Credit unions turned out an impressive performance in 2010. Highlights for the industry include:
Record loan volume posted for both the fourth quarter and second half of 2010;
More than $8.5 billion in modified loans at year end;
Asset quality improvement as economy recovers;
Net income up 268% over 2009;
Capital topping $100 billion at year end
Credit unions ended 2010 with record levels of lending activity. Loan originations for both the fourth quarter ($68.5 billion) and second half ($138 billion) of the year were the highest on record for those periods. For the full year, credit unions originated nearly $250 billion in loans to members, with first mortgages accounting for more than one-third of the total.
Low interest rates historically have provided credit unions the opportunity to refinance members’ loans and help them save on monthly principal and interest payments. Asset and liability management considerations, however, led credit unions to sell more than half of all first mortgage originations to the secondary market, limiting the growth of outstanding loans on the balance sheet during the current low-rate environment. Loan balances were down slightly in 2010, although the -0.6% annual growth rate would have exceeded 7% if the $44 billion of balances sold to the secondary market had been retained.
As they have throughout the recession, credit unions worked with members facing financial challenges, modifying more than $5.0 billion of loans during 2010 and ending the year with $8.5 billion of modified real estate loans outstanding. The success of credit union programs underscores how important it is to know about local economies and individual member situations when addressing consumer needs.
Loan quality improved during the year; both the delinquency and net charge-off rates fell nine basis points each to 1.74% and 1.13%, respectively. The improvement in asset quality allowed credit unions to reduce their provision for loan loss expense by more than 25% versus 2009. This reduction, combined with only 3.6% growth in operating expenses prior to the NCUSIF premiums, helped boost ROA to 0.51%. Capital levels remain strong with the net worth ratio at 10.1% and total capital ratio, including the allowance for loan losses, at 11% at year end.
Consumer activity is picking up, and credit unions are positioned to sustain their momentum in 2011. Visit CreditUnions.com and attend Trendwatch for more insight into fourth quarter trends and what they mean for 2011 plans and budgets.