In Q3, Stagnation, But ...

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ALEXANDRIA, Va.-Credit unions had one of their slowest quarters ever in the July-Aug. period, with both loan growth and deposit growth almost flat, NCUA reported last week.

Still, profitability rose slightly, from 0.41% return-on-average assets at mid-year, to 0.50% for the third quarter, even as most credit union charged the 12.4 basis points premium for the National CU Share Insurance Fund during the quarter. Increased operating costs in the third quarter, said NCUA, were offset by declining cost of funds, lower provisions for loan losses and higher fee income.

Both loans and shares for the third quarter grew by less than 1%, a stagnancy seldom seen by credit unions.

The delinquency ratio for the third quarter was 1.73%, almost the same as both the first and second quarters. The charge-off ratio also appeared stable at 1.1%, about the same as the first two quarters.

"Positive trends are emerging," said NCUA Chairman Debbie Matz. "Although difficult economic conditions persist, I am particularly encouraged by the return on average assets growing to 0.45%, up significantly from 0.18% at year-end 2009, and a negative 0.05% at year-end 2008."

Bankruptcies Continue To Rise
CU member bankruptcies continue to increase and are on track to exceed 2009 levels. The number of members filing for bankruptcy was 268,141 through the third quarter of 2010, compared to 246,386 over the same time in 2009. Member bankruptcies reached 323,737 at the end of 2009. Additionally, loans charged-off due to bankruptcy, and loans outstanding subject to bankruptcy are all on track to match or exceed the high 2009 levels. CUs in states with distressed real estate markets and high unemployment are particularly susceptible.

Foreclosed and repossessed assets grew 8.3% to $1.8 billion in the third quarter, the highest growth rate of the year.

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