June CU loans, credit quality, membership all up

MADISON, Wis. (8/2/10)--Credit union loan balances, credit quality and membership all improved in June, according to a Credit Union National Association (CUNA) economist's analysis of CUNA's monthly review of credit unions.

Credit union loans outstanding rose 0.3% during June 2010, compared to a 0.2% increase during May, according to the Monthly Credit Union Estimates. Credit union loans in June totaled $582 billion, compared with $585.9 billion in June 2009.

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"This year is going to be considered the 'off year' when it comes to credit union loan balances," Steve Rick, CUNA senior economist, told News Now. "This refers to members paying off loan balances and credit unions charging-off and selling-off loans. CUNA is forecasting zero loan-balance growth in 2010, the first year in credit union history where loan balances did not rise."

Adjustable-rate mortgages rising 1.2%, led loan growth, followed by unsecured personal loans and used-auto loans, which went up 1% and 0.8%, respectively. Credit card loans increased 0.3%, while fixed-rate mortgages and new-auto loans decreased 0.2% and 1.4%, respectively.

Credit union loan balances' increase was the "second consecutive month of loan growth after six months of decline," Rick said. "For the second quarter, credit union loan balances increased 0.44%, corresponding with Friday's gross domestic product release that showed durable good spending--cars, appliances, furniture--rose 1.8% in the second quarter.

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Credit union savings balances decreased 0.3% in June, compared to a 0.1% decline during May. Regular shares rose 0.5%, followed by money market accounts (0.4%) and one-year certificates (0.2%). Individual retirement accounts and share drafts dropped 0.3% and 4.8%, respectively. Credit union savings in June totaled $796 billion--or $43.8 billion more than the $752.2 billion saved in June 2009.

Credit unions' 60-plus-day delinquencies decreased slightly to 1.7%. "Credit union loan credit quality continued to improve in June," Rick said. "Loan delinquency rates fell to 1.71%--down from 1.77% in May and below the recent cyclical peak of 1.85% in January. The self-sustaining economic recovery and faster loan growth should reduce delinquency rates significantly in 2011."

The loan-to-savings ratio remained at 73% in June. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 19%.

The movement's overall capital-to-asset ratio remained at 10% in June 2010. The total dollar amount of capital for credit unions is $91 billion.

"Credit union wholesale borrowings dropped 27% over the past 12 months, from $40 billion to $29 billion," Rick said. "Weak loan demand, excess credit union liquidity and a desire to shrink balance sheets to boost capital-to-asset ratios are three factors causing the decline. This drop in wholesale funding caused 12-month credit union asset growth (4%) to be less than credit union savings growth (5.8%)."

Credit union membership rose 0.32% in June--the fastest pace since August 2009--to reach 92.815 million members, Rick said. "During the past 12 months, however, memberships are up only 1.15%," he added.

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