WASHINGTON - "Not-so-bad" loan growth and negative savings growth pushed credit unions' loan-to-share ratio up over 80% in May, according to CUNA's Monthly Credit Union Estimates.
Loans increased just 1% in May, which CUNA Senior Economist Mike Schenk called "not-so-bad," bringing year-to-date loans outstanding to 2.8% growth. This figure is much lower than last year's 3.6% growth for the same period. "Other" mortgage loans led the way with 3.6% growth followed by credit cards, which grew 1.8%. Delinquencies stayed the same at 0.6% and the capital-to-asset ratio crept up to 11.2% for the month.
During the same period, savings decreased 0.9%. "People are not saving and a lot when they do decide to save put it into money market mutual funds and are looking at some alternatives," Schenk said. He added that it is not unusual for savings to be weak in May, but the year-to-date figure of 1.7% is the lowest CUNA has on record since it began keeping track.
Gains were seen in certificates (0.9%), money market accounts (0.7%), and individual retirement accounts (0.5%). Share drafts plummeted 6.8% and regular shares were down 1.4%.
NCUA statistics from the end of the first quarter show credit unions with less than $10 million in assets experiencing negative savings growth while the largest institutions had savings growth into the double digits. Schenk said his guess is that a lot of credit unions, particularly smaller ones, are trying to maintain their earnings and "manage to a CAMEL 1" and so have not changed their deposit rates as quickly as other financials. Generally speaking, Schenk said a peak in savings does not occur until about a year after an actual peak in rates.
The one-two combination bumped credit unions' loan-to-share ratio up to 80.4% in May.
Long term, CUNA is forecasting 6% growth rate for 2006, increasing due to rising interest rates and slower home appreciation. Loan growth is expected to end the year around 8%.