February loan-to-savings ratio drops to 80.7%

MADISON, Wis. (4/3/08)--With savings growth overpowering loan growth, credit unions' overall loan-to-savings ratio decreased over two percentage points, to 80.7% in February from 83.2% in January, according to the Credit Union National Association (CUNA) monthly sample of credit unions for February 2008.

"The drop in the loan-to-savings ratio was due to the month ending on a Friday payday, which boosted share draft accounts by 12.3%," said Steve Rick, CUNA senior economist. "Most of these funds will be used by members for monthly living expenses and therefore leave the credit union."

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The liquidity ratio--the ratio of surplus funds maturing in less than one year of borrowing, plus other liabilities--rose to 21% from 19% in January.

Credit union savings balances grew 3.3% in February, the strongest growth since March 2001. The increase is a reflection of three paydays during February and the last payday landing on the last day of the month. Share draft accounts led savings growth, increasing 12.3%, followed by regular shares (3.7%), money market accounts (3.3%), certificates (1.1%), and individual retirement accounts (0.7%).

Credit union loans outstanding increased 0.2% in February, and 0.4% for the first two months of 2008. "Other mortgage loans" led loan growth, increasing 1.3% for the month and rising 16.3% the past 12 months.

"Year-over-year loan growth picked up slightly in February to 7%, from 6.7% in January, as many banks tightened their underwriting standards," Rick explained. "Credit unions are seeing strong growth opportunities in first and second mortgages and credit card lending. With U.S. new-auto sales down 12% over the last year, credit union auto loan balances fell 3.6% over the last 12 months."

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Adjustable-rate first mortgages, fixed-rate first mortgages, home equity, and other loans followed, increasing 1%, 0.9%, 0.7%, and 0.2%, respectively. "Home equity loan balances increased 2.2% year-to-date, as falling interest rates offset falling home prices to stimulate members' demand for this loan category," Rick said.

Declining during February were unsecured personal loans (1.5%), credit card loans (1.2%), and new-auto loans (1.1%).

Regarding asset quality, credit union 60-plus day delinquencies increased to 0.98% in February from 0.97% in January. "One good news story is that delinquency rates barely changed from January to February, indicating the subprime mortgage crisis has not yet contaminated credit union loan portfolios," Rick said.

With the increase in assets, the credit union movement's overall capital-to-asset ratio decreased slightly to 11.1% in February from 11.4% in January. The total dollar amount of capital ended the year at $89.4 billion, an increase of 0.4% from last month.

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