Credit Unions Should Weather Tough Economy
While many industries are struggling in the current Michigan and U.S. economy including some areas of financial services, credit unions continue to grow. According to the newest available statistics, credit unions look well-prepared to deal with the negative economic growth that began nationally in the third quarter of 2008 and is predicted to continue into 2009, and Michigan credit unions should continue to cope with a sputtering state economy.
According to the latest Callahan and Associates, Inc. peer-to-peer data, Michigan credit unions experienced growth in total assets, loans, shares, net worth and membership during the 12 month period ending June 30, 2008.
Credit unions in Michigan grew 7.1 percent to $34.4 billion from the $32.2 billion reported one year prior. Loans were up 5.3 percent to $21.6 billion, while shares grew 7.3 percent to $29.1 billion. Total credit union net worth grew by 4.7 percent to $4.2 billion for a net worth to total asset ratio of 12.2 percent. Credit union membership grew 2.3 percent to 4.4 million.
Credit unions remain strong across the country. According to CUNA’s third quarter statistics for credit unions nationwide, over 98 percent of credit unions are well capitalized with an average capital-to-asset ratio of about 11.2 percent. Both savings and loan growth are increasing, and CUNA predicts credit union saving growth to rise to 10 percent during 2009, as the recession and falling home prices encourage households to save more at insured depository institutions. Loan growth, however, is expected to decrease during 2009.
One area of concern for 2009 is loan delinquency rates, which are predicted to increase as credit quality falls and the mortgage credit crisis affects the auto, credit card, student and business lending sectors. Since June of 2007, delinquent loan balances in Michigan increased by 1.7 percent to $286.9 million from $282.1 million. CUNA expects overall loan delinquency rates to rise to 1.5 percent nationally in the New Year.
Michigan Economy Continues to Struggle
The Michigan economic outlook remains grim, as jobless rates continue to increase. According to data from the Michigan Department of Treasury, unemployment rates rose in all of Michigan’s major labor market areas between September of 2007 and September of 2008. Four areas were hit with rate increases exceeding two percentage points: Monroe, Flint, Muskegon and Benton Harbor. Employment fell in all major labor market areas with a large median decline of 4.4 percent. Unemployment rates rose in all 83 Michigan counties. Michigan wage and salary employment decreased by 78,000, or 1.8 percent. This number was down 519,000, or 0.4 percent, nationally.
The auto industry continued to suffer, with light vehicle sales in Michigan down 22.7 percent from last year to their lowest level in over 16 years. Compared to a year ago, the three-month average of state vehicle production fell 22.1 percent compared to a 20.9 percent decline nationally.
Nationally, CUNA predicts the unemployment rate could climb as high as 9 percent by the end of 2009, and as the labor market weakens, wage and inflation pressures will be reduced. Core inflation could decline to 1.5 percent. The Federal Reserve, meanwhile, will inject liquidity into the banking system in an attempt to unfreeze credit markets.
Foreclosure Numbers Slightly Improve; Home Prices Continue to Drop
According to RealtyTrack, fall brought some good news for the Michigan real estate market: Michigan foreclosure filings are down 15 percent from a year ago. Michigan still ranked seventh nationwide in October for foreclosure filings with a total of 11,393 or one from every 396 households. That compares with a national rate of one foreclosure for every 452 households.
The drop in foreclosure filings is only cause for cautious optimism, however, as a number of factors play into the change. The median price of homes sold was $70,000 in October, a 40 percent drop from the $117,000 median sales price in October 2007. Home prices continue to drop, which some believe has created a greater balance between the number of foreclosures coming on the market and the foreclosed houses being purchased.