WEST PALM BEACH, Fla. -
But an analysis by the Credit Union Journal of lending and delinquency trends from year-end 2006 through mid-year 2007 shows it may not be as bad as many fear. Even though real estate loan delinquencies continue to rise, the overall credit union loan quality appears to be relatively high.
Credit unions had total outstanding loans of $517.7-billion as of June 30, up from $505.5 billion at Dec. 31 2006. Total reportable delinquencies increased to $3.592 billion (.69% of total loans and 4.20% of industry net worth) at the end of June 2007 from $3.445 billion (.68% of total loans and 4.15% of industry net worth) at the end of December.
"Reportable" delinquency includes those loans greater than 60 days delinquent. Interestingly, total delinquencies actually decreased to $8.865 billion from $9.131 billion during the period when the 30-60/day delinquency category is considered to 1.71% of total loans (10.36% of net worth) from 1.81% of total loans (10.99% of net worth). Loans between 30 and 60 days delinquent have decreased to $5.273 billion at the end of June from $5.685 billion at the end of December.
Meanwhile, the allowance for loan loss coverage among all credit unions (as a percentage of reportable delinquencies) has decreased to 96.9% from 97.8%, which could mean that future provisions for higher levels of coverage will be made. Although, as a percentage of total loans, the allowance for loan loss remains at a constant .67% at the end of both periods.
Charge Offs Appear To Be In Line
Loan charge offs and recoveries for the six months through June appear to be in line with fiscal 2006 amounts-$1.444 billion in charge-offs and $283-million in recoveries for the six months through June 2007 compared with $2.736 billion in charge-offs and $530 million in recoveries during the 2006 year.
Non real estate related reportable delinquencies have actually decreased as a percentage of their respective loan categories as seen in the chart.
Credit card delinquencies between 30 and 60 days (not included in the chart) decreased from $371 million at the end of 2006 to $345.2 million at the end of June 2007.
But what about the loan category that has some worried? Delinquencies for real estate loans increased to $1.15 billion (.44% of RE loans) at the end of June from $851.4 million (.34% of total RE loans) at the end of December. The highest delinquency category remains the first mortgage adjustable products, increasing slightly to .70% from .67% compared with the other categories that showed significant rises.
Delinquencies Could Increase
It is possible that few adjustable rate real estate loans have reached their adjustment period, which might indicate future higher levels of delinquency if credit union industry loans were offered at low "teaser" interest rates. Data is not available to confirm.
The following table shows Real Estate delinquency by loan type:
In the total credit union loan mix total real estate loans have increased slightly to 50.5% at June 30 from 49.5% of the total loan portfolio at the end of December.
