Consumers rediscover credit unions as a great place to borrow money
Federally insured credit unions have grown at the fastest pace since the fall of 2008, according to several key measures, including new loans granted. Quarterly results reported to the National Credit Union Administration (NCUA) show that assets, earnings, and net worth have risen, while charge-offs, bankruptcy filings, and loan loss reserves have declined.
Consolidations in recent years have reduced the number of credit unions to below 7,000, but membership has grown significantly. Credit unions now serve more than 93 million Americans, an increase of 643,322 members in the second quarter of 2012. New deposits amounted to $2.7 billion.
According to NCUA Chairperson Debbie Matz, credit union lending is vital to support a recovering economy, and the recent increases are “playing an important role in efforts to create jobs, stimulate small businesses, and revitalize communities.” First mortgage home loans increased by 1.7% in the second quarter, new and used auto loans were up by 2.8%, and business lending increased by 1.2%. Business loans amounted to over $40 billion. Overall, lending increased in each of the last five consecutive quarters.
A huge increase occurred in small loans. Credit unions now offer low-cost alternatives to payday loans, with easier terms. The short-term small loan category grew by 23.9%, to $16.7 million.
Total credit union assets, which recently passed the $1 trillion mark, grew an additional $5.9 billion, and capital strength increased, as measured by the net worth ratio. Interest expenses and loan losses decreased, while income from fees and operations grew. ROAA, the return on average assets, rose to 86, 1 basis point higher than the first quarter level.
The credit union industry’s delinquency ratio continued to fall, helped by a change of when delinquencies are counted for troubled debts in loan modifications. A new rule, in line with policies used by other mortgage regulators, classifies debts as delinquent only after a restructured loan has been on the books for six months, helping to keep more families in their homes.
Another positive trend for credit unions is that fewer members are filing for bankruptcy. Although 58,386 members filed for bankruptcy during the recent quarter, this was a decrease of 17.3% from the first quarter of 2012. Bankruptcies accounted for 21.4% of all credit union charge-offs (a small increase,) but over all, the charge-off ratio fell to 0.75 percent.