Graph of the Week: Credit union asset quality remains stronger than FDIC-insured institutions

 
 




















In the first quarter of 2007, overall delinquency for credit unions was 0.62% versus 0.83% for FDIC-insured institutions, 21 bps difference. In just two years, that gap has grown to 232 bps, a tenfold increase. Additionally, there are two items worth noting that are not evident in the graph. First, credit card delinquency for the credit union industry is above the overall level, while for banks and thrifts it is below; this is because banks and thrift are charging off noncurrent credit card balances at 7.79%, nearly double the rate of credit unions. Second, FDIC-insured institutions report noncurrent loans at 90 days, versus the 60 days for credit unions; this dissimilarity in reporting causes the difference in delinquency ratios to be understated.

 

 

 

June 15, 2009


Comments

 
 
 
  • So what does this information tell us. Are we not serving our membership well enough in the lower credit tiers or are we just better at it than other FIs?
    Anonymous
     
     
     
  • To answer your question, it depends on the credit union, their primary membership base and their region. Credit unions with low current delinquency may have a specific field of membership that is financially stable, or the credit union may have tighter lending standards. However, we know that credit unions continue to lend to members with near-record loan originations in 2008 and the highest first quarter volume ever in 2009. As an example, YTD First Mortgage Originations are up 39.5% versus March 2008. If you have questions about your own credit union’s lending standards consider these questions: How have underwriting guidelines changed over the past year? Are originations year to date on par or higher than the previous year? Do loan/product penetration and average loan balances indicate you are serving a similar portion of your membership as your peer credit unions?
    Lydia Cole, Callahan & Associates
     
     
     
  • Another possibility is that credit unions are more willing to work with members when they get in financial trouble. Anecdotally, the credit unions i've worked with are more proactive with their loan modifications and realistic about what can and cannot be done to help members. Financial education is a big influence as well.
    Alix Patterson