More Loan Losses Ahead

Credit Union Journal Daily Briefing  |  Friday, March 5, 2010
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 The 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.