September CU loans up, savings down

MADISON, Wis. (10/31/08)--Credit unions maintained a strong level of real estate lending in September, along with increased year-to-date loan growth compared with last year's pace. However, flagging consumer confidence and fears of a prolonged recession likely will result in weak consumer lending in the fourth quarter, said a Credit Union National Association (CUNA) economist.

Credit union loans outstanding increased 0.8% in September and 6.2% over the first nine months of 2008, compared with 4.9% during the same period last year, according to the CUNA monthly sample of credit unions.

Home equity loans led growth (2.5%), followed by adjustable-rate mortgages (2.2%), fixed-rate first mortgages (1.1%), used-auto loans (0.9%), unsecured personal loans (0.5%) and new-auto loans (0.4%).

Fixed-rate first mortgages and adjustable-rate mortgages had the highest year-to-date increases, 15.1% and 11.8%, respectively.

"Credit unions continued to do well in real estate lending during the month of September," Steve Rick, CUNA senior economist, told News Now. Fixed-rate first mortgage loan balances rose 1.1% in September and 3% for the third quarter. Year-to-date total loan growth came in at 6.2%, up from last year's 4.8% pace, Rick said.

"Falling consumer confidence and expectations of a deep and prolonged recession will keep consumer lending weak in the fourth quarter," he added. "However, with banks tightening their mortgage loan underwriting standards, credit union real estate lending will continue to dominate credit union loan portfolio growth."

Though credit union savings balances declined 0.9%, to $685 billion in September from $691 billion in August, they rose 5.1% for the first nine months of 2008.

Individual retirement accounts increased 1.5%, while share drafts (7.3%), money market accounts (0.6%), regular shares (0.3%), and one-year certificates (0.4%) declined.

With loan growth increasing and savings growth decreasing, the loan-to-savings ratio increased to 84.3% in September from 83% in August.

The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--decreased to 14.6% from 15.5% in August.

Credit unions' 60-plus-day delinquencies increased slightly to 1.1% from 1% in August.

The movement's overall capital-to-asset ratio remains at 11%, with the total dollar amount of capital at $90 billion.

"The Bureau of Economic Analysis reported economic growth of negative 0.3% in the third quarter," Rick said. "Consumer spending fell 3.1% on a seasonally adjusted annual rate." Spending on durable goods--furniture, appliances, autos--fell by 14.1%.

Credit union new-auto and credit card lending reflected the spending slowdown. Credit card balances rose only 2.3% in the third quarter, down from last year's third-quarter pace of 4.7%. New auto loans rose 0.5% versus last year's third-quarter pace of 1%, Rick added.

courtesy of cuna.org