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Multiple factors lead to decline in CU lending
MADISON, Wis. (11/3/10)--For the sixth month this year, credit union lending declined slightly with many factors coming into play, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly review of credit unions for September. “Only two loan categories recorded rising balances: used-auto loans and fixed-rate first mortgages,” Steve Rick, CUNA senior economist, told News Now.
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Credit union loans outstanding decreased 0.1% during September, compared with an increase of 0.3% during August. Fixed-rate mortgages led loan growth, rising 1.2%, followed by used-auto loans, which went up 0.8%. Adjustable-rate mortgages declined 0.1%, followed by unsecured personal loans (0.2%) and home equity loans (0.3%). Credit card loans and new-auto loans dropped 0.6% and 1%, respectively. Credit union loans in September totaled $582.2 billion, compared with $589.8 billion in September 2009. “The Federal Reserve recently reported similar loan behavior for all consumer credit providers,” Rick said. “For the year ending August 2010, consumer credit loan balances declined 3.1%. In the month of August, consumer credit outstanding fell $3.3 billion. Falling revolving-credit balances outweighed slightly rising non-revolving credit. “Multiple factors are responsible for the decline: tighter lending standards, low consumer confidence leading to weaker consumer loan demand, households’ desire to deleverage their balance sheet, and banks charging off/writing down loans and credit card defaults,” he continued. “We expect credit union loan balances to fall more than 1.5% in 2010, and increase 4% in 2011,” Rick added.
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Credit union savings balances increased 0.3% in September, compared with a 0.7% decrease during August. Individual retirement accounts led savings growth, rising 1%, followed by money market accounts and regular shares, which both went up 0.7%. One-year certificates and share drafts each fell 0.5%. Credit union savings in September totaled $797.4 billion--or $42.6 billion more than the $754.8 billion saved in September 2009. “Savings balances rose 0.3% in September, traditionally a slow month for savings growth,” Rick said. “However, with consumers in no mood to spend, saving and deleveraging is the only game in town.” Regarding asset quality, credit unions’ 60-plus-day delinquencies remained at 1.8% during September. The loan-to-savings ratio remained at 73% for the month. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 18%. The movement’s overall capital-to-asset ratio stayed at 10% in September. The total dollar amount of capital is $93 billion.


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