3Q Call Report: CUs' Earnings up, Chargeoffs Slow (Misc News: December 1, 2010)
All the major indicators that credit unions like to see growing--loans, assets, savings, net income and net worth--grew during third-quarter, according to the third-quarter call reports submitted by the nation's 7,402 federally insured credit unions.
What's more, delinquency has leveled off and loan losses are falling, said the report, released Monday by the NCUA.
"This is further confirmation that the worst of the financial crisis is behind us," CUNA Chief Economis Bill Hampel said.
"We still have a way to go to get back to financial conditions that most credit unions would find appealing, but it sure is nice to be headed in the right direction. The big challenge for most credit unions going forward will be building loan volume, rather than having to deal with rising loan losses," Hampel told CUNA News Now.
Return on Average Assets (ROA), a key measure of credit union earnings, increased to 0.45 percent from second quarter's 0.40 percent, according to NCUA. Increasing operating expenses were offset by declining cost of funds, lower provision for loan loss expense, and higher fee and other income.
Meanwhile, credit union membership continues to grow, reaching 90.8 million members.
Assets, loans and shares grew during the traditionally slow-growing third quarter. While share growth continues to outpace loan growth, used-automobile and unsecured loans and credit cards remain popular, said NCUA.
Used-vehicle loans expanded 1.8 percent and continued to lead loan growth during the third quarter while new vehicle loans declined 3.6 percent. Unsecured loans increased 1.4 percent, and real estate loans rose 0.1 percent. Overall credit union lending remained flat, posting a 0.1 percent increase.
The delinquency ratio - while high - appears to have stabilized at 1.74 percent after reaching 1.76 percent in the first quarter and 1.73 percent in the second quarter. The net charge-off ratio continued to inch lower in the third quarter, falling to 1.13 percent from 1.16 percent.
"Positive trends are emerging," noted NCUA Chair Debbie Matz. "Although difficult economic conditions persist, I am particularly encouraged by the return on average assets growing to 0.45 percent, up significantly from 0.18 percent at year-end 2009 and negative 0.05 percent at year-end 2008. Coupled with the aggregate net worth ratio holding steady at 9.9 percent, there is reason to believe that credit unions are making progress.
"Having said that, NCUA is well aware of the stressed financial environment in which credit unions operate, and is committed to maintaining a rigorous supervisory regime that will enhance safety and soundness," she said.
As of September, loan modifications accounted for nearly 2 percent of all loans. While the pace of loan modifications slowed, growth continues as credit unions work to assist members, said NCUA.
From June through September:
• Assets increased 0.4 percent to $907.9 billion from $903.9 billion;
• Loans increased 0.1 percent to $567.1 billion from $566.4 billion;
• Shares increased 0.3 percent to $779.9 billion from $777.8 billion;
• Investments declined 1.8 percent to $226.2 billion from $230.3 billion;
• Net income increased 11.3 percent to $3.0 billion from $1.8 billion; and
• Net worth increased 1.4 percent to $90.6 billion from $89.3 billion.