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Economy begins to hit CU loan quality
MADISON, Wis. (1/29/09)--The economic, credit and housing crisis is beginning to affect credit union loan quality, said Steve Rick, Credit Union National Association (CUNA) senior economist. The credit union overall loan delinquency rate rose to 1.42% by December from 0.96% in July. With the national unemployment rate expected to rise from its current level of 7.2% to 9% by year-end, the credit union delinquency rate could hit 2% this year--the highest since 1986, Rick said. December statistics show that credit union loans outstanding increased 0.48% for the month, ending the year with a 7.6% increase, compared to increases of 0.5% and 6.5% during the same periods last year, according to the CUNA monthly sample of credit unions.
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Fixed-rate first mortgages led loan growth, increasing 3.3%, followed by increases in credit card loans (3%), home equity loans (1.3%), unsecured personal loans (0.7%), and used auto loans (0.5%). Adjustable-rate mortgages decreased 3.1%. “According to CUNA's monthly survey of credit unions, credit union balance sheets increased 7.5% in 2008 despite the ongoing recession, up from 6% the year earlier,” Rick said. “Fast-growing mortgage portfolios pushed up credit union loan balances by 7.6% in 2008, up from 6.5% in 2007. “The fog of uncertainty floating over banks’ asset values and capital levels is restraining their willingness to extend credit for both residential and consumer loans,” he added. “Credit unions are filling this void since many do not face similar capital constraints.”
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Credit union savings balances increased 0.4% to $700 billion in December from $697 billion in November. Overall year-to-date growth increased to 7.3% during 2008 from 5.1% in 2007. Individual retirement accounts led savings growth, rising 2.4%, followed by increases in one-year certificates (1.1%) and money market accounts (1%). Regular shares and share drafts decreased 0.5% and 2.3%, respectively. The loans-to-savings ratio remained relatively constant, inching up to 83.7% from 83.6% in November. The liquidity ratio rose slightly, to 16% from 15.8% in November. Regarding asset quality, credit unions’ 60-plus day delinquencies edged up to 1.4% from 1.3% in November. The movement’s overall capital-to-asset ratio remains at 11%, with the total dollar amount of capital at $90 billion. “Credit unions also stretched their balance sheets in 2008 by increasing their borrowings by $14 billion, a 49% increase from December 2007,” Rick said. “This dollar increase was exactly matched by a $14 billion increase in their investment portfolios, which rose 6.7% over the year. Credit unions bought more longer-term investments last year. The percent of the investment portfolio with less than a one-year maturity fell to 55% from 61%.”
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