Last week, one of our articles, Leading America Back to Savings..., predicted that there would be a significant surge in liquidity as investment trends fall back toward increased savings. If people start carrying a higher percentage of their worth in savings, credit unions will see a declining loan to share ratio. Shares should grow, while loans remain relatively stagnant.
Of these 113 credit unions, only 42 of them grew their loan portfolios in the first three months. Collectively they grew loans at less than 1.4% annualized rate in the first 3 months of 2003, while their shares grew at an annualized rate of 16.7% in those same three months. This caused their collective loan to share ratio to drop more than 2.5 percentage points in just the first quarter.
Lacking lending activity, credit unions consequently turned to investments. Investments grew at an annualized rate of 39.7% in the first quarter (among the 113 First Look participants). Cash on deposit and cash equivalents made up 48% of these new investments. If America continues this trend towards savings, we can expect to see similar liquidity develop throughout the industry.