ALEXANDRIA, Va. — Third quarter data on federally insured credit unions showed the loan-to-share ratio at its highest level since the Depository Institutions Deregulation and Monetary Control Act of 1980 was signed into law.
According to NCUA, FICUs loan-to-share ratio at the end of the third quarter reached 82.19%. Lending growth has slowed, but was up 6.47% for the year as of Sept. 30, from $458.2 billion to $487.9 billion.
Looking at the specifics, lending grew across the board with the exception of loan leases. First mortgage and other types of real estate loans grew 9.86% through the third quarter of 2006. New auto loans were up 4.9% while used auto loans grew 1.5%, and credit card lending rose 3.2% as other unsecured loans increased 3.9%. However, delinquencies remained low at 0.62% at the end of the third quarter.
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Savings is still weak, experiencing just 2.77% growth over the first three quarters. Feeding on higher rates, share certificates grew 17.1% while regular shares fell 3.96% and share drafts dropped 7.48%. All "other savings," including certificate, money market, IRA, and all other member share accounts, expanded 9.52% to $337.3 billion.
"The share growth is very, very slow and I think you'll see that traditionally for the fourth quarter because of the Christmas effect," NAFCU Chief Economist Tun Wai explained.
"While some categories of shares declined during the year, loan growth continued to expand illustrating the critical role credit unions play in providing affordable funding to their members," NCUA Chairman JoAnn Johnson said. "Federally insured credit unions reported first mortgage real estate loans expanded 8.20 percent and other types of real estate loans grew 13.13 percent in the first nine months of 2006. This signals credit unions consistent effort to serve their members."
Return on average assets nudged upward from 0.85% to 0.88%. Wai pointed out, "They break down the ROA in terms of the various components…One of the things that I noticed is essentially that the cost of funds of credit unions is growing faster than the revenue income. But surprisingly enough, their ROA is actually higher than it was at the end of last year. A lot has to do with the fact that the provision for loan loss expense has actually declined almost ten basis points and I think that's a pretty good sign in terms of controlling expenses."
He pointed out that when the bankruptcy law came into effect, credit unions did some shifting with their loan loss provisions and Wai expects the low level of bankruptcy filings to continue. Additionally, he said, with newer loans, credit unions tend to set aside less. The economist said he expects credit unions to continue to keep their loan loss provisions down for the near-term, which will help boost ROA.
Other information NCUA revealed about FICUs' first three quarters of 2006:
o Assets increased 3.28% to $700.9 billion from $678.7 billion;
o Investments declined 6.54% to $138.3 billion from $148.0 billion;
o Net worth to total assets increased to 11.52% from 11.24%; and
o Membership increased 1.56% to 85.8 million from 84.5 million members at the nation's 8,462 FICUs. –[email protected]
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