MADISON, Wis. (12/3/13)--Growth was the word of the month in October as credit union loans outstanding and savings balances both increased, according to CUNA's monthly sample of credit unions. Credit unions reported strong loan increases in October, with balances rising 0.6%, compared to 0.5% in October 2012. Adjustable-rate, first-mortgage loan balances posted the biggest increase, rising 4.5%, and are up 8.3% over the same period last year. New and used auto loan balances also grew rapidly in October, increasing 1.2% and 0.9%, respectively. New auto loan balances posted the fastest year-over-year loan growth, rising 12%, followed closely by a 10.8% increase in used auto loans.
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"Both supply and demand factors are driving the accelerated pace of lending: credit unions are lowering interest rates and loosening credit standards to increase the supply of loanable funds while stronger consumers' balance sheets are increasing the demand for loanable funds," Steve Rick, CUNA senior economist, said Monday. "Rapidly rising home and stock prices are creating what economists call a strong 'wealth effect,' whereby consumers feel wealthier and therefore borrow and spend more out of current income."
Credit union savings balances increased 0.3% to $929 billion in October, compared to a 0.6% decrease in September. Share drafts increased 1.8% while regular shares and one-year certificates grew 0.6% and 0.5%, respectively. On the decline were money market accounts (-0.4%) and individual retirement accounts (-0.6%).
Credit union assets rose 5.4% during the period ending October 2013, a decrease from the 6.2% pace set for all of 2012. "Weaker deposit growth of 4.8% was the main factor slowing balance sheet growth, while borrowing, which typically makes up only 3.1% of a credit union balance sheet, grew 24% over the last 12 months," Rick said. "Only the asset side of the balance sheet, credit union loan balances rose 6.8% over the last 12 months, the fastest pace since 2008."
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Regarding asset quality, credit unions' 60-day-plus delinquency rate has remained at 1% for the past eight months. "A 7.6% fall in the dollar amount of delinquent loans combined with a 6.8% rise in loans outstanding created the significant drop in the delinquency ratio," Rick said. "The delinquency rate should fall to 0.8% in 2014, back to the level reported before the onset of the Great Recession."
With loan growth outpacing savings growth during October, credit unions' loan-to-savings ratio increased to 70.2% in October from 70% in September. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--is 16.9%.
Total credit union membership grew 0.2% during October to 98.8 million.
The movement's overall capital-to-asset ratio remained at 10.4%. The total dollar amount of capital is $113 billion.
National Credit Union Administration data released Monday showed similarly positive results. (See NCUA: CU Loans, Members, Net Worth All Up in 2013 3Q)