CUs' loan delinquency rate drop significant, says CUNA economist

MADISON, Wis. (4/5/11)--Credit union loan delinquency rates finally broke out of their past 12-month range of 1.70%-1.80% in February, falling to 1.68%, according to the Credit Union National Association's (CUNA) Monthly Credit Union Estimates for February, released Friday.

"This is down significantly from the 1.83% reported by credit unions in February 2010," said CUNA Senior Economist Steve Rick. "This drop is even more impressive when you factor in that the denominator of the ratio, total loans, fell 0.4% in February and 1.1% over the last year. We expect the downward trend in loan delinquency rates to continue throughout the year with the ratio falling to 1.3% by year end."

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Share certificate balances fell 0.6% in February, while regular shares balances grew 3.5%, he said, adding, "Credit union members continue to prefer the liquidity of regular shares as they wait for the Federal Reserve to raise interest rates and then move funds to share certificates."

Credit unions' savings balances totaled $816.6 billion for February, an increase from February 2010's totals of $783.8 billion, according to the monthly estimates. Regular and other savings accounts accounted for 30% of the amount, while certificates made up 26.4%; money market accounts, 22.3%, share drafts, 11.8%, and individual retirement accounts (IRAs) 9.5%.

Share drafts led savings growth with an increase of 6.9%, followed by regular shares, which rose 3.5%. Money market accounts decreased 1% while IRAs grew less than 0.1%.

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On the loans side, credit union loans outstanding decreased 0.4% during February, compared with a 0.6% decrease in January 2011. Adjustable-rate-mortgages grew 0.9% and fixed-rate mortgages increased 0.1%. Used-auto loans fell 0.2%, home equity loans decreased 0.4%, and new-auto loans dropped 1.2%. Credit card loans and unsecured personal loans each fell 1.8%.

Fixed rate first mortgages were the largest piece of the loans distribution share--27.2%, followed by used-auto loans at 17.9% of total loans, adjustable rate first mortgages at 12.5% of loans, and new-auto loans at 10.9%.

Credit unions' 60+-day delinquencies remained at 1.7%, and the loan-to-savings ratio fell to 70%, while the liquidity ratio (the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities) remained at 19%.

Capital growth in February did not keep pace with asset growth, pushing down the capital-to-asset ratio to 9.92% from 10.1%, Rick told News Now. Credit unions' total dollar amount of capital is $94 billion, according to the monthly estimates.

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