Outstanding consumer credit at credit unions grew by almost $4.5 billion during September 2017 to $417 billion, according to the Federal Reserve.
During the previous month, consumer credit at credit unions grew at a slower pace of approximately $800 million.
Revolving credit edged higher by $200 million to $55.3 billion during September.
Outstanding nonrevolving credit at credit unions increased from $357.4 billion in August to $361.7 billion in September.
View the G.19 Report.
Tuesday, November 7, 2017
CFPB Flags Risk Associated by Longer Maturity Car Loans
A study by the Consumer Financial Protection Bureau (CFPB) flags the higher risk posed by longer term auto loans.
The study noted that auto loans with longer maturities continue to expand market share, despite a cooling in the auto finance market. According to the CFPB, loans with maturities of six years or longer accounted for 42 percent of the market in 2017 year-to-date, up from 26 percent in 2009.
Six-year auto loans are the most common term used to finance auto loans.
Longer-maturity loans may pose greater risks to consumers. These loans are more likely to be used for larger loan amounts and by borrowers with lower credit scores. The average credit score for a borrower for taking out a six-year auto loans was 674 -- 39 points below the credit score for borrowers taking out a five-year auto loans. And given that the average length of U.S. car ownership is 6.5 years, longer loan maturities may mean borrowers are paying off loans for cars they no longer drive.
The dividing line in loan quality between five-year loans and six-year loans was especially stark, with default rates for the latter roughly double the former at comparable points since origination. For example, a six-year car loan made in 2014 had a cumulative default rate of over 5 percent two years after origination, but a similar five-year loan saw a default rate of just over 2.5 percent.
Read the report.
The study noted that auto loans with longer maturities continue to expand market share, despite a cooling in the auto finance market. According to the CFPB, loans with maturities of six years or longer accounted for 42 percent of the market in 2017 year-to-date, up from 26 percent in 2009.
Six-year auto loans are the most common term used to finance auto loans.
Longer-maturity loans may pose greater risks to consumers. These loans are more likely to be used for larger loan amounts and by borrowers with lower credit scores. The average credit score for a borrower for taking out a six-year auto loans was 674 -- 39 points below the credit score for borrowers taking out a five-year auto loans. And given that the average length of U.S. car ownership is 6.5 years, longer loan maturities may mean borrowers are paying off loans for cars they no longer drive.
The dividing line in loan quality between five-year loans and six-year loans was especially stark, with default rates for the latter roughly double the former at comparable points since origination. For example, a six-year car loan made in 2014 had a cumulative default rate of over 5 percent two years after origination, but a similar five-year loan saw a default rate of just over 2.5 percent.
Read the report.
Monday, November 6, 2017
Delinquencies Rise at Quorum FCU due to Delinquent Taxi Medallion Participation Loans
Quorum Federal Credit Union (Purchase, NY) reported an increase in delinquencies during the third quarter due to troubled participation loans.
During the third quarter, delinquent loans increased by $4.1 or 8.2 percent to $53.7 million.
As of September, Quorum FCU reported that 7.22 percent of its loans were 60 days or more past due. This was up from 6.74 percent as of June 2017 and 4.20 percent from a year ago.
Almost 80 percent of the credit union's delinquencies were participation loans, presumably taxi medallion participation loans. As of September 30, 2017, delinquent participation loans were almost $42.7 million -- up $3.2 million from the previous quarter and $22.6 million from a year ago, respectively.
The credit union reported $113 million in participation loans, of which $79.7 million were commercial loans. It appears that $70.6 million of the commercial loans were taxi medallion participation loans.
As of September 30, the delinquency rate on participation loans was 37.57 percent. This was up from 16.35 percent from a year ago.
Troubled debt restructured commercial loans not secured by real estate were $24.4 million.
The credit union reported a year-to-date profit of $427 thousand; but a third quarter loss of $2.3 million. The loss was driven by a $6.7 million increase in provision for loan and lease losses during the quarter.
The quarterly loss caused the credit union's net worth to fall from $68.2 million as of June 2017 to $65.9 million as of September 2017.
As a result, the net worth ratio fell 15 basis points during the quarter to 7.65 percent on September 30, 2017.
The increase in provisions for loan and lease losses caused the allowances for loan and lease losses to increase to $34.2 million at the end of the third quarter from $28.9 million a quarter earlier.
