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Slow growth for CUs in 2Q NCUA reports
ALEXANDRIA, Va. (9/2/11)--The results of call reports from 7,239 federally insured credit unions “generally show stabilization and continued improvement,” but a weak economy continues to challenge credit unions, the National Credit Union Administration (NCUA) reported in its quarterly update on the credit union system. The year-to-date return on assets (ROA) ratio grew by three basis points (bp) during the quarter, totaling 77 bp. ROA totaled 51 bp at the end of 2010, and the NCUA said the 26 bp increase since that time “could be construed as a positive sign that credit unions are on the road to recovery from the recent recession.” Credit union membership is also improving, totaling 91 million, a 200,000 member increase from the prior quarter’s total. NCUA Chairman Debbie Matz said the second quarter financials “demonstrate the continued resilience of the credit union industry.” The NCUA also reported that:
• Net income increased by 10.7% over last quarter’s number, and totals $3.58 billion so far this year; • Net worth increased to $95.6 billion, a 2% increase over the $93.7 billion total reported last quarter; • Assets increased 0.3% to $942.5 billion; • Shares increased 0.1% to $812.2 billion; and • Investments, not including cash on deposit or cash equivalents, increased 0.8%, totaling $255.8 billion during the second quarter.
Loans also rose to $564 billion, a 0.7% increase over the first quarter total of $559.9 billion. Demand for short-term, small loans increased by 52% during the quarter, and credit cards and first mortgage real estate loans also “remain popular.” However, the agency noted that the number of new auto loans and other real estate loans fell during the quarter. Asset quality also continued to improve, with declines in both delinquency and net chargeoff ratios in the second quarter. Overall, 60-plus-day dollar delinquencies stood at 1.58% at mid-year--a five- basis-point improvement compared to previous-quarter results and net chargeoffs dropped by an identical amount to average 0.95% in that quarter. “The last time the net chargeoff rate was reported below 1% was the third quarter of 2008,” Credit Union National Association (CUNA) Vice President of Economics Mike Schenk said. Schenk added that balance sheet trends “continue to reflect developments in the macro economy. With a backdrop of uncertainty, slowly improving labor markets, and weak housing activity consumers continue to be cautious and remain focused on paying down debt. This translated into weak loan growth--with credit unions collectively logging only a 2.8% annualized increase in loan balances in the second quarter. “Of course the weak loan growth makes the movement’s asset quality improvements even more impressive,” as weak loan growth and fast payoffs can “tend to put upward pressure on delinquency and chargeoff ratios because they cause the denominator of these asset quality metrics to increase very slowly, or decline,” Schenk added. He noted that CUNA economists expect the total dollar amount of loans outstanding at credit unions to grow by just 2% this year, with improvements in asset quality coming “as labor markets slowly heal and incomes rise. “Further, NCUA’s recently announced plans for corporate stabilization charges suggest that the movement’s full-year earnings for 2011 will likely be in the neighborhood of 60 bp,” he said. For the NCUA release, use the resource link.
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