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Low consumer demand CU lending in 09 slowest in the post-WWII era
MADISON, Wis. (1/5/10)--Credit union lending activity in 2009 will be the slowest in the post-World War II era, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly sample of credit unions. Credit union loans outstanding decreased 0.1% during November, but rose 1.5% during the first 11 months of 2009. That’s down from a 6.8% increase during the same period of 2008. During November, adjustable-rate mortgages led loan growth, increasing 3.6%, followed by credit card loans (1%) and unsecured personal loans (0.4%). Other loans and home equity loans each increased 0.2%. Used-auto loans decreased 0.5% followed by fixed-rate mortgages, which declined 0.6%. New-auto loans and other mortgages also dropped--1.3% and 2.5%, respectively. “For the first 11 months of this year credit union loan balances
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rose only 1.5%, below the previous nadir of 2% set in 1982,” Steve Rick, CUNA senior economist told News Now. “Loan balances actually fell 0.11% in November as compared to a 0.22% rise in November 2008. The November loan seasonal factor of -0.22% historically weighs on overall actual growth. “So the difference between the actual growth rate and seasonal growth rate determines the underlying trend loan growth rate of 0.11%, which is a 1.3% annual rate,” he continued. Falling auto loan and fixed-rate first mortgage balances pulled the overall growth number into negative territory, Rick added. Auto-loan balances fell as loan amortization exceeded originations. Fixed-rate first mortgage balances declined due to a large amount of refinance activity and sales of low-rate fixed-rate first-mortgage loans into the secondary market, he explained. “It takes two to tango and it takes two parties to originate a loan,” Rick said. “The demand for consumer loans remains weak because households are still worried about jobs, home prices and future taxes. The supply of credit union loans remains ample due to the large influx of savings funds over the past 11 months.” Credit union savings balances decreased 0.2% in November and 10.4%
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during the first 11 months of 2009. During November, money market accounts increased 1.1%, followed by individual retirement accounts, which increased 0.7%. Regular shares decreased 0.3%, followed by one-year certificates (0.7%) and share drafts (1.2%). “So far this year savings balances are up 9.8%, the fastest pace since 2002,” Rick said. Concerning asset quality, credit union 60-plus-day delinquencies remained at 1.8% in November. The loan-to-savings ratio remained constant at 76.9% for the month. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--decreased to 19%. “This combination of rapid savings growth and slow loan growth pushed down the credit union loan-to-savings ratio to 76.9% in November, down from 83.3% in November 2008,” Rick said. The movement’s overall capital-to-asset ratio remained at 10% in November. The total dollar amount of capital is $90 billion.
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