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Share Growth Surges, Charge-offs Increase in First Quarter of 2008

Alexandria, Va., May 22, 2008 – Federally insured credit unions reported significant share growth in the first three months of 2008, and the loan delinquency ratio declined slightly primarily because of increased charge-offs according to Call Report data submitted by the nation’s 8,049 federally insured credit unions.

Total shares increased 5.6 percent, for an annualized 22.4 percent in the first three months of 2008, with every category of savings, except non-member deposits, growing by annualized double digits. Loan growth was 1.1 percent, or an annualized 4.5 percent, during the first quarter. Share growth typically outperforms loan growth in the first quarter of the year. Rapid share growth caused the loan-to-share ratio to dip below 80 percent. At 79.8 percent it trends slightly higher than the March 2007 loan-to-share ratio of 79.1 percent.

“The influx of shares in the first quarter illustrates that credit unions are providing their members with competitive savings products,” said NCUA Chairman JoAnn Johnson. “Federally insured credit unions reported a 4.8 percent increase in 1st mortgage real estate loans in the first three months of 2008. However, the data also indicates adverse real estate delinquency trends. 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.”

Overall, real estate delinquency increased from 0.67 percent to 0.70 percent. While delinquent 1st mortgage fixed rate loans declined 0.7 percent, delinquent 1st mortgage adjustable rate loans increased from 0.69 percent to 0.87 percent. Additionally, the   delinquency for other real estate adjustable rate loans increased from 0.81 percent to 0.96 percent.

Net charge-offs increased from 0.50 percent to 0.67 percent, resulting in the loan delinquency ratio declining from 0.93 percent to 0.91 percent. Additionally, the combined delinquency and net charge-offs ratio increased from 1.44 percent to 1.58 percent.
 
Details of major balance sheet categories and membership growth in federally insured credit unions from December 31, 2007, to March 30, 2008, follows:

• Assets increased 5.1 percent to $792.2 billion from $753.4 billion;
• Loans increased 1.1 percent to $532.8 billion from $526.9 billion;
• Investments increased 8.5 percent to $ 154.6 percent from $142.5 billion;
• Shares increased 5.6 percent to $667.7 billion from $632.4 billion;
• Net worth increased 1.8 percent to $87.7 billion from $86.2 billion; and
• Membership increased 0.8 percent to 87. 5 million members

Among the primary loan categories, total real estate loans increased 3.1 percent to $279.6 billion, used auto loans increased 0.7 percent to $89.7 billion, new auto loans declined 3.2 percent to $84.1 billion, and unsecured credit card loans declined 1.2 percent to $29.7 billion.

With the exception of 1st mortgage real estate loans, lending was curtailed in the first quarter of 2008, and the influx of shares resulted in several investment categories expanding significantly. Available for sale securities increased 16.9 percent to $67.9 billion, and deposits in commercial banks, S&Ls and savings banks grew 27.7 percent to $21.0 billion.

Evaluating share growth, money market shares grew 7.9 percent to $119.9 billion, and share drafts grew 6.9 percent to $75.8 billion. Regular shares grew 5.1 percent to $177.6 billion and share certificates grew 4.6 percent to $226.1 billion, while IRA and KEOGH retirement accounts grew 4.2 percent to $59.3 billion.

The return on average assets ratio declined to 0.60 percent from 0.64 percent at year-end 2007 due to an increase in the provision for loan and lease losses expense from 0.44 percent to 0.55 percent as credit unions account for potential loan losses.

Details of first quarter 2008 data are available in a consolidated balance sheet and a March 2008 Facts/Summary posted online at http://www.ncua.gov/data/FOIA/foia.html

The National Credit Union Administration is the independent federal agency that regulates, charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 87 million accounts in all federal credit unions and the overwhelming majority of state-chartered credit unions.

                                                            -NCUA