WASHINGTON – NCUA Chairman JoAnn Johnson yesterday told the Senate Banking Committee credit unions have beefed up their provisions for loan losses over the past year and are well positioned to weather the continuing credit storm.
But, the credit union regulator added, storm clouds continue to collect over credit unions, as they do over the banks and thrifts, as delinquencies and charge offs continue to rise, especially in mortgage lending.
The credit union regulator was testifying alongside other regulators on the state of the banking industry, which was described in dire terms. Regulators for banks and thrifts all told of plunging profits and huge losses, especially in mortgage lending, and predicted continuing losses for the foreseeable future.
For credit unions, the mortgage delinquency rate rose to a 13-year high of 0.67% at year-end 2007 from a low of just 0.34% at year-end 2006, said Chairman Johnson.
The largest concern for NCUA, she said, is among other real estate adjustable rate loans, particularly home equity lines of credit, where delinquencies rose to 0.80% at year-end 2007 from just 0.36% at year-end 2006.
Home foreclosures also are on the rise among credit unions, increasing by 28% in the third quarter last year, and by 22% in the fourth quarter, to a high of $332 million–double the amount of a year ago.
There are other signs of trouble, the NCUA Chairman told the senators, including a rise in credit card delinquencies to 1.33%, the highest since 2003.
As a result, credit unions continued to move large amounts to their provisions for loan losses, pushing down the industry’s profitability, or ROA, in 2007 to just 0.65%, its lowest in more than a decade.
“This level of return, however, was more than sufficient to cover the cost of operations and contribute to the already solid level of net worth,” said Johnson, pointing to a near-record level of 11.4% capital at year-end 2007.
