ALEXANDRIA, Va. – Loan losses grew 34% at credit unions in the first quarter, while mortgage delinquencies continued to increase, portending continued troubles further into the year, according to NCUA.
The average charge-off ratio rose to 0.67%, from 0.50% at year end, while the overall delinquency ratio declined slightly to 0.91%, from 0.93%, as an increasing number of loans passed from the delinquency category to charge-offs.
The delinquency ratio for mortgage loans continued to rise, to 0.70%, from 0.67% at year end. The delinquency ratio for ARMs surged to 0.87%, from 0.69%; and the ratio for other real estate ARMs climbed to 0.96%, from 0.81%.
The troubled loans continued to weigh on profitability, which stood at just 0.60% (return on average assets) for the first quarter. That was up from the decades-low 0.35% for the fourth quarter, when hundreds of credit unions boosted their allowance for loan losses significantly, but still near a 10-year low.
The deteriorating mortgage portfolios caused credit unions to continue to move billions of additional funds to their loan loss reserves, which increased another 25% in the first quarter.
First quarter share growth was strong, 5.6%, while loan growth was tepid, just 1.1%.
NCUA Chairman JoAnn Johnson pointed to the strong share growth as a positive sign, but noted the weakening mortgage portfolios. “While these trends are not indicative of systemic problems in the overall safety, soundness and stability of the credit union industry, they underscore the importance of diligence and care in credit union underwriting and proactive management of real estate loan portfolios,” she said in a statement.
