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CU capital and savings grow
MADISON, Wis. (7/7/09)--Credit unions’ capital formation and savings balances are both on the rise, according to a Credit Union National Association (CUNA) economist’s evaluation of CUNA’s May monthly sample of credit unions. “Credit unions resumed capital formation in May after five consecutive months of decline,” Steve Rick, CUNA senior economist, told News Now. “The credit union movement’s capital level grew 0.5% in May, reaching $83.6 billion. This is 7.1% lower than a year earlier and $7.28 billion below the high-water mark set in November 2008.”
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Credit union savings balances increased 0.8% in May, but grew 7.3% during the first five months of 2009. Share drafts grew the fastest with a 2.5% increase, followed by money market accounts (2.4%), regular shares (1.0%), and individual retirement accounts (0.8%). One-year certificates declined 0.6% during May. “Credit union savings balances rose 7.3% in the first five months of this year, up from 6.8% for the similar period last year, and above the recent 16-year average of 4.8%,” Rick said. “Members’ concerns over job security have reduced their proclivity to spend and increased their desire to save current income. Precautionary savings balances are on the rise as witnessed by the 7.5% increase in regular shares over the last five months. “With interest rates bottoming out, the speculative demand for money is also on the rise, as witnessed by the 12% jump in money market accounts so far this year,” he added. “When market interest rates turn the corner and begin to rise over the next year, funds from both of these products will flow back into share certificates.”
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Credit union loans outstanding increased 0.2% in May and 0.5% during the first five months of 2009, down from a 2% increase during the same period of 2008. Credit card loans led growth, rising 1.2%, followed by fixed-rate mortgages (0.7%), other loans (0.6%), and used-auto loans (0.5%). “Credit union loan balance growth was very weak in the first five months of 2009; in fact it was the slowest pace since the 1992 recession,” Rick said. “During the first five months of 2009, loan balances increased only 0.51%, down from 2% for the similar period last year and lower than the past 16-year average of 2.7%. “Credit union members are deleveraging their balance sheets by paying down their consumer loans,” he added. “So far this year, credit card, unsecured and new-auto loan balances fell 2.1%, 3.8% and 2.2%, respectively. The fastest growing loan category was used-auto lending at 2.8%, followed by adjustable-rate mortgages at 2.4%.” Declining during May were unsecured personal loans (-0.1%), new-auto loans (-0.3%), and adjustable-rate mortgages (-0.4%). Other mortgages and home equity loans led the decline in May (-0.4% and -1%, respectively). Credit union 60-plus-day delinquencies grew to 1.7% in May from 1.6% in April. “Rising unemployment rates and falling home prices are the major contributing factors to the recent rise in credit union loan delinquency rates,” Rick said. “In May, 1.7% of all credit union loans were delinquent, up from 1% a year earlier. With both economic indicators expected to deteriorate for another year, credit unions should plan for further weakening in their credit quality.” The loan-to-savings ratio decreased slightly to 78% in May 2009. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities-- increased slightly to 20% from 19% in April. The movement’s overall capital-to-asset ratio remains at 9.5%. The total amount of capital is $84 billion.
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