First Quarter Data is Looking Up for Arizona Credit Unions

Credit unions in the Grand Canyon State are saving members’ homes and earning positive net income.


According to Callahan’s FirstLook data, Arizona credit unions posted $19.8 million in net income during first quarter 2011, pushing them into the black. Of the 50 Arizona FirstLook credit unions, 36 of them posted a profit for the quarter. Overall these credit unions increased their return on assets 1.05% between fourth quarter 2010 and first quarter 2011, raising it from -0.38% to 0.67%. This is the first quarter these credit unions have posted a positive ROA since late 2007. To achieve this feat these credit unions cut expenses; notably, they reduced their provision for loan losses by almost a 50% annualized rate from the fourth quarter.

Arizona FirstLook Credit Unions ROA

Click on graph to view larger size. |  Source: Callahan & Associates' Peer-to-Peer

Arizona credit unions not only increased their ROA, they also decreased their delinquency ratio. Sitting at 4.32%, the first quarter delinquency ratio represents a 69-basis-point drop from fourth quarter and marks the second straight quarter of decline in delinquency. Not an insignificant accomplishment as it follows fourteen straight quarters of increases. First mortgage delinquency declined 99 basis points from last quarter while other real estate delinquency fell 106 basis points.

Arizona FirstLook Credit Unions Delinquency

Click on graph to view larger size. |  Source: Callahan & Associates' Peer-to-Peer

Although these credit unions did increase their net charge-off rate (63 basis points from the fourth quarter), the troubled loan rate — which is calculated by dividing total delinquent loans and annualized net charge-offs by total loans — has fallen 43 basis points (to 10.34%) from the fourth quarter.

Arizona was one of the hardest hit states when the housing bubble burst. As such, it continues to have one of the highest foreclosure rates in the country. According to RealtyTrac, one in every 205 Arizona homes received a foreclosure filing in April 2011, giving the state the second highest foreclosure rate in the country. Despite the hurdle, Arizona credit unions are playing a crucial role in keeping members’ homes out of foreclosure by modifying more than 1,750 real estate loans. Such actions have made it easier for members to repay loans and have likely helped decrease the amount of foreclosed real estate at credit unions. These modifications, however, have also kept the state's delinquency level relatively high. Delinquent modified loans as a percentage of total delinquent loans increased from 48.8% in fourth quarter 2010 to 52.3% in first quarter 2011.