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Year-end loan-to-savings ratio highest since 70s
MADISON, Wis. (2/6/08)--With credit union loan growth outpacing savings growth, the loan-to-savings ratio increased to 84.6% in December from 83.9% in November, according to the Credit Union National Association’s (CUNA) monthly sample of credit unions for December 2007. This is the highest year-end reading since the 1970s, suggesting that for some credit unions, liquidity is very tight, Mike Schenk, CUNA senior economist, told News Now. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowing, plus other liabilities--remained at 18% during December. However, the widely reported problems in the housing market--combined
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with general weakening of economic conditions--suggests that 2008 will be a slow-growth year for credit union loans, Schenk added. Credit union loans outstanding increased 0.6% in December, ending the year with a 7.6% increase. Credit card loans outstanding increased 4.1% for the month, followed by adjustable-rate mortgages (2.5%), unsecured personal loans (1.1%), fixed rate mortgages (0.9%), and other mortgages (0.7%). Declining during the month were other loans (2.5%), new-auto loans (0.3%), and home equity loans (0.1%). Credit union savings balances fell 0.2% in December, but increased 4.8% overall in 2007. Share drafts (4.6%) and regular shares (1.2%)
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declined, while individual retirement accounts (1%), certificates (0.8%), and money market accounts (0.8%) increased. Total savings balances ended the year at $650 billion. “Our baseline forecast calls for loan growth of 5% and savings growth of 9%, as nervous consumers ratchet down their spending and borrowing,” Schenk said. “This will put downward pressure on loan-to-share ratios, and--by definition--increase credit union liquidity.” In terms of asset quality, credit union delinquency increased only 0.27 percentage points from a year ago despite the weaker economy--to 0.95% in December 2007 from 0.68% in December 2006. The credit union movement’s overall capital-to-asset ratio remained at 11.5% in December. The total dollar amount of capital ended the year at $89 billion, an increase of 6.5% from a year ago.
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