NAFCU has released an analysis examining the characteristics of loans and shares at credit unions.
Released this month, the analysis is based on credit unions that participate in its Flash Report survey.
Among NAFCU's findings:
* 83% percent of the credit unions indicated that they do not require a minimum balance for share drafts, and of those that do, all require $500 or less. While 95% responded that they require a minimum balance for their share certificates, 93% of them require $1,000 or less.
* 32% of the credit unions answered that they offer loans that are alternatives to payday loans. Seventy-five percent of the credit unions that offer payday alternative loans indicated that they offer their members financial education services.
* As of November 2005, the median balance of the members' share draft accounts was approximately $1,800, with the high being $3,924 and the low $800. Meanwhile, NAFCU said it found that "many credit unions appear to be reaching out to low- to moderate-income members. Sixty percent indicated that they offer community services oriented toward low- to moderate-income members. Further, 28% of the credit unions offer assistance to community development credit unions.
* 53% of credit unions offer loan programs targeted at first time home buyers, while 92% indicated that they offer their members free share draft accounts.
Unique Programs Offered
Meanwhile, NAFCU found that credit unions are offering various unique loan and share programs. Examples include credit rebuilder loans, interest only and 40-year mortgages, youth savings programs, and better loan and share rates for active duty military members and veterans. Seventy-seven percent of credit unions offer their members an alternative loan option if their initial loan request was denied, NAFCU said. Fifty-two percent answered they offer their members a shorter amortization schedule, while 41% offer a higher interest rate. Thirty five percent require a direct debit for the loan payment, and six percent require the loan to be co-signed. Other options included a larger down payment and lower loan amount.
The increase in loan growth coupled with weaker share growth caused the Flash participants' loan-to-share ratio to rise to 85.1% in November from 83.5% in October. During November, the delinquency ratio as a percent of total loans rose to 0.52% from 0.49% during October, while charge-offs due to bankruptcy as a percentage of total charge-offs rose to 49.5% from 47.8% in October.
Total credit union loan portfolios rose to $473.7 billion during November, supported by fixed-rate real estate secured lending and new light vehicle loan demand. NAFCU said it is forecasting 2005 loan growth for all credit unions to be approximately 11.5%, declining to approximately 8.5% during 2006. Real-estate-secured lending accounted for 61% of the $47.5 billion of loan growth from November 2004 through November 2005. Light-vehicle loans and member business loans accounted for 29% and 10% respectively of the loan growth. During the same time frame, total loan growth was 11.1% while year-to-date total lending expanded by 10.5%, according to NAFCU.
"Strong loan demand coupled with the dearth of share inflows pushed the total credit union loan-to-share ratio to 80.2% and the loan-to-asset ratio to 68%," the trade group noted. "These levels have not been recorded since the early 1980s."
During November, credit union consumer credit expanded by $400 million.
Share Growth To Slow
Participants in the survey reported that 12-month share growth for the period ending in November was just over 6.0%, down from the 6.2% growth for the 12-month period through October. November share growth was negative 0.46%, down from 0.43% during October. Total credit union shares declined to $590.4 billion during November. NAFCU is projecting share growth during 2006 will be approximately 5.5%, up from 3.5% during 2005.
The survey found that during November participating CUs' average return on average assets (ROA) was 1.15% compared to 1.31% in November 2004. NAFCU is forecasting an average ROA for all CUs during 2006 of 0.95%.
