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Weak economy keeps CU member focus on debts not new loans
WASHINGTON (9/1/11)--While labor market weakness, a lackluster housing market and stock market jitters are seemingly keeping consumers focused on paying down their debts, the number of loans taken out by credit union members increased for the fourth straight month in July, rising by 0.23%, CUNA Senior Economist Mike Schenk told News Now. The 0.23% uptick in loans is consistent with last month’s numbers. Overall, the increase in loans remains very weak, sticking at a 2.7% annualized, but not seasonally adjusted, rate, Schenk noted in his analysis of July's monthly estimates of credit unions.
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Adjustable-rate mortgages led loan growth in July, increasing by 1.9%, with personal unsecured loans increasing by 0.9% and used-auto loans and credit cards each increasing by 0.7%. New-auto balances, fixed-rate mortgages, and home equity Lines of credit/second mortgages declined. Current economic conditions “are apt to keep many consumers focused on paying down debt rather than acquiring more--and that suggests that annual loan increases will continue to be far below those normally seen in economic recoveries,” Schenk said, adding that CUNA’s baseline forecast for credit union loan growth in 2011 remains at 2%. Savings growth was even slower than loan growth, totaling 0.13% during the month. The fastest growth was seen in individual retirement accounts (IRAs) (4.1%); share drafts (2.1%) and money market accounts (0.48%), but regular share and certificate account balances declined in the month.
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“Because loans grew and savings declined credit union loan-to-savings ratios increased slightly from 69.6% to 69.7% --the third consecutive increase,” Schenk added. “ Nevertheless, credit unions continue to reflect large liquidity buffers and their large and low-yielding investment portfolios are likely to continue to put a significant drag on earnings,” he said. Credit union asset quality improved slightly for the third consecutive month, and Schenk said that “slowly improving labor markets should help to buoy incomes and fuel further improvement in asset quality as the tepid but sustainable U.S. economic recovery continues.” Credit unions’ 60-plus-day delinquency rate declined to 1.56% in July, down from 1.6% in June. That rate stood at 1.75% at the start of 2011, and 1.79% in July 2010. The movement’s overall capital-to-asset ratio increased for the fourth consecutive month, totaling 10.19% at the end of July. Credit unions’ capital-to-asset ratio totaled 9.97% as of Dec. 31, 2010, and was 9.9% in July of 2010.


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