the past year as of July, according to the Trends Report. Significant declines in new vehicle loans at negative 15.5% and second mortgages at negative 10.3% reduced total loans by almost $18 billion. These same portfolios are down $12 billion year to date, Colby pointed out.
"Credit unions can grow loans by leveraging local knowledge of both employment conditions and collateral valuations," Colby said.
Member business loans, used vehicle and home equity loans continue to be the front runners posting positive year-to-date growth. First mortgage loans were up 1.7% year to date with positive contributions from fixed and adjustable rate loans, Colby said. Despite retaining 52% of originations, the modest gain this year implies refinances are cannibalizing existing loans, he added.
"Operationally, little has changed over the past few months. Consumers remain hunkered down with loan pay-downs exceeding new borrowing," Colby said. "Tax credit-induced home sales are behind us and refinance opportunities are fading. On the deposit side, rates continue to fall as most credit unions are having a difficult time earning a positive return on new money."
Money market accounts, share drafts and regular shares accounted for a 122% increase that boosted savings 5.7% since July 2009, according to the data. Certificates of deposits were down 3.4% year to date and 6.0% or $14.1 billion over the past year. Colby said although the five payroll Fridays in July biased results upward, as evidenced by the 4.8% month-only gain in share drafts, the overall growth trend for savings and assets is not robust.
"Looking forward, we see CUs aggressively managing asset growth to maintain capital ratios," Colby said. "This implies continued low deposit yields for at least another 12 to 18 months."