RANCHO CUCAMONGA, Calif. — Both California and Nevada credit unions posted much lower gains in nearly every financial category in 2006; however, the cooperatives still achieved moderate growth, despite the region's struggling real estate market.
These are the findings from the WestScan annual financial report released July 5 by the states' leagues. Credit unions in both states saw significant decreases in loan growth, deposit growth, asset growth and returns on assets; however, they are in line with historical average annual gains, and for the most part, still outpace national averages.
For example, California saw loan growth drop to its first single-digit pace in three years, at 9.14%. However, that rate still outpaced the national average of 7.83 percent. And, the shift from real estate loans to higher rate products like credit
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cards contributed to a 0.41 percent loan yield increase over last year.
Nevada credit unions felt the sting of the nation's real estate slump more sharply, dropping to a 6.85% gain in loans, below the national average. However, the state's cooperatives racked up an impressive 3.36% net interest margin, seeing an increase in that category while the rest of the country averaged a decline. Like California, the report suggested that credit unions in Nevada strengthen their unsecured product line to keep up with consumer borrowing trends.
Both states went against a national decrease…yes, decrease…in delinquencies. Nevada took the biggest hit, with an increase to 0.51% over 2005′s very low 0.37%. California reported only a slight increase of 0.03% over 2005. Despite these gains, both states are still well below the national average. Additionally, both states
followed a national trend of decreased charge-offs.
Share growth was another category in which the western states went against national averages with significant decreases. California fell to only 3.84% growth after averaging more than 10% annualized growth since 2000. In Nevada, share growth was less than half of 2005′s numbers, down to 3.03%.
Asset growth in both states also fell, putting them both slightly below national averages.
Nevada credit unions still enjoy good profitability, with return on average assets falling just one point to 0.99%, well above the national average. California credit unions, however, suffered significant
decreases in ROA, falling from 0.93% in 2005 to only 0.79% in 2006.
Net worth also slowed in both states, with California dipping to 7.34%. Although the state's credit unions posted a 14.16% increase in undivided earnings, a nearly 31% decrease in other reserves dragged down the growth rate.
"The decline most likely speaks to the strength California credit unions are enjoying in regard to their various portfolios," the report said, noting that the $200 million overall decrease was used elsewhere.
Nevada credit unions posted an 8.67% gain in net worth, led by gains in both undivided earnings and regular reserves. Other reserves grew by 40%, indicating that the state's institutions may be planning for potential losses or debt maintenance. The report noted that should the excess reserves not be needed to cover losses, Nevada credit unions would be primed to redistribute these funds into capital improvements or returns to members.
The report also cautioned California credit unions against further increases in loan to share ratio. Golden State credit unions increased their LTS ratio to more than 84%, which could present liquidity issues
when combined with rising consumer debt and decreases in savings.
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