ALEXANDRIA, Va.-The nation's credit unions reported a loss for the fourth quarter of 2008-a whopping $2 billion-the first quarterly loss ever for the industry, NCUA reported last week.
The fourth quarter loss pushed the return-on-average assets down from a mere 0.51% at the end of the third quarter to just 0.31% for the year, the lowest in decades for credit unions. That compares to 0.63% ROA for 2007, and 1% for an average year over the past decade.
The fourth quarter loss was caused by the addition of billions of dollars in new loan loss reserves as the industry's delinquency ratio surged to a decades-high of 1.37% at year-end, and charge-offs rose to 0.84%. Many credit unions, especially in the four "Sand States" of California, Nevada, Arizona and Florida, reported delinquency and charge-off ratios twice as high.
Average net worth for the industry fell below 11% for the first time in two years, to 10.96%, still a high figure.
"Adverse economic conditions and distress in the financial sector places credit unions at greater risk; however, net worth remains high helping to stabilize the industry," said NCUA Chairman Michael Fryzel. "With safety and soundness the 0priority, NCUA has proactively adopted a more frequent examination contact schedule and activated a national examination team with the knowledge, skill, and experience to effectively deal with current issues."
Loans grew by less than 1% in the fourth quarter (0.7%); while savings grew by just under 2% during the period.
For the full year, net income plunged by 47.5%, based primarily on a doubling in the provision for loan losses as credit unions prepared for possible losses, but also because of the uptick in charge-offs and reduced earnings on investments.
Loans grew by 7.1% for all of 2008, with the first mortgages expanding by 14.5%. Used vehicle loans increased by 5.8%; while new vehicle loans declined 6.2%. Foreclosed real estate doubled and repossessed automobiles increased 28% during 2008.
Savings increased by 7.7% for the year. Regular shares increased 5.7% while money market shares increased 15.8%, share certificates increased 4.7% and IRA/KEOGH accounts increased 13.7%.
