DURHAM, N.C. – As one of the leading subprime lenders among credit unions, Self Help CU always has reported a high delinquency ratio, but a 6.3% ratio through the first three quarters of the year–most of it in mortgages–is puzzling officials at the leading community development credit union.
That’s because the $290 million CDCU does not make the kind of adjustable-rate loans that are exploding throughout the subprime market, the job market is stable in North Carolina, and the state has not been plagued by the downturn spreading through many of the major markets, according to Randy Chambers, chief financial officer at Self Help CU. “We’ve always had high delinquencies,” he told The Credit Union Journal, admitting they do not understand the reason for the rising delinquencies. “Clearly, there’s something going on.”
The credit union’s delinquency ratio, which was as high as 7.3% in 2003, is up from 4.6% a year ago.
But despite the tradition of high delinquencies, Self-Help CU has always had a low charge-off ratio, just 0.22% at the end of the third quarter–matching a typical gap between late payments and defaults.
Chambers attributed the gap to the work they do with members experiencing repayment difficulties. He said Self Help CU monitors those members having difficulties and targets them for counseling early on. “We see a lot of people kind of toggle between 30, 60 and 90 days past due,” he said, adding that few of them eventually default. “We intervene pretty early and we are very active on servicing and loss mitigation.”
So far, the high delinquencies have not affected the bottom line. Through the first three quarters Self Help CU had net income of $1.3 million, translating into a healthy return-on-average assets of 1.66%. Even without a $390,000 bond recovery, the CDCU had net operating income of $870,000, for a still-strong 1.22% ROA.
