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CU savings growth for February strong at 1.9
MADISON, Wis. (4/2/10)--Savings growth at credit unions was strong in February--at about 1.9%, according to the Credit Union National Association’s (CUNA) Monthly Credit Union Estimates for February. February typically experiences growth of 0.9% when adjusted for seasonal variation. The additional 1% signals underlying trend growth, said Steve Rick, CUNA senior economist. If the growth continues--at an additional 1% each month for the remainder of the year for a total of 12%--credit unions will experience strong savings, he said.
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One continued development taking place is that consumers are paying down their debts. For the first two months of the year, all mortgage categories were negative, meaning that the mortgage loan balance is falling. “People are paying their mortgages off faster than they are taking on new ones,” Rick said. Credit union loans outstanding decreased 0.6% during February, down from a 0.5% increase during January. Home equity loans and used-auto loans decreased 0.1% and 0.3%, respectively. Fixed-rate mortgages decreased 0.4%, followed by unsecured personal loans and credit card loans, each of which decreased 2.0%. Adjustable-rate mortgages led loan growth, increasing 0.1%. Overall loan growth was weak at 1.1%, due to uncertainty in the labor market. “People don’t want to borrow,” Rick said. The delinquency rate at credit unions is rising at a slower pace and is headed for a peak. “If we hit a turning point, the rate will go down,” Rick said. The rate has been rising for the last few years because of the recession. “If jobs come back, we could see delinquencies start to fall,” he added. Rick also noted the continued drop in share certificates. One-year certificates dropped by 0.3% in February and by 1.1% in January. As the certificates mature, people are deciding not to get another certificate and placing their money into a money market account. People are waiting for the rates to rise, Rick said. During February, share drafts increased 5.7%, followed by regular shares and money market accounts, which increased 3.9% and 1.4%, respectively. Individual retirement accounts increased 0.1%. Another area of interest is the loan-to-savings ratio, which has dropped significantly since last year, Rick said. The loan-to-savings ratio decreased to 74.4% in February 2010 from 79.6% one year ago. The liquidity ratio, the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities, remained at 19%.
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Credit unions have deposits to make more loans, but consumers are not seeking loans because of uncertainty in the job market. Credit unions are instead investing the money into short-term investments like Treasury bonds. Placing the money into short-term investments will keep downward pressure on credit unions’ earnings. “Credit unions would rather put that money into a mortgage,” Rick said. When the labor market picks up, the loan market will pick up, he added. He also noted that the Fed will not change interest rates until the fall. “The low-rate environment will continue,” he said. The movement’s overall capital-to-asset ratio remained at 10% in January 2009. The total dollar amount of capital is $90 billion.
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