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CUs loan delinquency rates trending downward
MADISON, Wis. (6/2/10)--For a second consecutive month, credit unions’ loan delinquency rates--delinquent loans divided by total loans--fell, perhaps a sign of a downward trend due to a recovering job market, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly review of credit unions for April. The rate dropped to 1.83% in April from 1.88% in February. “If two months of data make a trend, then we can say that credit union's loan delinquency rates are trending down,” Steve Rick, CUNA senior economist, told News Now.
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“The decline in this ratio is even more remarkable given that the denominator--total loans--fell 0.35% during this two-month period, which would increase the ratio,” he continued. “So a 2.8% decline in the dollar amount of delinquent loans--the numerator--was sufficient to drop the ratio. If the Euro-Zone debt crisis doesn't lead to a double dip recession in the U.S., we believe delinquency rates hit their apex in February and should continue to trend down through 2010. “The biggest causal factor leading to this decline is a recovering job market,” Rick added. “During five of the past six months, more jobs were created than were lost. This is setting in motion a self-sustaining economic recovery where job growth begets job growth.” Credit union loans outstanding decreased less than 0.1% during April, compared with a 0.3% decline during March. Credit union loans in April totaled $579 billion, compared with $582.4 billion in April 2009. Adjustable-rate mortgages led loan growth, increasing 1%, followed by used-auto loans and home equity loans, which both rose 0.4%. Credit card loans increased 0.3%, while unsecured personal loans and fixed-rate mortgages both fell 0.5%. New-auto loans dropped 1.6%. “Credit union loan balance growth is still in the doldrums, having declined for each of the last six months as members pay down debt, and credit unions either sell off or charge-off debt,” Rick said. “This is the first time in 50 years, if not all of credit union history, we’ve seen this level of debt reduction. It should be of no surprise, however, given the massive debt accumulation that took place leading up to the great recession. We don’t expect a robust pickup in loan demand anytime soon because households are still trying to fix their personal balance sheets.”
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Credit union savings balances increased 1% in April, down from a 0.7% rise during March. Credit union savings in April totaled $794.8 billion, compared with $746.6 billion in April 2009. Share drafts grew 6.9%, followed by regular shares and money market accounts, which each rose 0.9%. Individual retirement accounts grew less than 0.1% and one-year certificates decreased 0.5%. “Credit union savings balances increased 3.3% during the first four months of 2010, less than half the pace set during the similar period in 2009,” Rick said. “The fear spawned by the 2008-09 recession has ebbed and consumer confidence is on the rise, both of which reduce credit union members’ desire to boost precautionary savings balances.” The loan-to-savings ratio decreased slightly to 73% in April. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 19%. The movement’s overall capital-to-asset ratio remained at 10% in April. The total dollar amount of capital is $90 billion.
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