SACRAMENTO, Calif. – State regulators said the second quarter saw a continued increase in loan delinquencies and loan losses and of troubled institutions among California’s credit unions.
The delinquency ratio for all California credit unions topped 2% at mid-year, with state charters particularly hard-hit at over 2.2%, William Haraf, commissioner of the state’s Department of Financial Institutions, told the California CU League last week. That compares to a delinquency ratio of 1.58% for all credit unions nationwide at mid-year.
Loan defaults surged by 12% during the second quarter to more than $1 billion, while the charge-off ratio rose to almost 2%.
Delinquencies among real estate loans continued to rise even faster, by 27% in the second quarter to $680 million. Delinquencies for member business loans also spiked in the second quarter to 1.78%, from 1.23% in the first quarter, the DFI Commissioner reported.
In addition, the number of problem credit unions, those rated CAMEL 3, 4 or 5, rose to 53, from 41 at the end of the first quarter, even as several troubled institutions, like American River HealthPro CU, E1 Financial CU and Community Trust CU, were merged out.
At mid-year, there were 54 California credit unions under some kind of supervisory agreement, either a cease and desist order or a letter or understanding and agreement with the DFI or NCUA.
"We are seeing a global economic downturn which credit unions have not been immune to, but are doing their best to fight off," said Daniel Penrod, an analyst for the California CU League. "Unfortunately, we’re seeing defaults and more troubled loans as we go forward."
"The state was one of the hardest-hit by the housing crisis. "Unfortunately, it still has pockets where we’re still seeing lingering effects," said Penrod.
But, even with the plunge in real estate prices over the past two years and the rise in the state’s unemployment to 11.6%, the credit union analyst sees positive signs that the worst may be over.
For one thing, he noted that home prices have apparently stopped declining and may be rising. For another, he said the increase in the unemployment rate has also slowed--it rose just one-tenth of 1% last month. "We are seeing some positive signs in the market," Penrod told The Credit Union Journal yesterday. "We’re seeing the housing market start to stabilize; prices are starting to tick upward. That tends to be a leading indicator."
"While we would like to see a "V-shaped" recover, with a quick upturn, what we’re seeing is a slowing of the descent," he added.
