First Quarter Was Worst Ever For CUs

Published May 27, 2009, 7:41 p.m. EDT

Updated August 27, 2020, 12:39 a.m. EDT

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ALEXANDRIA, Va. – Buffeted by the costs to bail out U.S. Central FCU and WesCorp FCU and the spreading recession, credit unions had their worst quarter ever in the first three months of the year, according to data released by NCUA yesterday.

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The nation’s 7,749 federally insured credit unions lost $3.2 billion in the first quarter–half of which may be recaptured because of the new corporate bailout law–pushing return-on-average assets, the industry’s key profitability indicator, down to negative 1.5%–it’s lowest ever.

The losses slashed net worth–capital–at the nation’s credit unions by more than $3.3 billion, pushing the ratio below 10% for the first time in a decade.

In addition, loans declined by 1% during the first three months of the year, while the delinquency ratio continued to climb, to 1.44%, from 0.91% a year ago, and the charge-off ratio rose to 1.11%, from 0.67% for the first quarter last year.

While more than two thirds of the first quarter losses were attributable to the costs associated with the U.S. Central and WesCorp failures, legislation passed by Congress last week will allow credit unions to recapture most of those costs this year by spreading them out over as many as eight years.

"Reflecting the unstable economy and typifying the normal first quarter influx of funds, credit union members were strong depositors, posting gains in every category of credit union member share and saving accounts in the first three months of 2009," said NCUA Chairman Michael Fryzel in a statement. "The unstable economy slowed lending, with the exception of mortgage lending, primarily due to historically low 1^st mortgage loan rates.

The recession prompted greater savings among credit union members, a strong 6.4% gain for the quarter.

First mortgage real estate loans and lines of credit grew 1.5% and used auto loans grew 0.8%, while the significant lending categories of credit cards and other types of unsecured credit declined over 3%, and new vehicle loans continued to decline, down 1.6% during the first quarter of 2009.