WASHINGTON — The nation's economic woes helped spark a 15.7% decline in federally insured credit unions' net income, the NCUA said.
A 71.9% increase in the provision for loan and lease losses, funds set aside for possible losses, caused the bulk of the decline, according to the agency, which based its analysis of Call Report data from all 7,904 federally insured credit unions.
Other signs that the economic crisis is hurting credit unions included a 20-basis-point increase in the loan delinquency ratio from 0.93% to 1.13%, an increase in the net charge-off ratio from 0.51% to 0.75%., and a decline in return on average assets from 0.64% to 0.51%.
There had been 15 credit union failures through Oct. 31, compared to 12 for all of 2007. Those failures have cost the NCUSIF $228.5 million. Of those failures, 13 were involuntary liquidations and two were assisted mergers.
NAFCU Chief Economist Tun Wai said the figures aren't as bleak as they could be, in light of the significant problems facing many providers of financial services. He also pointed out that the quality of most loans made by credit unions is still excellent. Wai added that loans usually exceed savings during the second half of the year.
The data also showed the loan-to-share ratio rising to 83.73%; assets jumping 6.4 % to $801.7 billion; loans increasing 6.3% to $560 billion; investments up 15.5% to $164.5 billion; shares rising 5.8% to $668.9 billion; net worth increasing 5.21% to $89.5%; first mortgage real estate loans and lines of credit grew 13.6%; and used automobile loans were up 5.6%. Additionally, credit union membership increased 2.0% to 88.5 million members.
Regular shares increased 6.3% and money market shares were up 14.4%.
“Credit unions are doing a lot in anticipation of future problems given the uncertainty of the economy. Also, consumers are worried and that explains why deposits are up,” Wai said.
NCUA Chairman Michael E. Fryzel said the mixed results reinforced the importance of vigilance by his agency.
“Credit unions' continued high level of net worth will help them weather today's turbulent economy; however, credit unions are not immune to financial stress, as noted in the delinquency increase in categories such as credit cards and mortgage loans,” he said in a statement. “NCUA is keeping a watchful eye on these adverse trends as part of a broader commitment to maintaining a safe and sound credit union industry.”
The day before the agency released the data, the board approved a stepped up examination program that is aimed at increasing the frequency and rigor of its examinations of federally insured credit unions.
The agency's budget for next year includes funding for an increase of 51 full-time equivalent employees, mostly examiners.
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