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CU loans up savings down in June
MADISON, Wis. (8/4/08)--Credit union loans are up and savings have declined, and that’s causing Credit Union National Association (CUNA) economists to reconsider their economic outlook.
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Credit unions loans outstanding increased 1.3% in June, while overall loan growth for the first six months of the year was at 4.1%, up from 2.4% for the same period in 2007, according to CUNA’s monthly sample of credit unions. Fixed-rate mortgage loans led loan growth, rising 2.4% during June and 13.1% year-to-date. Credit cards (1.9%) and adjustable-rate mortgages (1.5%) also increased, followed by unsecured personal loans, used-auto loans and other mortgages--all rising 1.3%. New auto loans dropped 0.5% and have decreased monthly since November 2007. Credit union savings balances declined 0.5% in June, but had grown 6.2% over the first six months of 2008, up from 4.3% for the same period in 2007. “The current numbers are causing CUNA economists to rethink their credit union outlook for the year,” Mike Schenk, CUNA vice president of economic and statistics, told News Now. “Normally in an economic slowdown, credit union savings growth speeds up significantly, and credit union loan growth declines significantly. Typically in this environment, savings growth exceeds loan growth. “What appears to be happening now though, is first, on the loan side of the balance sheet, credit unions are experiencing faster growth than expected,” he continued. “We think this is a reflection of their willingness to step up to the plate and help members who obtain toxic mortgages from other lenders.” Growing were money market accounts (1.4%), individual retirement accounts (1.1%) and regular shares (0.4%), while share drafts and one-year certificates declined 5.6% and 0.8%, respectively.
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With loan growth outpacing savings growth, the loan-to-savings ratio increased to 81.8% in June from 80.3% in May. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--decreased to 17.6% in June from 19.5% in May. Regarding asset quality, credit unions’ 60-plus-day delinquencies slightly rose from 1% in May to 1.1% in June. The movement’s overall capital-to-asset ratio is 11%. The total dollar amount of capital remains at $90 billion. “In general, consumers aren’t borrowing as much or spending as much, but relatively speaking, credit unions are doing more business than their competitors; they’re picking up market share on the loan side,” Schenk said. “In contrast, on the savings side, many credit union competitors are aggressively pricing up in an effort to stem outflow from savings accounts. “The spectacular failure of Indy Mac is undoubtedly driving some of this activity,” he concluded.
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