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3Q call report CUs earnings up chargeoffs slow
WASHINGTON (11/30/10)--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 National Credit Union Administration (NCUA). "This is further confirmation that the worst of the financial crisis is behind us," said Bill Hampel, chief economist at the Credit Union National Association (CUNA). "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 News Now. Return on Average Assets (ROA), a key measure of credit union earnings, increased to 0.45% from second quarter's 0.40%, said 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% and continued to lead loan growth during the third quarter while new vehicle loans declined 3.6%. Unsecured loans increased 1.4%, and real estate loans rose 0.1%. Overall credit union lending remained flat, posting a 0.1% increase. The delinquency ratio--while high--appears to have stabilized at 1.74% after reaching 1.76% in the first quarter and 1.73% in the second quarter. The net charge-off ratio continued to inch lower in the third quarter, falling to 1.13% from 1.16%. “Positive trends are emerging,” noted NCUA Chairman Debbie Matz. “Although difficult economic conditions persist, I am particularly encouraged by the return on average assets growing to 0.45%, up significantly from 0.18% at year-end 2009 and negative 0.05% at year-end 2008. Coupled with the aggregate net worth ratio holding steady at 9.9%, 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% 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% to $907.9 billion from $903.9 billion; * Loans increased 0.1% to $567.1 billion from $566.4 billion; * Shares increased 0.3% to $779.9 billion from $777.8 billion; * Investments declined 1.8% to $226.2 billion from $230.3 billion; * Net income increased 11.3% to $3.0 billion from $1.8 billion; and * Net worth increased 1.4% to $90.6 billion from $89.3 billion.
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