Quorum's coverage ratio (allowances for loan and lease losses to delinquent loans) was 63.65 percent as of September 2017 -- up from 58.22 percent as of June 2017, but down from 82.57 percent from a year ago.
Quorum ended its taxi medallion participation loan program in 2013.
During the third quarter, delinquent loans increased by $4.1 or 8.2 percent to $53.7 million.
As of September, Quorum FCU reported that 7.22 percent of its loans were 60 days or more past due. This was up from 6.74 percent as of June 2017 and 4.20 percent from a year ago.
Almost 80 percent of the credit union's delinquencies were participation loans, presumably taxi medallion participation loans. As of September 30, 2017, delinquent participation loans were almost $42.7 million -- up $3.2 million from the previous quarter and $22.6 million from a year ago, respectively.
The credit union reported $113 million in participation loans, of which $79.7 million were commercial loans. It appears that $70.6 million of the commercial loans were taxi medallion participation loans.
As of September 30, the delinquency rate on participation loans was 37.57 percent. This was up from 16.35 percent from a year ago.
Troubled debt restructured commercial loans not secured by real estate were $24.4 million.
The credit union reported a year-to-date profit of $427 thousand; but a third quarter loss of $2.3 million. The loss was driven by a $6.7 million increase in provision for loan and lease losses during the quarter.
The quarterly loss caused the credit union's net worth to fall from $68.2 million as of June 2017 to $65.9 million as of September 2017.
As a result, the net worth ratio fell 15 basis points during the quarter to 7.65 percent on September 30, 2017.
The increase in provisions for loan and lease losses caused the allowances for loan and lease losses to increase to $34.2 million at the end of the third quarter from $28.9 million a quarter earlier.
Quorum's coverage ratio (allowances for loan and lease losses to delinquent loans) was 63.65 percent as of September 2017 -- up from 58.22 percent as of June 2017, but down from 82.57 percent from a year ago.
Quorum ended its taxi medallion participation loan program in 2013.
Saturday, November 4, 2017
Two Assisted Mergers Impose Small Losses on the NCUSIF
The National Credit Union Administration's Office of the Inspector General (OIG) recently reported that the National Credit Union Share Insurance Fund (NCUSIF) incurred small losses associated with the assisted merger of two credit unions between April 1, 2017 and September 30, 2017.
According to the Semiannual Report to the Congress, Love Gospel Assembly Federal Credit Union (Bronx, NY) and Madco Credit Union (Edwardsville, IL) imposed an estimated loss to the NCUSIF of $30,771 and $25,000, respectively.
Love Gospel Assembly FCU failed due to poor record keeping and inadequate management. The credit union was closed on August 2. The NCUA approved a voluntarily assisted merger with USAlliance Federal Credit Union (Rye, NY).
Madco Credit Union failed due to severe operational concerns and potential unrecorded liabilities and unrecognized losses. NCUA approved an involuntary assisted merger with with 1st MidAmerica Credit Union (Bethalto, IL).
Read the report.
According to the Semiannual Report to the Congress, Love Gospel Assembly Federal Credit Union (Bronx, NY) and Madco Credit Union (Edwardsville, IL) imposed an estimated loss to the NCUSIF of $30,771 and $25,000, respectively.
Love Gospel Assembly FCU failed due to poor record keeping and inadequate management. The credit union was closed on August 2. The NCUA approved a voluntarily assisted merger with USAlliance Federal Credit Union (Rye, NY).
Madco Credit Union failed due to severe operational concerns and potential unrecorded liabilities and unrecognized losses. NCUA approved an involuntary assisted merger with with 1st MidAmerica Credit Union (Bethalto, IL).
Read the report.
Friday, November 3, 2017
Bank and Credit Union Trade Groups Call for National Data Breach Standards
Seven financial trade associations wrote to lawmakers calling for a national data security and breach notification standard.
In a letter to Representatives Blaine Luetkemeyer (R-Mo.) and Lacy Clay (D-Mo.), the financial trade associations called for a standard that would require all entities handling sensitive personal and financial data to have robust protections in place and to notify consumers in a timely manner in the event of a breach. They also added that such a standard would help eliminate current inconsistencies between a patchwork of state and federal laws.
