Loans up, savings balances decline in April

MADISON, Wis. (6/5/08)--Credit union loans outstanding increased 0.9% in April 2008, and 1.8% during the year, a one percentage point increase compared with the same period last year, according to the Credit Union National Association (CUNA) monthly sample of credit unions.
"The year-to-date loan growth of 1.8% is a bit stronger than we had expected," said Bill Hampel, CUNA chief economist.

This probably is--despite the fact that members are cutting back on borrowing--also because of the weak economy, Hampel explained. Members are doing more of their borrowing at credit unions because other lenders have substantially cut back on lending. There are likely to be more opportunities for credit unions to make good loans, especially mortgage loans, for the rest of the year because of restricted credit supplies from other lenders, he told News Now.

"After making sure of the asset/liability management implications, credit unions with sufficient liquidity can meet some of these member demands," Hampel added.

The year-to-date increase in loans also is partly due to fixed-rate first mortgages increasing 7.4%.

Adjustable-rate mortgages rose 2.9% during April, followed by other loans (1.6%), fixed-rate first mortgages (1.5%), used-auto loans (1.1%), home equity loans (1%), credit card loans (0.9%), and unsecured personal loans (0.6%).

Other mortgages (1.3%) and new-auto loans (0.7%) declined during April.
Credit union savings balances declined 0.2% in April, but grew 4.8% year-to-date. Money market accounts and one-year certificates increased 1.5% and 0.5%, respectively. Share drafts (2.7%), individual retirement accounts (1.5%), and regular shares (0.9%) decreased during the month.

"Savings growth is still running ahead of the weak performance of the previous four years, and CUNA's economists expect 2008 to be a strong year for credit union savings as members cut back spending because of the weak economy," Hampel said.

During the first four months of 2008, money market accounts increased 10%, double the 5% for the same period last year.

Credit unions' loan-to-savings ratio increased to 81% in April from 80% in March. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--declined to 19% in April from 21% in March.

Regarding asset quality, credit union 60-plus day delinquencies were 1% in April 2008.
The rapid rise in loan delinquency last year, from 0.68% in April to 0.93 in December, has since slowed, Hampel noted, adding "the delinquency rate was essentially unchanged from March to April, rising from 1.00% to 1.01%.

"The outlook for 2008 remains difficult for credit unions," Hampel said. "But, the good news is that credit quality does not seem to be worsening further."

With the increase in assets, the movement's overall capital-to-asset ratio remains at 11.1%. The total dollar amount of capital is still at $90 billion.

courtesy of cuna.org