In a speech before the annual conference of the National Federation of Community Development Credit Unions in Atlanta on Friday, NCUA Board Chairman Debbie Matz said low-income designated credit unions are lending more than other types of financial institutions, and growing stronger as a result of NCUA assistance.
“Low-income credit unions are national trendsetters. These dedicated financial cooperatives are leading other lenders in loan growth, while strengthening their safety and soundness,” Matz said. “The collective success of low-income credit unions demonstrates that credit unions can do well while serving people of modest means.”
As a group, low-income credit unions led the nation in lending throughout the recession of 2008–2009, as well as the steady recovery of recent years, Matz said. Between December 2007 and March 2012, low-income credit unions expanded loans by $11 billion, a 57.6% increase.
During the same time period, the entire credit union industry expanded loans by $45 billion, an 8.6% increase, while banks and thrifts decreased loans by approximately $500 billion, representing a decrease of 6.3%.
Low-income credit unions, which serve 6.6 million Americans, have steadily increased their lending in each of the last four quarters, including a robust 4.6% increase in loan growth for the first quarter of 2012.
In comparison, credit unions’ total loans inched up by 0.1% in the first quarter, and the FDIC reported that loan balances at banks and thrifts declined by 0.8% during the same timeframe.
“Most key indicators for low-income credit unions continued to improve in the first quarter. Low-income credit unions as a group now have a net worth ratio of 10.25%, 24 basis points higher than all federally insured credit unions,” Matz said. “Since year-end 2009, return on average assets at low-income credit unions has nearly doubled, delinquencies have held steady, and charge-offs have fallen by about a third.”
While low-income credit unions’ delinquency rate (1.83%) is higher than the credit union industry average (1.44%) their charge-off rate of 0.65% is lower than the industry average of 0.78%.
“These statistics reflect the unique nature of low-income borrowers,” Matz said. “Many low-income borrowers may pay slowly at first, but they work diligently to repay their loans.”
To help small and low-income credit unions grow stronger and provide more services to their members, Matz highlighted the enhanced programs and services of NCUA’s Office of Small Credit Union Initiatives.
“During the last year, NCUA has greatly expanded its support for small and low-income credit unions by providing more strategic planning consulting, offering a wider range of assistance, and revamping our loan and grant program,” Matz said.
“As a result, OSCUI is reaching more credit unions through a mix of new and old technology, including DVDs, online videos, webinars, e-newsletters, phone calls, and in-person visits and workshops. Additionally, qualified credit unions can now use a streamlined process to receive grants and loans with record-low rates,” she said.
Through the Community Development Revolving Loan Fund, the OSCUI offers grants and loans for 1,119 credit unions with a low-income designation. The NCUA has made available $1.3 million in grants and $11 million in loans this year.
Credit unions have until June 29 to apply for individual grants up to $25,000. Loans up to $300,000 are available until funds are fully expended. The OSCUI may raise the loan amount for credit unions in special circumstances.