CUs Score First Quarter Rebound

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ALEXANDRIA, Va. – NCUA said this morning that credit union profitability rose to 74 basis points for the first quarter, up from 51 bps in the fourth quarter of 2010, and the best performance in four years.

First quarter ROA was just 47 bps last year, negative 151 bps for the first quarter of 2009, and 60 bps for the first quarter of 2008.

“The solid financial start to 2011 shows the resilience of the industry, and credit unions as a group continue to make solid progress during the economic recovery,” said NCUA Chairman Debbie Matz. “Significantly, return on average assets increased by 23 basis points to 74 basis points during the most recent quarter.”

In comparison, the FDIC reported last week that banks' profitability rose to 87 bps for the first quarter, from 53 bps for the same period last year.

The rising credit union profitability was fueled by a continued decline in operating expenses and cost of funds as well as the provision for loan loss expenses. In addition, credit unions have yet to accrue for expected charges for the corporate credit union bailout, or a National CU Share Insurance Fund assessment, as they did in each of the last three years.

Still, the move from 51 to 74 basis points first-quarter ROA "could be construed as a positive sign that credit unions are on the road to recovery from the recent recession," said NCUA Chairman Matz.

However, some indicators for troubled assets remain high. Loan delinquencies and loan charge-offs continued near historic highs, at 1.62% and 1%, for the first quarter, although both key indicators continued to trend downward.

Loans, which declined by 1.4% last year, fell another 0.86% in the first quarter, while shares (deposits) rose by 3.21%.

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