CUNA News Now: CU loans and savings both up in October

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MADISON, Wis. (12/3/08)--The U.S. entered a recession in December 2007 that continues to this day, the National Bureau of Economic Research reported Monday. So far this year, credit union members have responded to the recession as expected by increasing their savings balances, said Steve Rick, Credit Union National Association (CUNA) senior economist.

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October's statistics show that with payday falling on the last day of the month, credit union savings balances increased 1.5% to $695 billion from $685 billion in September, according to the CUNA monthly sample of credit unions.

Share balances increased 6.6% during the first 10 months of 2008. Share drafts increased 7.2% while one-year certificates grew 1.5%, and individual retirement accounts rose 1.2%. Regular share and money market accounts declined 0.3% and 0.03%, respectively.

"During the first 10 months of 2008, credit union savings balances rose 6.6%, faster than the 3.7% reported for the similar period in 2007," Rick said. "Regular share balances rose 5% so far this year, up from a 5.2% drop for the similar period in 2007. Recessionary fears are encouraging members to increase their 'precautionary' regular share balances," he told News Now.

Money market account balances rose 13.5% for the period, up from 8.9% for the similar period last year, he added. "Low market interest rates are encouraging members to increase their 'speculative' money market account balances," Rick said. "Members are placing their investment funds in liquid money market accounts rather than illiquid low-rate share certificates.

"Members are speculating that market interest rates are nearing their bottom and will move investment funds back to certificates of deposit once interest rates head back up," Rick said. "With this recession expected to last for another six to 12 months, credit unions should expect both regular share and money market account growth to increase in 2009, while share certificate balances to actually decline."

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Credit union loans outstanding increased 0.5% in October from September, and 6.6% over the first 10 months of 2008, compared with increases of 0.7% and 5.6% during the same period last year.

Home equity loans led loan growth with a 1.4% increase, followed by a 1.1% rise in adjustable-rate mortgages, a 0.6% increase in used-auto loans, and a 0.4% increase in fixed-rate first mortgages. Unsecured personal loans declined 1.2%, followed by a 0.3% decline in new-auto loans, and 0.2% decline in credit card loans.

Fixed-rate first mortgages and adjustable-rate mortgages had the highest year-to-date increases, rising 15.4% and 11.8%, respectively.

With savings growth outpacing loan growth, the loan-to-savings ratio decreased to 83.4% in October from 84.3% in September.

The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--grew to 15.7% in October from 14.7% in September.

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

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