MADISON, Wis. – While there are now a few indications the recession has hit bottom, credit unions should prepare for a few aftershocks in what could be a slow road to recovery, advises CUNA’s 2009-2010 Credit Union Environmental Scan (E-Scan).

The recession topped this year’s list of Top 10 E-Scan Insights, which identifies the key trends and challenges affecting credit unions in the coming years. The E-Scan is credit unions’ premier source of issues and trends affecting the financial services industry and is used to prepare for strategic planning sessions, budgeting, product development, and new initiatives.

The top insights, as identified by E-Scan analysts, are:

1. Recession – Evidence is building that indicates the economy, while a long way from recovery, might have hit bottom. Credit unions are well-positioned to take advantage of opportunities in the credit and deposit markets, if they’re willing to be bold in this time of risk aversion.
2. Unemployment – The U.S. unemployment rate is the highest it has been in 25 years as employers continue to cut jobs. It could hit 9.5 percent by year-end and 10.5 percent in 2010. CUNA economists expect unemployment to continue to increase at about 300,000 jobs per month through the end of 2009.
3. Housing – Rising foreclosure numbers and the supply of unsold homes puts even more downward pressure on home prices. Analysts say the housing market will continue its slide through 2009, despite reports of higher home sales in some areas and slight improvements in home construction.
4. Bankruptcy – The weak economy and its repercussions – rising unemployment, lower pay, fewer people with health insurance, and the mortgage crisis – are all playing a role in rising bankruptcies. Analysts expect bankruptcy filings to reach nearly 1.5 million by the end of the year – a 36 percent increase over the 1.1 million filings in 2008 – surpassing the average number of annual filings (1.4 million) that took place prior to the enactment of new bankruptcy laws in October 2005.
5. Lending – Although credit union loan growth will fall to 6 percent in 2009, look for excellent lending opportunities in business, auto, student, and mortgage lending in 2010 as many banks will be reluctant to lend in these areas due to their capital constraints, higher risk aversion, cash hoarding, and tighter underwriting standards. Loan growth will rebound in 2010 to an 8 percent annual growth rate, the strongest pace since 2005.
6. Membership growth – For the first time in more than 20 years, credit unions saw an increase in the percentage of members in their prime borrowing years (age 25 to 44), from 38 percent of all members in 2006 to 42 percent in 2008. At the same time, younger members between the ages of 18 and 24 declined from 6 percent in 2006 to only 4 percent in 2008, representing a large, attractive market for credit union growth.
7. Corporate CUs – NCUA will continue to work through its corporate stabilization plan and its corporate restructuring initiative. While the costs and accounting procedures of the plan have yet to be finalized, it’s clear the plan will reduce credit union earnings.
8. Legislation – NCUA’s corporate stabilization plan will dominate credit union legislative and regulatory efforts this year and possibly beyond. CUNA will continue to monitor other important issues, such as lifting the business lending cap, mortgage cramdowns, and interchange fee income.
9. Earnings – Credit union return on assets is expected to be only 0.4 percent in 2009 and 0.5 percent in 2010 as deteriorating credit quality and slower loan growth reduce earnings. Improving loan credit quality in 2010 will reduce provisions for loan losses and boost credit union earnings.
10. Consumers – Consumers are saving more and spending less as the national savings rate, below 1 percent from 2005 to 2008, is now back above 4 percent. After losing a large portion of their personal wealth, consumers will need help and personal finance education from their credit unions to manage their finances and live within their means.

Additionally, the E-Scan covers these key issue areas: trust, demographics, economics, marketing, lending, financial literacy, payment systems, human resources, and legislation and regulation.

The E-Scan is available in four formats: 80-page report, 100-slide PowerPoint presentation, 40-minute DVD, and strategic planning guide kit. The planning guide leads credit unions through a step-by-step process to achieve actionable short- and long-term goals, and the kit includes applicable worksheets, the DVD, and 12 copies of the E-Scan report.

For more information or to order CUNA’s 2009-2010 Credit Union Environmental Scan resources, visit advice.cuna.org and click on “Reports,” then “Strategic Research,” or call (800) 356-8010, press 3, and ask for stock number 28801 (report), 28803P (PowerPoint), 28802 (DVD), or 28804K (strategic planning guide kit).