MADISON, Wis. – January was a bad month for credit unions with negative growth for both shares and loans, while loan delinquencies continued to rise to a 22-year high.
The delinquency ratio for credit unions climbed to 1.92% in January, the highest since 1988, according to Steve Rick, a senior economist for CUNA. Delinquencies are expected to continue rising until the end of the year, portending higher charge-offs and loan losses, he noted.
"It [the delinquency ratio] is going to continue to rise," Rick told Credit Union Journal yesterday. "We still have 15 million unemployed Americans and 6 million of them have been unemployed for six months or longer. Those are the people who really show up on your delinquencies, and that number is still rising."
In an unusually bad sign, both loans and deposits declined in January, a traditionally slow time of the year for credit unions anyway. "Virtually every type of loan category actually fell, except first mortgages," said Rick, who attributed the trend to a "de-leveraging" in which people are trying to pay off their loans.
Credit union loans outstanding decreased 0.5% during January, compared to a 0.3% increase for January 2009. Fixed-rate mortgages led loan growth, rising 0.4%, while used-auto loans and home equity loans each declined 0.1%. Unsecured personal loans dropped 0.5%, followed by other mortgages (0.9%) and new-auto loans (1.5%). Credit card loans also decreased 1.5%, and adjustable-rate mortgages fell 1.9%.
It was the third straight month of negative loan growth for credit unions, according to Rick.
Credit union savings balances declined by 0.4% for January, compared to a 1.7% increase during January 2009. Money market accounts rose by 1.5%, followed by regular shares, which increased less than 0.1%. Individual retirement accounts declined by 0.8%, followed by one-year certificates and share drafts, which dropped by 1.1% and 2.7%, respectively.
