LAS VEGAS - During WesCorp's CU Outlook conference here, Credit Union Journal asked: How has the credit crisis directly affected your CU? Specifically, how is your loan volume?
We are a closely held field of membership, so it has had more of an indirect effect than a direct effect. Loan losses have not increased. Our lending is flat. Even firefighters have cut back, even though firefighters don't lose their jobs. We have had members let properties go, but we are an old-style credit union and members continue to pay us off, even if they have problems elsewhere.
We are not having a liquidity problem, which is interesting because WaMu is at our back door. Even though WaMu is raising its rates, WaMu's customers only want $100,000 there, so people are bringing deposits to us.
We are only at two-thirds of our usual volume on consumer lending, but mortgage lending is on track. The reduction in home values in Seattle has been running about 6% or 7%, which is much less of a decline than other areas. Indirect loan balances have been reducing monthly, and we are seeing more losses in that category.
An unintended consequence of what is happening is the rise in people letting their mortgage payments go delinquent while they keep their credit cards current. It used to be the other way around-people paid their mortgages first and let their credit cards go delinquent. We have seen this, although we have not had delinquencies on our real estate lending [knocking on wood as he spoke]. I believe this is attributable to the quality of our membership, plus a strong local economy that allows people to keep their jobs. When people lose their jobs, that's when they stop paying their mortgages. Also, there is the quality of our loan portfolio. Every loan we do has to meet secondary market standards, and we never got involved in subprime lending.
We've seen increasing consumer delinquency. We have had to provision $183,000, making net income negative year to date. Last year we had a reverse provision. If we were to have no provision this year, we would be plus-$50,000 out of August. That is annualized to $80,000, which would be a 400% improvement over last year. We have had no mortgage losses on a small portfolio, but we do have losses on auto and unsecured loans. Autos are killing us because at auction there is such a high loss of value.
Our loan volume has not been what we thought it would be, and has been down compared to last year. In August it picked up quite a bit. August was one of only two positive months this year. I don't know if it is a trend yet.
Fortunately, in Hawaii we have not been affected greatly, at least not at our credit union. We serve faculty, staff, students and alumni of the university, and their families. The local economy is doing much better than our sister states. This is not to say it couldn't happen, because Hawaii typically lags other states. Tourism is down because of fuel costs, and that trickles down to the rest of the economy.
Our loan volume is pretty steady. It is not going up, nor is it going down. We are meeting our goals because we expected flat volume this year. Deposits are up, and were up even before the stock market went from bad to worse. But we don't want "hot" money. We don't want to grow for the sake of growth; we want to serve our members.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
