State of Bankruptcy

 
 

Credit unions, after growing liquidity for two straight years, are focusing their efforts on growing their loan portfolio. However, while growing loans is important, it is equally important to not lose sight of maintaining quality loans on the books. In 2002 credit unions lost $1.5 billion in loans due to bankruptcy, a record for the industry. That $1.5 billion was 0.44% of total loan balances, the highest level since 1997.

The table below lists the leading and trailing five states based on bankrupt loans as a percentage of total loan balances. The top five states all seem to have similarly strong concentrations of real estate loans in their portfolio, ranging from 50% to over 65%. Conversely, the five states with the highest level of bankruptcy have far less of a percentage of their loans in real estate, those states range from 22% to 41%.

Instead, the states with the highest bankruptcy levels seem to have a much greater portion of their loans in auto loans. Ironically, these states have a much higher average bankrupt loan, even though their loan portfolio favors less high-ticket real estate loans. Unfortunately, it also appears that these five states all have high delinquency ratios, indicating that there bankruptcy woes may be far from over.

 

 

 

May 12, 2003


Comments

 
 
 
  • I am an Adjustments manager in Michigan and I'm glad to see we're not on either list.
    Anonymous
     
     
     
  • I am a VP of Lending at a CU in Arkansas. Bankruptcies are serious here but I did not realize it was this serious.! CRH Blytheville AR
    Anonymous
     
     
     
  • Where is the other 40 states?
    Anonymous
     
     
     
  • One area you cannot exclude in your analysis is unsecured debt (i.e., credit cards). A high degree of BK losses are related to credit card debt. Typically, lenders have a greater chance of reaffirming secured loans (mortgage and auto's.)
    Anonymous
     
     
     
  • I agree with the previous comment, where are the other 40 states. I am interested in Florida.
    Anonymous
     
     
     
  • Where is the data on the remaining states?
    Anonymous