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Loan-to-savings ratio drop hurts CU performance
MADISON, Wis. (10/6/10)--The loan-to-savings ratio in August is pulling down credit unions’ financial performance, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly review of credit unions. “An increase in loans and a decrease in savings pushed the loan-to-savings ratio back above 73% in August, but down from 78% in August 2009,” Steve Rick, CUNA senior economist, told News Now. “This drop in the loan-to-savings ratio is placing downward pressure on credit unions’ asset yields and net interest margins.”
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Credit union loans outstanding increased 0.3% during August, compared with a decrease of 0.1% during July. Used-auto loans led loan growth, rising 1%, followed by unsecured personal loans and credit card loans, which went up 0.8% and 0.7%, respectively. Fixed-rate mortgages went up 0.5%, and adjustable-rate mortgages grew 0.4%. Home equity loans increased 0.3% while new-auto loans decreased 1.3%. Credit union loans in August totaled $582.6 billion, compared with $590 billion in August 2009. “Credit union loan balances rose 0.3% in August, the fastest pace since August 2009 when balances rose 0.6%,” Rick said. “Loan balances declined 0.8% during the first eight months of 2010, a complete turnaround from the 1.6% rise during the similar time period in 2009. Credit unions charging off and members paying off loan balances are the two main factors driving this result. Credit card, unsecured-personal and new-auto loan balances are down 0.2%, 1.1%, and 12% so far this year. “Credit union loan balances are expected to rise 4% in 2011 due to a strengthening economy, pent up demand for consumer durables, lower loan charge-offs and a rise in new-auto sales,” he added.
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Credit union savings balances decreased 0.7% in August, compared with a 0.7% increase during July. Individual retirement accounts led savings growth, rising 0.2%. One-year certificates and money market accounts each dropped 0.2%. Regular shares and share drafts fell 0.5% and 4.5%, respectively. Credit union savings in August totaled $795.1 billion--or $39.7 billion more than the $755.4 billion saved in August 2009. “Credit union savings balances fell in August by 0.7%--mainly because the month ended on a Thursday--a day before the Friday payday and a surge of payroll funds,” Rick said. “During the past year, credit union savings balances are up 5.3%, below the 9.4% recorded in the year ending August 2009. Members appear to be using any excess funds to pay down high-rate consumer debt, rather than placing funds in low-rate savings products.” Regarding asset quality, credit unions’ 60-plus-day delinquencies decreased slightly to 1.7% during August. The loan-to-savings ratio remained at 73% in August. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--decreased slightly to 18%. The movement’s overall capital-to-asset ratio remained at 10% in August. The total dollar amount of capital for credit unions is $92 billion.


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