ALEXANDRIA, Va. (8/13/10)—The general financial condition of credit unions nationwide remained “sound” during the first quarter of 2010, enabling credit unions to reduce their provisions for loan losses, lower their costs of funds, and cut operating expenses during that time period, National Credit Union Administration (NCUA) Chairman Debbie Matz said in a recent letter to federally insured credit unions. The letter noted that a 29 basis point reduction in provisions for loan losses led to an increase in earnings of the same amount during the quarter. Matz also noted that for the first time in five years, operating expenses were lower than credit unions' net interest margin. "Federally insured credit unions reported improved earnings performance and overall declining loan delinquency," Matz pointed out. However, Matz said that the NCUA is closely monitoring credit and interest rate risks faced by credit unions, adding that credit unions are specifically facing increasing real estate and business loan delinquencies as economic uncertainties persist. "The NCUA expects credit unions to implement plans to mitigate these risks,” Matz said. “Proactive sructuring and proper control over loan concentrations and share products will be fundamental to the future viability of credit unions,” she added. “While some short-term numbers are moving in the right direction,” Matz said that “credit unions still have a long way to go before overcoming all the effects of the economic downturn,” adding that the NCUA will work with credit unions “to take proactive steps to protect the safety and soundness of the credit union industry.” For the NCUA letter, use the resource link.