ALEXANDRIA, Va. -- Credit union assets and net worth continued to increase through 2007 as earnings followed their recent downward trend, according to a recent NCUA Letter to Credit Unions (08-CU-04).

The report highlights that assets at federally insured credit unions grew by $43.46 billion or 6.12% to $753.46 billion. At the same time, net worth was up 5.28%; however, the ratio of net worth to assets fell from11.53% to 11.44% over 2007.

Credit unions' collective return on average assets fell from 0.82% to 0.65%.

Loan volume increase continued to outperform share growth, pushing the loan-to-share ratio up from 82.44% to 83.32% at year-end.

NCUA Chairman JoAnn Johnson noted in the letter, "Overall, federally insured credit unions continued their solid performance in 2007. Loans, shares, and net worth grew; however, the delinquent loan ratio increased 25 basis points and the loan loss ratio increased five basis points indicating increasing potential concerns in credit quality of loan portfolios. While net interest margins continued to decline, credit unions achieved favorable operating results."

Meanwhile, delinquencies crept upward toward the 1.00% mark, landing at 0.93% by year-end. The trend had been steadily downward from 0.79% in 2002 to 0.68% in 2006. Foreclosed real estate more than doubled from $0.16 billion to $0.33 billion. Additionally, delinquent real estate loans increased as a percentage of total real estate loans from 0.34% to 0.67%.

Net loan charge-offs increased by 18.38%, for $397.86 million.

While noting credit unions' high net worth levels, Johnson stated, "Delinquency, especially in the real estate portfolio, increased significantly during 2007. It is important to note the increases in delinquency, though substantive, do not threaten the overall safety and soundness and stability of the credit union industry.

"Credit unions with a large or increasing real estate loan portfolio need to maintain vigilance in their asset-liability management and liquidity management planning processes, as well as address the credit risk implications in light of ongoing developments in the real estate sector of the market. All credit unions need to ensure the loans they make reflect not only the needs of the members but also the risk profile of the credit union in order to control future losses."

On the other side of the balance sheet, shares were up $31.21 billion or 5.19%, the majority of which has come from share certificates and money market accounts.

Membership expanded by 1.1 million or 1.27%.