Lending at California's credit unions increased by 1.3% in thesecond quarter, making it the fastest second-quarter loan balanceincrease since the beginning of the recession in 2007, according toa new report from the California Credit Union League.

Automobile financing led the way with a 7.8% in new vehicleloans, and a 6.3% increase in used vehicle loans in the first halfof 2013. Unsecured personal loans also grew increasing by 1.8%in the first half.

“It's clear the reports of California's (economy) heating upweren't a flash in the pan,” said League Chief Economist DwightJohnston. “This improved economic outlook is building consumerconfidence with near-record increases in new loan applications forbig-ticket items ranging from homes to cars.”

Helping drive demand for new vehicles is that Californians havereturned to work in 2013. The state's unemployment rate dipped to8.5% at the end of the year.

While the state's jobless rate is still high, it declined nearlya percentage point in the second quarter and 1.3% since the startof the year, according to the CCUL.

Another sign that the state's economy is improving is that homeprices have increased by 5% in the first quarter and by 17% in theyear ending in March, the most recent data available for theFederal Housing Finance Agency purchase-only index.

What's more, statewide personal bankruptcy filings declined by26% in the first half of the year compared to year-ago levelsaccording to the Administrative Office of U.S. DistrictCourts. California credit union borrower-bankruptcy filingsdeclined even faster—by nearly 31%—in the same time period.

Despite the increased spending, the report found Californianscontinued to save. Credit union savings balances grew 3% in thefirst half and by 3.2 percent in the year ending June 2013. Withhistorically low market interest rates consumers continue to focuson building short-term liquid accounts. The state's credit unionsreport regular savings account balances grew by 6.9%, whilechecking account balances increased by 5.4% and money marketaccounts edged up by 1.4% in the first half of the year, accordingto CCUL.

The CCUL report is compiled from credit unions representing 53%of all federally insured credit unions that collectively serve 96%of the members and manage 98% of the assets.