While member business loans are up 16.3% over the past year, most of the gain occurred in 2008. The year-to-date gain is less than 0.5%, according to CUNA Mutual Group's May "Credit Union Trends Report."
Total loans are up just 0.5% year-to-date and annual growth has slowed to 5.2%, which is the lowest gain since April 1993, the July 13 report stated.
"Without the strong push from real estate-secured lending, loan growth will head lower," the report read. For 11 of the past 13 years, real estate-secured loans drove total loan growth. While first mortgages are a large share of the year-to-date gain, credit unions will be selling more loans. As a result, growth "will be muted until interest rates move higher." Used vehicle lending accounted for 20% of all loan growth over the past year and 89% of the year-to-date change. The 6.2% gain in this portfolio was offset by a 3.6% decline in new vehicle loans, according to the report.
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CUNA Mutual's forecast shows loan growth improving by the end of 2009 as interest rates and first mortgage retention levels rise.
Meanwhile, credit unions generated 0.8% deposit growth in May through share drafts, money market accounts, and regular shares, which accounted for 112.0% of the gain. Certificates of deposit declined by $1.3 billion in May. Over the past year, liquid deposits have accounted for 64.0% of all deposit growth. Almost 38.0% came from the 15.1% growth in money market accounts which are rapidly approaching 20.0% of all deposits.
"Given that yield spreads between one-year CDs and money market accounts have fallen to 0.88%, members gain significant liquidity without sacrificing much yield," according to CUNA Mutual.
While annual savings deposit growth is 7.4%, the year-to-date increase is already $5.8 billion above the full-year 2008 gain. Many larger and well-capitalized credit unions are reporting very strong deposit inflows, but those with low capital levels are discouraging deposits by lowering CD and money market yields, CUNA Mutual said.
"The extension of the period to pay off stabilization assessments may provide additional room for credit unions to grow over the next few years, but we will not see a safe haven surge of 15% like we did in the 2001 recession," the report read.
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