NCUA’s second-quarter call report data revealed much cause for optimism: substantial increases membership, loan, and earnings growth.
And yet, credit union loans should be growing at double-digit rates judging by previous economic recoveries.
Credit Union Magazine recently asked Mike Schenk, CUNA’s vice president of economics and statistics: What gives?
CU Magazine: NCUA recently released second-quarter call report data. What caught your attention?
Schenk: We haven’t spotted any shocking new developments but we do see a continuation of several key trends and important changes that we’ve been following over the past several quarters. These include a strong, sustained increase in total credit union membership, overall improvement in loan growth, and high earnings.
CU Magazine: Can you give us some context on today’s strong membership growth?
Schenk: Sure. Over the past 20 years, membership growth has averaged 2.1%. In 2003, those growth rates began a fairly steady decline, hitting a low of 0.7% in 2010.
Since 2010, we’ve seen an astounding turnaround with a 1.5% increase in 2011, a 2.1% increase in 2012, and, in the most recent data, a 2.1% increase in memberships in the year ending June 2013.
This might not sound like a huge number. But remember, the U.S. population has been growing at a rate of roughly 0.9%, according to the Census Bureau. That means credit union membership is growing at more than twice the rate of population growth.
It’s clear: More consumers are discovering the credit union difference, and an increasing number of Americans realize that credit unions are their best financial partner.
CU Magazine: That’s an incredible turnaround. What’s causing this shift?
Schenk: There are a number of factors at play. One of the more compelling developments was Bank Transfer Day which, at a certain level, was a reaction to big banks announcing stiff increases in consumer fees.
But on a broader level, membership growth reflects the public’s disgust with the general bad behaviour many banking institutions have displayed—behaviours that ultimately spawned the financial crisis.
Even today, the Chicago Booth/Kellogg School Financial Trust Index shows that 62% of the public trusts credit unions—the highest rating in the financial sector.
In contrast, the index shows just 28% of the public trusts big banks. With a disparity like that, continued growth in membership is a safe bet.
CU Magazine: And loan growth is back?
Schenk: Well, it’s like the overall economy. Recovering, not recovered. Improving—but we’ve got a ways to go to get back to “normal.”
Credit union loans actually declined (-1.2%) in 2010—the first time that’s happened in modern history. Overall, credit union loan portfolios grew by 1.2% in 2011, and by 4.8% in 2012. The new data shows growth of 5.5% in the year ending June 2013.
Looking at previous economic recoveries at this stage, four years into recovery, credit union loans typically grew at double-digit rates. The long-run average annual growth rate in loans is 7.8%, and a bit over 9% if you remove the Great Recession from the average.
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