WASHINGTON-CUs' balance sheets are "much more solid than their competitors" and despite a huge jump in delinquencies and charge-offs are still on track to grow in 2009 according to Callahan's "First Look" at Q4 2008 and full-year numbers.
CUs representing about 27% of the movement's assets sent their 5300s to Callahan and results show that while the broader economy is making its mark, the industry continues to increase its loanvolume, diversifying its portfolio and picking up deposits.
Loan growth slowed in Q4 to 1% bringing the full year's rate down to 6.6%, but that number is still strong in a bad economy where consumers are saving all the money they can argued Callahan principal Jay Johnson. "The positive is that the lending activity continues to be strong when all of the headlines talk about the credit crisis," he said.
Loan portfolios were boosted by home loans, which now constitute more than 58% of all CU loans. A surge of refinances in December pushed broader real estate lending balances up 10.7%. The plunge in real estate prices as well as lower mortgage rates is attracting a strong number of "bottom feeders" in boom-gone-bust markets like California, Nevada and Florida, and Johnson sees those circumstances, combined with hesitancy on the part of bankers, as an opportunity for CUs in 2009 and beyond. "It gives CUs the opportunity to move beyond just being an auto lender" in the eyes of the general public, he said.
Auto loans became less of a CU staple in 2008, falling by 1.2% over the year with projections for 2009 showing even further weakness. Indirect and used auto loans were up, but a 6.8% drop in new car loans offset those gains. Business loans worked overtime to offset losses in auto lending, jumping by 11% and credit card loan balances also increased to 6.7%.
Delinquencies shot up over 87% to a rate of 1.43%, up from 1.13% in Q3. Charge-offs leaped by nearly 105% over the course of the year, ending at a net charge off rate of 95 basis points, a full 11 points higher than what was reported in Q3. Johnson said the increases were regrettable but bound to happen because of the broader economic strife. Still, he was not greatly concerned that the portfolio hits would damage CUs too badly. "I think credit unions are being very prudent in their lending. We're in a period of time that nobody has been through in ages and if you look at where credit unions are compared to FDIC institutions, they are still in a much better situation," said Johnson. "That said, members are impacted by the economy just like everybody else. I think the expectation is that '09 is still going to be challenging from (a losses) standpoint."
Even so, Johnson predicted some good things for CUs this year. "There will be some opportunities (in 2009), but given the caution of the consumer we're likely to see a slowdown in growth," Johnson concluded. "But I still think there will be some good solid growth on the lending side."
