Flexible ‘Lattice’ Replaces Corporate Ladder

CU360
March 5, 2010 | COMMENTS

Credit unions finished 2009 with nearly 10% net worth, while loan demand and delinquencies showed weakness in the face of economic stress, according to Call Report data released March 1 by NCUA. Membership in the nation's 7,554 federally insured credit unions increased to nearly 90 million, and shares grew at a robust 10.5%.

“Credit union membership growth is impressive and encouraging,” says NCUA Chairman Debbie Matz. “These positive developments, however, are tempered by recognition of ongoing market stresses. This reality reinforces NCUA's decision to increase examination staff and augment regulatory oversight to monitor and assist credit unions faced with persistent, adverse economic conditions.”

Reflecting stress in the job market and a struggling economy, delinquent loans to total loans increased to 1.82%. Credit unions continued to build provisions for loan losses as the ratio of net charge-offs to average loans grew from 0.85% to 1.21% during the year.

Overall loan volume grew 1.1%. Most of the loan growth in 2009 was in used automobile, credit card, and first mortgages.

Net income returned to a positive $1.7 billion after a two-year decline. This figure includes both NCUSIF stabilization income and expense in 2009. Data also suggests that, by improving cost management, credit unions reduced operating expenses and the return on average assets grew 24 basis points compared to year-end 2008.

Details of major balance-sheet items and member growth in federally insured credit unions from January through December 2009 include:

• Assets increased 9.08% to $884.8 billion from $811.1 billion;
• Loans grew 1.1% to $572.4 billion from $566.0 billion;
• Shares increased 10.5% to $752.7 billion from $681.1 billion;
• Investments increased 27.3% to $210.9 billion from $165.7 billion;
• Net worth grew 1.9% to $87.7 billion from $86.1 billion; and
• Membership increased 1.5% to 89.9 million from 88.6 million members.

Because share growth significantly outpaced loan growth during 2009, the loan-to-share ratio declined to 76.05% from 83.1% posted at year-end 2008. This resulted in significant investment growth.

Within share accounts, regular shares, share drafts, and IRA/Keogh accounts each posted double-digit increases, and money market shares grew a substantial 23.5%.

Funds in federally insured credit union share certificates declined 0.2%. Used-car loans increased 4.1%. First mortgage real estate loans and lines of credit grew 4.4% in 2009. Credit cards posted 6.6% increase—2% lower than the 8.6% unsecured credit card debt posted in 2008. New-car loans declined 7.7% and other types of real estate loans declined 4.3%.

To protect against potential losses, federally insured credit unions increased provisions for loan and lease losses by 34.1% during 2009 following a 120% increase in 2008. Over $9.4 billion is now set aside to cover loan and lease losses. Delinquent loans grew 33.7% to a reported $10.4 billion.