“Our existing payments system serves hundreds of millions of consumers, retailers, financial institutions and the economy well,” the groups wrote. “Protecting this system is a shared responsibility of all parties involved and we must work together and invest the necessary resources to combat increasingly sophisticated threats to the payments system.”
The seven financial trade associations that signed the letter are the American Bankers Association, Consumers Bankers Association, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers Association, National Association Federally-Insured Credit Unions, and The Clearing House.
Read the letter.
In a letter to Representatives Blaine Luetkemeyer (R-Mo.) and Lacy Clay (D-Mo.), the financial trade associations called for a standard that would require all entities handling sensitive personal and financial data to have robust protections in place and to notify consumers in a timely manner in the event of a breach. They also added that such a standard would help eliminate current inconsistencies between a patchwork of state and federal laws.
“Our existing payments system serves hundreds of millions of consumers, retailers, financial institutions and the economy well,” the groups wrote. “Protecting this system is a shared responsibility of all parties involved and we must work together and invest the necessary resources to combat increasingly sophisticated threats to the payments system.”
The seven financial trade associations that signed the letter are the American Bankers Association, Consumers Bankers Association, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers Association, National Association Federally-Insured Credit Unions, and The Clearing House.
Read the letter.
Thursday, November 2, 2017
Bad Loans Push Conserved Riverdale CU Deeper into Insolvency
Massive losses from poor performing loans have pushed conserved Riverdale Credit Union (Selma, AL) deeper into insolvent as of September 2017. performing loans.
The credit union posted a year-to-date loss of $14.3 million, driven by provision for loan and lease losses of $15.6 million through the first 3 quarters of 2017.
As a result of the loss, the credit union's net worth has dropped from almost $8.9 million to a negative $6.1 million.
The credit union's net worth ratio fell from 12.21 percent as of the end of 2016 to minus 11.05 percent as of September 2017.
Delinquent loans rose from $1.6 million at the end of 2016 to $7.1 million at the end of the third quarter 2017. The delinquency rate as of September 2017 was 14.33 percent.
As of September 2017, net charge-offs were $12.8 million. The net charge-off rate was 30.61 percent as of the most recent call report.
Total assets of the credit union have dropped by almost 25 percent from the start of this year to $54.9 million as of the most recent call report. However, the credit union's assets are now less than its total deposits and shares of $57 million.
Surprisingly, the credit union is reporting almost $1.4 million in uninsured deposits and shares.
The credit union posted a year-to-date loss of $14.3 million, driven by provision for loan and lease losses of $15.6 million through the first 3 quarters of 2017.
As a result of the loss, the credit union's net worth has dropped from almost $8.9 million to a negative $6.1 million.
The credit union's net worth ratio fell from 12.21 percent as of the end of 2016 to minus 11.05 percent as of September 2017.
Delinquent loans rose from $1.6 million at the end of 2016 to $7.1 million at the end of the third quarter 2017. The delinquency rate as of September 2017 was 14.33 percent.
As of September 2017, net charge-offs were $12.8 million. The net charge-off rate was 30.61 percent as of the most recent call report.
Total assets of the credit union have dropped by almost 25 percent from the start of this year to $54.9 million as of the most recent call report. However, the credit union's assets are now less than its total deposits and shares of $57 million.
Surprisingly, the credit union is reporting almost $1.4 million in uninsured deposits and shares.
Wednesday, November 1, 2017
Large CU Loan and Deposit Growth Outperforms Community Banks
A study by Experian found that smaller community banks and credit unions are losing ground to larger institutions and that large credit unions are outperforming community banks.
Experian noted that credit unions with over $1 billion in assets had faster deposit and loan growth rates than community banks.
The median deposit growth rate for larger credit unions was 8.77 percent versus 4.06 percent for community banks. Median loan growth was 12.23 percent for large credit unions versus 5.62 percent for community banks.
However, large credit unions are less efficient and less profitable than community banks.
Read the report.
Experian noted that credit unions with over $1 billion in assets had faster deposit and loan growth rates than community banks.
The median deposit growth rate for larger credit unions was 8.77 percent versus 4.06 percent for community banks. Median loan growth was 12.23 percent for large credit unions versus 5.62 percent for community banks.
However, large credit unions are less efficient and less profitable than community banks.
Read the report.
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