Q1 Financials: Shares and Assets Up, Loans Down

The National Credit Union Administration reported that credit union assets and shares (deposits) grew during the first quarter, while loans declined.

Commenting on credit union performance during the first quarter, NCUA Chairman Debbie Matz said: “Some of the short-term numbers are moving in the right direction. However, credit unions still have a long way to go before overcoming all of the residual issues from the economic downturn of the past two years.”

Shares Post Strong Growth, Loans Fell

Federally-insured credit unions reported assets increased at a rate of 1.5 percent during the quarter to $897.6 billion, while deposits grew by 2.7 percent to $773.2 billion. However, loans fell by 1.2 percent to almost $566 billion. As a result, credit unions’ loan-to-share ratio continues to recede, down to 73.16 percent as of March 31, 2010, from 76.06 percent at year-end 2009.

With the exception of 1st mortgages and other lines of credit, all other loan categories fell during the first quarter:
• Credit card loans were down 2.9 percent;
• Other unsecured credit contracted by 2.7 percent;
• New vehicle loans fell by 5.7 percent;
• Used vehicle loans declined by 0.3 percent;
• Other real estate loans slipped by 1.8 percent; and
• Lease receivables by 5.4 percent.

Additionally, faltering loan demand caused cash, cash equivalents and investments at credit unions to increase during the first quarter. At the end of the first quarter, credit unions reported $297.7 billion up from 278.3 billion at the end of 2009.

Credit Unions Post $1.1 Billion Profit

The credit union industry reported a profit of $1.1 billion in the first quarter, with a return on average assets ratio of 0.48 percent. In comparison, federally-insured credit unions earned slightly less than $1.6 billion for all of 2009 and reported a return on average assets of 0.18 percent.

Net interest income was up 21.9 percent from a year ago to $5.4 billion, as interest expense at credit unions fell more rapidly than interest income. Non-interest income was up 15 percent from a year ago to $2.67 billion, while non-interest expenses grew at a slower pace of 2.8 percent.

Net Worth Ratio Slipped 3 Basis Points

Credit unions continue to build capital during the first quarter. Total equity at credit unions increased 1.5 percent to almost $88 billion. However, the net worth ratio for credit unions edged lower to 3 basis points during the quarter to 9.87 percent as of March 31, 2010.

Delinquency and Charge-Off Rates Edged Lower

During the first quarter of 2010, delinquent loans (loans 60 days or more past due) fell by 5 percent to $9.94 billion; however, delinquent loans were still 20.6 percent above what was reported for a comparable period last year. The percentage of loans that were delinquent fell by 7 basis points to 1.76 percent.

Net charge-offs were almost $1.69 billion, as of the end of the first quarter of 2010 – up almost 8.2 percent from year ago levels. However, the net charge-off rate slipped by 2 basis points during the quarter from 1.21 percent of average loans to 1.19 percent.

Credit unions reported almost $8.5 billion in modified outstanding loans, of which nearly $6.8 billion were real estate loans and $1.6 billion were consumer loans. Modified business loans were $1.3 billion, of which an overwhelming majority was real estate loans. As of the end of the first quarter, 22.32 percent of all modified real estate loans were two months or more past due with modified commercial real estate loans reporting a higher delinquency rate of 29.49 percent.

Credit unions set aside $1.85 billion for loan losses during the first quarter. This was 12 percent below the provisioning for loan losses from a comparable period a year earlier. During the first quarter, credit unions reported that allowances for loan and lease losses increased by approximately $180 million to almost $9 billion.

Foreclosed and repossessed assets increased by 37.5 percent over the last year to $1.6 billion at the end of March 2010.