Friday, March 12, 2010

Credit Unions Post Strong Deposit Growth in 2009

The National Credit Union Administration (NCUA) on March 1 reported that federally-insured credit unions posted robust asset and share (deposit) growth in 2009.

Assets grew by 9.08 percent to $884.8 billion and shares (deposits) at federally-insured credit unions expanded at a robust 10.5 percent pace in 2009 to $752.7 billion. However, loans grew 1.1 percent to $572.4 billion. As a result, the loan to deposit ratio at credit unions fell from 83.1 percent to 76.05 percent.

Loans for credit cards, used autos and first mortgages/lines of credit grew during 2009, while new auto loans, other real estate loans/lines of credit, and leases contracted during the year.

Net worth grew 1.9 percent to $87.7 billion from $86.1 billion; but did not keep pace with asset growth. As a result, the net worth ratio for credit unions fell by 70 basis points to 9.71 percent.

Credit Unions Posted a Profit of $1.7 Billion

Net income was $1.7 billion – yielding a return on assets of 0.20 percent, which was up 24 basis points from 2008. Higher provisions, a NCUSIF capitalization expense of $3 billion, and lower interest income were a drag on credit union earnings, while a 22.6 percent decline in interest expense, a 4 percent drop in non-interest expenses, and a NCUSIF Stabilization Income of $3.3 billion helped to bolster credit union earnings.

Federally insured credit unions continued to build reserves to cover problem loans during 2009. Provisions for loan and lease losses grew by 34.1 percent during 2009, following a 120 percent increase in 2008. Over $9.4 billion was set aside to cover loan and lease losses. As a result, allowances for loan and lease losses increased by almost 41 percent to $8.77 billion.

Nonperforming Assets and Charge-offs Increase in 2009

Delinquent loans (loans 60 days or more past due) grew 33.7 percent to a reported $10.4 billion. At the end of 2009, 1.82 percent of loans were 60 days or more past due, up from1.38 percent at the end of 2008.

Additionally, federally-insured credit unions reported $9.3 billion in loans that were between 30 days and 60 days past due.

Credit unions reported holding $1.5 billion in foreclosed and repossessed assets at the end of 2009. This is up 48.4 percent from 2008’s level of about $1 billion.

There was a 48.7 percent increase in net charge-offs for 2009. Total net charge-offs were $6.9 billion. As a result, federally-insured credit unions reported that the net charge-offs to average loans ratio rose from 0.85 percent to 1.21 percent during the year.

Credit unions also reported writing down slightly more than $1.5 billion in capital investments in corporate credit unions during 2009.

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