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More "nonperforming" assets force banks and credit unions to actions like tougher standards.
A tightening economy is translating into more loans going bad at credit unions and banks in the state.
About 15 percent of credit unions and 10 percent of banks in Colorado had 3 percent or more of their assets not performing in the first quarter, according to Bauer Financial, a bank-rating firm.
Nonperforming assets represent loans and leases that are 90 days or more behind. Many get written off, reducing income and draining capital.
Nationally, there were 805 banks with more than 3 percent of their assets defined as nonperforming in the first quarter, compared with 302 in the first quarter of 2007, said Karen Dorway, president of Bauer Financial.
In Colorado, the number of banks in that category went from 13 to 20 over the same period. Dorway describes 3 percent or higher as a level that would put an institution under stress.
Many banks are able to recover from such levels of nonperforming assets, so it's not necessarily a sign the institution is in imminent risk.
Carol Rusler, who became president of Aurora Catholic Federal Credit Union in May, is trying to clean up a 6.54 percent rate of nonperforming assets she inherited.
Borrowers coping with rising adjustable-rate mortgage payments are letting car loans and unsecured loans slide, she said. And even a few mortgages going bad at a small institution can cause a serious disruption. The credit union has gotten tougher about collecting collateral, eliminated unsecured loans and cut back on lending to borrowers with poor credit scores.
"I'm trying to clean up the abusers," Rusler said.
U.S. Alliance Credit Union had 14.37 percent of its assets not perform, the highest of any credit union in the state, after construction loans it backed in Florida went bad.
Ent Federal Credit Union acquired U.S. Alliance at the end of May, said James Moore, a spokesman for the Colorado Springs credit union.
Colorado Federal Savings Bank of Greenwood Village, primarily a mortgage lender, reported more than 10 percent of its assets as nonperforming, the highest among banks.
Source: http://www.denverpost.com/business/ci_9628680
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