Northwest Credit Unions Compare Favorably to Peers and Competitors Through Year’s First Half

Oregon and Washington credit unions have seen steady improvements through the first half of the year. The return on average assets (ROA) for credit unions took a nice jump during the past two quarters, far exceeding Oregon and Washington commercial and savings banks. Oregon and Washington have also had a stronger ROA compared to the national credit union average over this period.

The driving factors behind this strong first-half ROA have been the reduction in the provision expense to fund allowance for loan losses (ALL), as well as no temporary corporate credit union stabilization expense or National Credit Union Insurance Fund (NCUSIF) premium expense assessments. However, it is worth noting that these figures do not reflect the most recent 25-basis-point premium assessment, which will have a significant impact on all credit unions’ 2011 ROA.

The provision expense for loan losses has decreased by 36 percent compared to June 2010. The significant reasons for this decrease are the steady decline in loan charge-offs over the past two quarters and a leveling out of the delinquency ratio. Commercial and savings banks have seen a significant decline in these areas as well—even more than credit unions. However, commercial and savings banks remain consistently above the credit union industry in their delinquency and net charge-off ratios.

Due to the increase in ROA, we also saw a 30-basis-point jump in the net worth ratio for Oregon and Washington credit unions, which will provide some needed cushion considering the amount credit unions had to book for 2011’s premium assessment.

Loan growth for Oregon and Washington credit unions has seen a slight decline for three straight quarters as loans become harder to fund. Deposits have seen consistent growth at around five percent, which has primarily been in savings and checking accounts. Total asset growth also continues to rise at nearly the same growth rate as deposits due to loan growth being extremely flat. Loan growth for commercial and savings banks decreased significantly in 2011 on a national level and has been consistently declining in Oregon and Washington.

The Northwest Credit Union Association (NWCUA) anticipates a significant increase in deposit and membership growth in the coming months as banks begin charging for debit cards. Credit unions have seen more people flock to the safe haven of credit unions recently, and further opportunities for increased membership are expected. It is important to consider that the resulting increase in deposits will impact the net worth. However, this is a short-term issue, and the membership swell will only help the growth and vitality of the credit union movement in the long run.


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