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CU System
CU Profile notes liquidity asset quality trends
MADISON, Wis. (3/12/10)--Credit union liquidity increased and asset quality decreased, according to the U.S. Credit Union Profile report, the Credit Union National Association’s (CUNA) summary of National Credit Union Administration (NCUA) call report data released March 1. The profile report of edited NCUA data confirms the broad trends NCUA reported and also reveals some trends and details that were not highlighted by the agency’s news release, said Mike Schenk, CUNA vice president of economics and statistics. For example:
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* Credit union liquidity increased in 2009 as savings inflows exceeded loan growth by a wide margin. Savings grew at a doubledigit rate (+10.3%) while loans increased a modest 1.2%. Loan-to-savings ratios fell from 83.2% to 76.3% and the liquid asset ratio remained near 33%--about 10 percentage points higher than the level at year-end 2005. * Asset quality deteriorated marginally in the year as delinquencies jumped 0.45% (to 1.82%) and net chargeoffs rose by 0.37% (to 1.21%).
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While these increases were large, they paled in comparison to those seen in the commercial banking sector. U.S. banks saw year-end 2009 delinquencies rise to a stunning 5.37%, and bank net chargeoffs in the year were 2.49%--double the level experienced by credit unions. Credit union bankruptcies increased from 2.6 per thousand members in 2008 to 3.6 per thousand members in 2009. The 2009 level is nearly equal to the levels seen immediately prior to passage of bankruptcy reform in 2005. * Interest rate risks seemed to moderate if only slightly in 2009. Credit union long-term assets declined to 31.6% of total assets (from 31.9% in 2008). Credit unions sold more than half of their mortgage originations into the secondary market in 2009--which helped to keep this exposure at manageable levels. Also, core deposits rose slightly--from 36.2% of total deposits in 2008 to 36.9% in 2009. Share drafts grew 15.4% in 2009 and regular shares increased by 11.7%. While credit union rate-risk exposure moderated somewhat in 2009, the risks appear greater than they did four or five years ago, which will mean that interest-rate risk management will be a point of emphasis in the coming exam cycle.
CUNA’s Profile report also includes a snapshot of recent economic activity, which reflects strong fourth quarter growth, vastly improved labor market conditions, more stable home prices and tame inflation--obvious signs of progress toward a self-sustaining recovery, Schenk said. The profile’s economic outlook summary reflects economic improvement in 2010 but a continued steep yield curve--which will help keep credit union interest margins high. The prospect of faster loan growth, slower savings growth and obvious asset quality improvement later in the year are clear signs that the biggest challenges are behind us, Schenk said. To view the profile report, use the link.
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