WASHINGTON — The nation's economic woes helped spark a 15.7%decline in federally insured credit unions' net income, the NCUAsaid.
A 71.9% increase in the provision for loan and lease losses, fundsset aside for possible losses, caused the bulk of the decline,according to the agency, which based its analysis of Call Reportdata from all 7,904 federally insured credit unions.
Other signs that the economic crisis is hurting credit unionsincluded a 20-basis-point increase in the loan delinquency ratiofrom 0.93% to 1.13%, an increase in the net charge-off ratio from0.51% to 0.75%., and a decline in return on average assets from0.64% to 0.51%.
There had been 15 credit union failures through Oct. 31, comparedto 12 for all of 2007. Those failures have cost the NCUSIF $228.5million. Of those failures, 13 were involuntary liquidations andtwo were assisted mergers.
NAFCU Chief Economist Tun Wai said the figures aren't as bleak asthey could be, in light of the significant problems facing manyproviders of financial services. He also pointed out that thequality of most loans made by credit unions is still excellent. Waiadded that loans usually exceed savings during the second half ofthe 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 rising5.8% to $668.9 billion; net worth increasing 5.21% to $89.5%; firstmortgage real estate loans and lines of credit grew 13.6%; and usedautomobile loans were up 5.6%. Additionally, credit unionmembership increased 2.0% to 88.5 million members.
Regular shares increased 6.3% and money market shares were up14.4%.
“Credit unions are doing a lot in anticipation of future problemsgiven the uncertainty of the economy. Also, consumers are worriedand that explains why deposits are up,” Wai said.
NCUA Chairman Michael E. Fryzel said the mixed results reinforcedthe importance of vigilance by his agency.
“Credit unions' continued high level of net worth will help themweather today's turbulent economy; however, credit unions are notimmune to financial stress, as noted in the delinquency increase incategories such as credit cards and mortgage loans,” he said in astatement. “NCUA is keeping a watchful eye on these adverse trendsas part of a broader commitment to maintaining a safe and soundcredit union industry.”
The day before the agency released the data, the board approved astepped up examination program that is aimed at increasing thefrequency and rigor of its examinations of federally insured creditunions.
The agency's budget for next year includes funding for an increaseof 51 full-time equivalent employees, mostly examiners.
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