Credit Union Newsletter - #36
Anurag Mukherjee
Credit Union & Community Bank C-Suite Advisor | P&L and GTM | Data Scientist | Fintech Advisor & Podcaster
Credit union loan balances showed little spring from March to April, but it was enough to break an unusual three-month streak of declining portfolio balances, according to a report from America's Credit Unions.
The trade group's Monthly Credit Union Estimates report released Friday showed the nation's 4,719 credit unions held $1.64 trillion in loans on April 30, up 4.5% from a year earlier. The 0.4% gain from March was only half of the average 0.8% March-to-April gain over the previous seven years. Nonetheless it broke a streak of three consecutive declines that lowered loan balances by $2.2 billion, or 0.1%, from December to March.
Results for the first quarter showed credit unions remain in sound financial condition, but rising delinquency rates are a top concern, NCUA officials said Wednesday.
Also, credit unions charged off a net $12.9 billion in loans in the three months ending March 31, up 63% from a year earlier and up 36% from the fourth quarter.
That translated into a net charge-off ratio of 0.80% for the first quarter, up from 0.52% a year earlier and 0.61% in the fourth quarter.
NCUA Deputy Chief Economist Rachel Cononi said rising delinquencies have become the biggest concern of agency officials, especially the delinquency rate on credit cards, which has now exceeded rates during the Great Recession.
NCUA data released Wednesday showed 0.78% of the balance of all types of loans was at least 60 days late as of March 31, up from 0.53% a year earlier, but down from 0.83% on Dec. 31.
Officials with the Fairfax, Va.-based Apple Federal Credit Union and NextMark Credit Union unveiled their plans on Wednesday to merge the two organizations into a nearly $5 billion credit union. If approved, the merger could be completed by November of this year.
According to a joint statement, if the NCUA and members of NextMark ($532 million in assets, 16,672 members) approve of the merger, the combined credit union will do business as Apple ($4.4 billion in assets, 245,392 members) and expand its services throughout Northern Virginia with 25 branches.
Members of the $2.2 billion Centra Credit Union in Columbus, Ind., thought merging with the $926 million Hoosier Hills Credit Union in Bedford, Ind., would have been in the best interest of both financial cooperatives.
According to Centra SVP of Marketing Chrissy Bailey, "96% of voting members cast a positive vote" on June 3. Nearly two weeks earlier, however, Hoosier Hills members rejected the proposed consolidation on May 22.
"The Indiana DFI is somewhat unique in that it requires both credit unions in a merger partnership to vote positively before the merger can take place," Bailey said. "We felt it was important to move forward with our member vote despite the outcome of the HHCU vote so we could hear and understand our members' thoughts on the matter."
After nearly 30 years at its old headquarters and doubling its employee base, officials with the $5.5 billion UW Credit Union in Madison, Wis., realized they had effectively outgrown the space and needed to plan for something bigger and more sustainable for the credit union's future in Wisconsin's capital city.
Fair Break Federal Credit Union in Memphis, Tenn., has been granted a federal charter and Share Insurance Fund coverage, the NCUA said Thursday.
Fair Break is the second federal credit union to receive a charter under the federal agency's provisional charter pilot initiative, which provides organizers of the credit union 12 months to secure the $600,000 in capital necessary to open its doors for business.
Fair Break is a low-income-designated credit union that will primarily serve people who live, work, worship or attend school in the Memphis-Clarksdale-Forrest City areas in the Tennessee, Mississippi and Arkansas combined statistical area, as well as serving those participating in programs to alleviate poverty or distress within the community. The specific counties include Crittenden and St. Francis in Arkansas; Fayette, Shelby and Tipton in Tennessee; and Benton, Desoto, Marshall, Tat and Tunica in Mississippi.
The CFPB finalized a rule on Wednesday that outlines the process and qualifications to become a "recognized industry standard setting body" as it relates to the Bureau's push to accelerate the shift to open banking in the United States and for organizations to comply with the upcoming Personal Financial Data Rights Rule.
According to a statement from the CFPB Wednesday morning, "Today's rule identifies the attributes that standard setting bodies must demonstrate in order to be recognized by the CFPB. The rule also includes a step-by-step guide for how standard setters can apply for recognition and how the CFPB will evaluate applications."
The $1.5 billion ELGA Credit Union in Grand Blanc., Mich., said Tuesday it plans to acquire the $666 million Marine Bank in Vero Beach, Fla., for $79.5 million in cash.
The credit union and Marine Bancorp of Florida, Inc. (OTCMKTS: MBOF), the holding company for Marine Bank & Trust Company, said the financial institutions have signed a definitive agreement.
Subject to the terms of the agreement, shareholders of Marine Bank will receive $43.75 in cash for each share owned. The bank's current shares outstanding total 1,818,095, according to OTC Markets Group.
More credit unions are likely to be turning their auto loans into securities as a way to improve their liquidity, according to a report by the Kroll Bond Rating Agency.
KBRA's report, "Rise in Credit Union Auto Securitizations," looked at the sharp increase in issues sponsored by credit unions in the past five years. Altogether 11 credit unions have sponsored $4.3 billion in deals since the first $175 million issue in 2019.
There were no deals in 2020, but volume rose from $300 million in 2021 to $735 million in 2022 to $2.1 billion in 2023. So far this year, three credit unions have sponsored $987 million in deals. The latest was a $255.5 million securitization that closed May 30 sponsored by First Community Credit Union of Houston ($2.6 billion in assets, 162,097 members).
The credit trends come from the company’s Quarterly Credit Industry Insights Report for the first quarter of 2024, based on developments seen in its credit report database. A separate consumer pulse study from the company, based on a sentiment survey taken in the second quarter, indicates that concerns about personal finances have reached the highest level in two years.
Beyond that, the pulse study uncovered a trend of interest to financial marketers and lenders alike: Nearly one in three consumers who plan to apply for new credit or to refinance have been abandoning those plans before they commit, typically because of the cost of fresh credit issued at today’s rate levels. Nearly half — 46% of the sample — included interest rates among their top three economic concerns.
Source – CU TIMES, The Financial Brand