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Capital levels rise with increases in member savings
MADISON, Wis. (9/3/09)--Credit union capital levels closed in on their pre-financial crisis highs, and credit union members increased their savings balances by a significant amount in July, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly sample of credit unions.
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“In July, total credit union capital grew 0.7% to reach $89.037 billion, just shy of the high-water mark reached last November of $90.840 billion,” Steve Rick, CUNA senior economist, told News Now. “However, the 9.3% asset growth since November has pushed the credit union capital-to-asset ratio down to 9.8% in July from 10.9% last November.” Credit union savings balances increased 1.0% in July to $763.8 billion. That’s 9.5% more than during the first seven months of 2009. During the month of July, share drafts increased 3.9%, followed by money market accounts (2.1%), regular shares (0.7%) and one-year certificates (0.3%). Individual retirement accounts declined (-0.6%). “Credit union members increased their savings balances by a strong 1% in July, with the fastest pace set in the share draft (3.9%) and money market account (2.1%) products,” Rick said. “Much of this growth, however, was due to a month-end payday. But so far this year, savings balances are up 9.5%, faster than the 5.8% pace set during the first seven months last year. “Many credit union members are trying to increase their precautionary savings balances due to job-loss fears,” he added. “But for many, this has become a difficult endeavor as layoffs, furloughs and paycuts reduce their income.” Credit union loans outstanding increased 0.2% during July to $586.3 billion, which is 1.0% more than in the first seven months of 2009. That is down from a 4.1% increase during the same period of 2008.
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In July, other loans led loan growth, rising 2.8%, followed by credit card loans (1.3%), home equity loans (1.0%), used-auto loans (0.6%), unsecured personal loans (0.5%) and other mortgages (0.2%). However, new-auto loans declined (-0.2%), as did fixed-rate mortgages (-0.5%) and adjustable-rate mortgages (-1.4%). “Loan growth has dropped off sharply so far this year as members try to deleverage their balance sheets,” Rick said. “Loans grew only 1% during the first seven months, compared to 4.1% increase for the similar period last year. Fixed-rate first mortgages are the only loan category reporting decent growth--5.7%--so far this year, but the growth still is less than half the pace set last year--12.4%.” The loan-to-savings ratio decreased slightly to 76.8% in July from 77.5% in June. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--increased to 21% in July from 20% in June. “The growth rate disparity between credit union loan and savings balances has increased the investment portfolio by 31% over the last seven months,” Rick explained. “Deposits at corporate credit unions have fallen from 17.2% of surplus funds--cash plus investments--in July 2008 to 13.8% today. Government securities and deposits at banks were the investment categories with a rising share of surplus funds.” Sixty-plus-day delinquencies at credit unions remained constant at 1.5% in July. “The weak labor and housing markets were the major factors contributing to a 3.3% jump in total credit union loans delinquent--$8.8 billion--in July,” Rick said. “The ratio of delinquent loans-to-loans now stands at 1.5%, up from 0.95% this time last year. With net job creation not expected until the spring of 2010, credit unions should plan for rising delinquency and loan charge-off rates well into next year.” The movement’s overall capital-to-asset ratio remained constant at 9.8% in July. The total dollar amount of capital is $88 billion.
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