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Auto Lending Gains Set Pace for Arkansas CUs in 2013
Friday, February 21, 2014 6:55 AM

Arkansas credit unions finished 2013 on a strong note, benefitting from continued improvements in both economic and labor market conditions. In a sign that Arkansas’s economy continues to improve, credit union loan growth in the state outpaced savings growth by a wide margin in 2013. Overall, credit union loan portfolios grew by 6.8 percent in the 12 months ending December 2013, while savings balances increased by 3.0 percent in the year. 

The 6.8 percent full-year loan portfolio increase was the largest percentage gain Arkansas credit unions experienced since 2009 and the 2013 tally also represented the first time since 2008 that annual credit union loan growth exceeded savings growth in the state.  

Automobile lending continued to drive overall loan growth results in 2013 as improving labor markets and pent-up demand pulled more consumers into dealer showrooms.  The surge in borrowing activity in Arkansas was reflected in a 24.4 percent full-year jump in used auto loans and a 4.8 percent increase in new vehicle loan balances in the year. Credit cards and other unsecured loan balances increased by 4.0 percent and 2.6 percent respectively. 

Slow-but-sure improvement in the state’s labor markets and a healthy housing market rebound both helped consumer finances and put more Arkansans in the mood to borrow.  For example:

  • Arkansas’s economy added 12,600 jobs in 2013 – over three times higher than the increase of 4,000 recorded in 2012.  Nevertheless the unemployment rate finished the year at 7.4 percent - that’s elevated compared to the current 6.6 percent national unemployment rate and a bit higher than the rate reported in the state at the start of the year according to the Bureau of Labor Statistics.  It is worth noting that is not unusual to see the unemployment rate rise marginally in an improving labor market as those who dropped out of the labor force during the downturn begin to re-enter.
  • Arkansas home prices continue to firm, with 3.8 percent increase in the year ending September 2013 (the most recent data available).  This result was higher than the 2.4 percent full-year 2012 increase according to the Federal Housing Finance Agency’s purchase-only index. 
  • Household balance sheets continue to improve, reflected in a continued steep decline in credit union borrower-bankruptcy filings.  In all, filings fell by 11.0 percent in the year-ended December 2013.

As shown in the following chart, Arkansas credit unions continue to offer substantial financing advantages on a variety of consumer loans.

Arkansas Consumer Loan Interest Rate Averages
February 19th 2014 – Source: Informa Research Services

Product

AR Credit Unions

AR Banks

CU-Bank Difference

Credit Card Platinum

9.12%

10.93%

-1.81%

Home Equity Loan -70%LTV $25,000/5 Yr.

 

4.65%

 

6.30%

 

-1.65%

New Vehicle – 5 Yr.

1.97%

4.12%

-2.15%

Used Vehicle – 4 Yr.

2.27%

4.16%

-1.89%

 

The current average rate on a five-year new auto loan at the state’s credit unions now averages 2.15 percentage points lower than the comparable rate at the state’s banking institutions according to Informa Research Services.  On a five-year, $30,000 new car loan the credit union advantage saves the average Arkansas consumer over $344 per year – or over $1,720 over the life of the loan.

It seems Arkansas consumers are increasingly recognizing these and other significant benefits of credit union membership. Indeed, total memberships in the state’s credit unions grew by 1.4 percent in 2013 – that’s the fastest increase since 2010 and also is over four times higher than the 0.32 percent rate of state population growth in the period according to the US Census Bureau.

 

(Note: The information in this report is based on a sample of large Arkansas credit union operating results. This quarter’s report is based on results of 18 percent of all Arkansas credit unions that collectively serve 64 percent of the members and manage 74 percent of the assets in credit unions throughout the state.)