California Credit Unions Proving Competitive

Increased loan originations and strong earnings show credit unions in this Sand State are far from sunk.


In the first quarter of 2011, loan balances at FDIC-insured institutions fell 3.4% from March 2010 levels. Loan balances at credit unions across the country fell 1.1% over the same period; however, credit unions posted strong growth in loan originations when compared to first quarter 2010. Nationally, credit unions increased originations 12.7%, originating more than $58 billion in total loan value. Notably, this strong lending activity was not restricted to healthy regions of the country.

California’s financial services industry has changed significantly over the past few years. Thirty-seven banks in the state have failed since 2007 (only three states have more bank failures), and California credit unions are moving in to fill the lending void. California’s credit unions increased loan originations by more than $867 million during the first quarter of 2010, which represents a 17.2% growth rate.

The credit unions increased the volume of every high-level category of loans over the past 12 months. They nearly doubled business loan originations (the fastest-growing category) from first quarter 2010 and originated $2.5 billion in first mortgages (up 29.7% from one year ago). California credit unions increased other real estate originations 9.8%, posting $392 million in originations. And although their consumer loans had the slowest growth rate out of all categories, the credit unions still increased those originations 4.5%.

The success at California credit unions is not limited to lending. Consider:

  • Their delinquency ratio as of the first quarter was 2.11%; that’s down 41 basis points from a high point in March 2010.
  • Net charge-offs fell 39 basis points from their peak in March 2010 to reach 1.51%, proving the decline in the delinquency ratio is not solely due to charged-off loans.
  • The credit unions cut their provisions for loan losses by more than 55%; provisions are now slightly less than $180 million.
  • Their return on assets increased 49 basis points from the previous March; ROA is now up to 79 basis points.
  • The credit unions grew their capital 5.6% over the past 12 months to $15.5 billion.

A pick up in loan originations combined with strong earnings shows how California credit unions are turning things around in a Sand State that was hit by housing market declines, high unemployment, and the write-downs of corporate credit union investments. Despite the state’s history, these credit unions are setting the pace for a strong 2011.