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More Good News For The Bottom Line

MADISON, Wis.-"Good news for the bottom line" of credit unions continues, according to new analysis from CUNA's Economics and Statistics Department.

CUNA said that member savings growth slowed during December 2003 at the same time lending continued its uptick, bringing the loan-to-share ratio up slightly to 72.2% from 71.1% one month earlier.

Not surprisingly given the holidays, savings balances for December decreased 0.6% from November balances, while full-year 2003 savings growth was 8.4%, lower than the 11.4% growth recorded for the same period during 2002, CUNA said. December savings totaled $541.5 billion, compared with $499.7 billion in December 2002.

Savings in IRAs rose 0.5%. Showing declines were share drafts, 3%; regular shares, 0.5%; money-market accounts, 0.2%; and one-year certificates, 0.1%.

"Savings growth is slowing down but still remains close to the long-term average for the decade, which is 7.9%," said CUNA VP Mike Schenk.

Credit unions moved from the tight liquidity of about three years ago to become very liquid, but now that's slowing, and loans are picking up. "That's fairly good news, for the bottom line," Schenk added.

Loans for December 2003 totaled $390.8 billion, compared with the $355.2 billion recorded in December 2002. During December 2003, the dollar amount grew 1%, with overall year-to-date growth for 2003 at 10%, up from 7.4% for the same period during 2002.

CUNA reported that credit card, home equity, and unsecured personal loans led growth with increases of 5%, 2.2% and 1.3%, respectively. Also increasing during the month were adjustable-rate mortgages, 1.1%; new-auto loans, 0.7%; other mortgage loans, 0.3%; and used-auto loans, 0.3%.

The average capital-to-asset ratio increased in December to 10%, and delinquencies remained at 0.7% for the past seven months.

More Borrowing To Fund The Borrowing

WASHINGTON-Flat growth in share balances forced some credit unions to turn to other sources of funding, including borrowing, according to a sample of year-end data.

Callahans & Associates said that credit unions participating in its First Look program, which provides an early industry snapshot, grew shares 0.46% in fourth quarter 2003, down from an already low 1.41% in third quarter 2003. (The entire credit union industry grew shares 1.10% in the third quarter). While the 506 credit unions in the current First Look sample generally outperform industry averages, their trends have previously proven to be good indicators of industry-wide trends, the company said.

For the third consecutive quarter, loan growth in the sample, at 2.74%, outpaced share growth, leading to another increase in the loan-to-share ratio. The 12-month loan growth of these credit unions is also outpacing share growth, which could make 2003 the first year that loan growth outpaced share growth since 2000.

First Look credit unions have combined assets of $180 billion, representing approximately 30% of industry assets. Credit unions contribute their data to Callahans First Look program.

"With the slowdown in share growth at the same time that the demand for loans remained high, many credit unions looked to borrow, as the rate for notes payable was up 9.12% in just the fourth quarter in First Look credit unions," the company said in its analysis.

"The number of credit unions that borrow money is small and generally limited to larger, more sophisticated credit unions,"said EVP Jay Johnson. "However, I expect we will see an increase in the number of credit unions that borrowed in the fourth quarter, as well as an increase in total borrowings."

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