CUNA Monthly Credit Union Numbers Show Loans Up "Healthy" 1.3% as Savings Falls 1.1%

WASHINGTON-CUNA’s Monthly Credit Union Estimates for August demonstrated credit unions’ strong lending growth as savings waned. Credit union loans grew 1.3% during the month of August, while savings balances fell 1.1%, the data showed. All lending categories were up, CUNA reported. `Other’ mortgages experienced the greatest growth at 3.2%. Home equity loans increased 3%, followed closely by credit cards at 2.9%, then adjustable rate first mortgages at 1.7%. Still, new car loans were up 1.6%, unsecured personal loans rose 1.4%, and fixed-rate mortgages edged up 0.4%, as did used car loans. Capital remains strong at 10.7% for the month of August. Asset quality remains steady with delinquencies holding at 0.7% for the last six months. Year-to-date loan growth was at 8% and annualized at 12%, according to CUNA’s Chief Economist Bill Hampel. Meanwhile, savings growth dropped from 9% last August to 4.2% for August 2004, according to the Monthly Credit Union Estimates. One-year certificates and IRAs grew at 0.9% and 0.2% respectively. Share drafts (-5.5%), regular shares (-1.3%), and money market accounts (-0.3%) were all down. Because loan growth has been so much stronger than savings, the loan-to-share ratio jumped from 72.2% in July to 73.9% in August 2004. “This is actually a little more than we had expected-more of a pick up in loans and slow down in savings. The balance sheet this year, in fact, in credit unions is looking very similar to what happened in 2000, the last boom year just before the recession,” Hampel commented. “The other thing that’s a little surprising about this is that we had forecast softer savings and stronger loans primarily on the basis of expecting the economy to be gaining quite a bit of momentum this year and the economy hasn’t been. The economy has been disappointing slightly, but what this might suggest is that when the numbers come out for the third quarter, the economy might be a little bit stronger than we otherwise expected. This is a little bit unusual to get this sort of loan and savings behavior in the context of a sluggish macroeconomy, but that’s what we’ve got.” Though jobs have not come back quite as much as economists had expected, savings and lending has trended consistent with strong job growth. “What’s important about what credit unions show is it’s sort of a picture of what the consumer is doing and consumer spending is two-thirds of GDP,” Hampel said, emphasizing the credit unions were just a small part of the economy. While credit unions’ performance has been strong overall, membership growth is lagging. Over the last 30 years, Hampel said, it has dropped from 6% to 2%. “The typical target pool credit unions serve has become saturated. That’s why it’s really good that credit unions are reaching out and grabbing underserved areas and community charters,” he said. “In the next few years, I expect we might see some recovery in that.” He added that the population is also not growing as fast as it used to. As of August, credit unions had 86.2 million members. [email protected]