Last week’s release of the Quarterly Banking Profile highlighted a noticeable trend in financial services – a moderation in asset quality measures. This week, Elliott Kashner tackles industry averages as of March 31. Regional differences, however, have been highlighted over the course of the Great Recession. Such differences have most notably created a new group within the United States, the Sand States. Comparing similar changes at a state level using Callahan & Associates’ FirstLook program, in 22 states – or nearly half the country – both delinquency and charge-off ratios decreased.
Only eight states posted a positive change in delinquency – that is delinquency increased from year-end 2009 to March 2010. Regionally, these states (excluding New York) are concentrated in the western part of the United States. Arizona continues to struggle with rising delinquency and charge-offs as it tries to manage decreasing home prices and poor economic conditions. Utah, North Dakota, New Mexico, New York, and Oregon all posted increases in their delinquency ratios over the previous quarter, but their charge-offs declined.
By contrast to those eight, 11 states posted decreases in delinquency. In some states, such as Delaware and Nevada, credit unions charged-off delinquent loans – an indication of business cycle management rather than overall asset quality improvement. In Delaware and Nevada credit unions charged off delinquent loans at the beginning of the year to, perhaps, clean the slate. This method also allows collectors one last chance to reach out to past-due members after the holiday season.
The final chart illustrates that more credit unions are decreasing their delinquency and charge-off ratios than are increasing them. Ranging from improvements of three basis points to 29, these credit unions have had, on average, lower ratios than industry averages.
The drivers of these changes vary by state, although most of the states posted improvements in their delinquent indirect portfolios. Changes with credit card delinquency were mixed but in most cases modest in scope. At the extremes, credit unions in Alabama decreased their credit card delinquency rate by 43 basis points to 1.05%; delinquencies at Colorado credit unions increased 74 basis points to reach 2.26% as of March 31.
There were a few notable regional differences in real estate delinquency, including:
- Florida’s “Other Real Estate” delinquency decreased by 29 basis points to 3.14%. Overall Florida’s delinquency ratio decreased by nine basis points, while the charge-off ratio increased by 12 basis points.
- 24 states posted increases in their first mortgage delinquency rate; 26 posted decreases. Colorado’s rate remained unchanged at 1.22%.