SACRAMENTO, Calif. (3/26/09)--California's credit unions continued to experience growth in total assets, total loans and total shares, according to statistics released for fourth quarter 2008 by the state's Department of Financial Institutions (DFI). Credit unions' assets, which totaled $72.6 billion, grew 1.7% from the $71.4 billion reported as of Dec. 31, 2007. Loans rose a fraction of a percent during the year to $52 billion, while shares grew 1.4% to $60.5 billion from $59.7 billion the year before. However, for the full year 2008, loans rose 2.5%. "Given the economy, the growth rate is excellent," Daniel Penrod, industry analyst with the California and Nevada Credit Union Leagues, told News Now. "Banks have pulled back and contracted their lending or are not lending at all, and credit unions are filling the market," he said. Also, credit unions' conservative lending has served them well. "Credit unions have never had to change their lending standards. Loan standards are conservative, the same as they were years ago. That's why credit unions are still lending," Penrod added. California credit unions' share growth for the full year was 4.25%, which is very good, Penrod added. "The key to these numbers is that they're sustainable. The growth doesn't throw the organization out of whack," he said. "In the lending boom, you had growth in double digits--that's not sustainable over a long time. You need 3% to 5% growth to sustain the credit union over the long term." Members equity decreased 2.4% during the year to $7.4 billion from $7.6 billion, causing the capital-to-asset ratio to decrease to 10.23% at year-end 2008 from 10.66% at year-end 2007. Credit unions are still well-capitalized, said Penrod, noting that 7% is considered well-capitalized. DFI noted the allowance for loan losses was up 82.2%--from $450.7 million to $821.3 million. But credit unions' charge-off ratio in California is at 1.17 for 2008, still very low, Penrod said. "Credit unions are finding ways to modify loans and avoid charge-offs. Credit unions increase their loan loss reserves and put money aside to prepare for it. They are well-capitalized enough to absorb loss and continue business as usual and even grow." Net margin to average assets rose to 4.22% from 4.02% a year earlier, and the provision for loan losses more than doubled--to $1.1 billion from $483 million at the end of 2007. Net income dropped from $218.1 million in 2007 to a net loss of $197 million, a decrease of $415 million or 190.3%. Delinquent loans were up 86.6%, or $411.7 million, to $887.2 million from $411.7 million. That doesn’t tell the full story, however. "Delinquent loans increased, but the actual delinquency ratio for 2008 is 1.65. Banks would kill for that kind of ratio," Penrod told News Now. Banks' delinquency ratio is significantly higher, at 3%. Nine fewer credit unions existed in the state at the end of 2008, with the number dropping to 187 from 196, said DFI. California's state-chartered commercial banks also saw losses during fourth quarter. Their net interest margin dropped to 3.23% from 3.50%, constricted by the increased cost of funds. Loan loss reserves for the banks were up 60.2% to $3.1 billion at year-end 2008 from $1.9 billion a year earlier. However, noncurrent loans went up from $1.5 billion to $4.6 billion, which caused reserve coverage of noncurrent loans to decrease to 66.61% from 130.02%.