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Friday, May 7, 2010

Delinquent loans nag OnPoint in first quarter

Our regular quarterly look at the financial statements of Portland's OnPoint Community Credit Union provides another glimpse into the state of the local economy, as it has since we first started checking into those reports more than two years ago. And no surprise this time around, there are still quite a few credit union members suffering out there. Delinquent loans continued to swell at OnPoint in the first quarter of 2010, erasing some of the recovery in that department that had been noted in the immediately preceding quarter.

Here are the numbers, as recently filed with the National Credit Union Administration:

Item3/31/0912/31/093/31/10Quarterly increase (decrease)12-month increase (decrease)
Total investments$247,615,140$432,665,342$556,611,18628.65%124.79%
Federal agency securities$124,075,055$285,152,450$420,887,98747.60%239.22%
Total reportable delinquency - total delinquent loans$27,041,586$22,551,519$31,397,46239.23%16.11%
Total reportable delinquency - indirect lending$8,725,911$4,449,517$3,598,018(19.14%)(58.77%)
Total outstanding loan balances subject to bankruptcies$4,978,864$29,565,449$7,004,332(76.31%)40.68%
Ratio of delinquent loans to total loans (percent)    
Ratio of total delinquent loans to net worth (percent)11.598.7311.96   

Delinquent loans are those delinquent for two months or more.

Two of the figures that we were watching closely when the economy started to implode -- federal agency securities and indirect lending -- no longer seem to be much of an issue at OnPoint. However, the delinquent loan ratios, which had improved toward the end of 2009, slipped in the first quarter of 2010, to worse levels than a year before.

It's also sobering to looking back to OnPoint's delinquent loan ratios not so long ago, in the third quarter of 2007. At that point, delinquent loans to total loans were just 0.17%, and delinquent loans to net worth were just 1.56%. Today they're at 1.51% and 11.96%, respectively.

Over on the profit and loss side, OnPoint's net income for the first quarter of 2010 was $4,166,831, up 22.98% from $3,388,178 in the first quarter of 2009. In the first quarter of 2010, deposits increased from $2,381,752,154 to $2,446,618,429 -- a third consecutive quarterly increase, of 2.72%. Deposits a year earlier were $2,321,865,874, and thus for the year, deposits were up 5.37%.

That brings us to our comparison of some of OnPoint's financial data with that of three other Oregon-based credit unions: Unitus here in Portland, First Tech in Beaverton, and Oregon Community down in Eugene.

One number that we've been tracking for the group has been the ratio of delinquent loans (two months or more) to total loans -- the higher the number, the worse the portfolio from a delinquency standpoint. Here are the percentages for all four credit unions in that department at three recent reporting dates:

Credit union3/31/0912/31/093/31/10
First Tech0.901.090.96
Oregon Community0.971.511.19

Another ratio that we've been watching is delinquent loans to net worth. Here are the percentages for the group on that score:

Credit Union3/31/0912/31/093/31/10
First Tech6.146.635.71
Oregon Community11.6716.9113.11

Only OnPoint's delinquency ratios worsened from the end of 2009 to March 31, 2010. The other three institutions' ratios improved during the quarter.

Finally, here are the year-to-date net income (loss) figures for the group, worth noting for the trends:

Credit Union3/31/093/31/10
First Tech$1,033,887$2,677,963
Oregon Community($7,699,749)$689,385

Everyone's operating results improved from the year before, but OnPoint's improvement was the least dramatic.

This may be the last quarter that we'll be able track First Tech in a meaningful way for a while. It's planning to merge into Addison Avenue Credit Union in Palo Alto, and at that point it will be hard to compare First Tech's past with its present. Perhaps we'll have one more quarter of First Tech as we know it, but even then, we may find some last-minute accounting maneuvers in preparation for the combination of the two institutions.

Comments (8)

I am not sure that First Tech's owner/shareholders are going to rubber stamp any merger. We will see.

Interesting. Looks like round 2 of the financial crisis is hitting Europe, which had bought into U.S subprime and then to add to misery the "Club Med" portion of the Euro zone has been reporting bogus public finances. As a consequence, the EURO hit a recent low of $1.26 per U.S dollar yesterday. Milton Friedman once said he didn't believe in the longevity of the EURO given the balkanized nature of Europe. This is a test.

If you want to take a trip to Europe someday soon, it might be worth the risk to buy some EUROs (hoping France and Germany stay with the currency). I think the risk of near term abandonment of the EURO is pretty low, as it probably would be less economically damaging for all involved if Greece just went ahead and went through debt restructuring. The other way would be for the European Central Bank to buy outstanding Greek government debt with newly printed EUROs. This would have a near term plus but allow Greece's beggar thy neighbor welfare state to continue on its merry way.

Odds of disinflation and deflation seem to be strong once more, especially when you consider parts of Asia have been growing economically at elevated levels for many a year and economic history would suggest this comes to a sharp slowing at least periodically.

Thanks for that excellent roundup.

Does anybody know what Addison's financials look like? If they don't look too good, then I'm with LucsAdvo on this one.

"Another ratio that we've been watching is delinquent loans to net worth."

Shouldn't that follow the ratio of delinq loans to total loans?

The only thing that would change that would be moving their reserve requirements. I am guessing that by the above, the requirements are 10% reserves for each dollar loaned out?

What's more interesting is the ratio of federal securities to total investments. About the only thing the banks are trusting now are T-bills?

I think they also get into Fannie Maes.

Not that I am that comfortable with them buying mortgage-backed debts like FNMA (even if Fed-guaranteed), but the main thing is that it looks like they are not generating new loans at all. That and the unemplyment is probably why this recession has a ways to go.

OnPoint issued $105.5 million in loans in 2008, up from only $668,000 in 2007. So it is not suprising that they are on the losing end of this economy.

OnPoint has been loaning out fewer dollars than ever. I have spoken to a couple of loan officers who work for them, and they state that people who have good credit scores, whom would normally qualify and have good collateral, are being turned down. This seems to be done more out of fear. They seem to be loaning out to those who mostly have money put away in accounts whether with them or somewhere else. The 3.99% promotions for auto loans they've done in the last couple of years brought in multiple millions in new memberships and deposit dollars, the criteria for qualifying for a loan was not as strict, and of course with the economy taking a dive, this decision to loan to just about anyone has come back to bite them.

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