RANCHO CUCAMONGA, Calif. (9/21/09)--Credit unions in Nevada--a state hit harder by the economy than most--are still managing to serve their members.
"Despite the economy, credit unions there are seeing an improvement in some areas," said Daniel Penrod, senior industry analyst for the California and Nevada Credit Union Leagues. For example, members are saving more and deposits have grown 3.75% through the first two quarters, mostly in basic savings and money market savings.
"Credit unions are doing their best under very difficult circumstances. The state has been hit by the local economy and the local housing crisis. Most of the state lives off tourism. And the global economy has exacerbated problems for financial institutions," Penrod told News Now.
"Still, credit unions are finding ways of making mortgages. Their primary fixed rate was 1.5% for second quarter. That's not a large number, but any positive number for that area is huge," Penrod said. Historically the number is 4% or 5%.
Credit union members, like credit unions, are conservative. "They're not out seeking exotic mortgages and aren't racking up more debt than income." Being conservative means that during the good times, the numbers might not be as high as others. But when the economy drops, they don't drop as low as other financial institutions' numbers, he said.
Nevada is dealing with a struggling job market--unemployment was greater than 13.2% in August, according to the Bureau of Labor Statistics. But struggling members can get help from credit unions. "Credit unions are very different than other lenders. They are able to lend, willing to lend, and they have the means to do so," Penrod said.
In areas where they can, credit unions have always been big on modifications and being proactive with members in terms of offering deferment options, modifying principal or rate, or offering to delay a payment two months and tack the missed payment onto the end of the loan term, he said. "They help as much as they can. Of course, with an upside down mortgage situation, help is limited."
According to Henry Kerman, league spokesman, credit unions can provide member assistance through Credit Union Home Loan Payment Relief (HLPR) loans and personal loans.
The nation's auto industry struggles have bled over into financial institutions, and Nevada's auto loan programs are no exception--both new- and used-auto loans are down. "Members are more wary of large purchases, and manufacturers are taking market share with 0% and 1% loans. Credit unions can't match that. Manufacturers make money on the sale and therefore can decrease the rate on the loan. Credit unions don't have that," said Penrod.
Kertman noted that credit unions perform loan modifications on auto loans (as well as on mortgage loans).
Of the 27 credit unions in Nevada, 12 work with CU Direct Lending (CUDL) on auto loans, according to Bill Meyer, communications coordinator for the auto lending service provider. Nationwide, CUDL works with 700 credit unions' programs, he told News Now.
CUDL doesn't have data specific to Nevada, but provided a look at second-quarter auto trends in 60+ day delinquency rates, noting that credit unions' delinquencies are the lowest of all lender categories--at 1.18%--compared with banks at 1.62%, captives at 1.34%, finance companies at 4.47%, and others at 4.88%.
"CUDL is telling credit unions across the board that they should make sure their underwriting criteria and risk lending and risk management practices are current," Meyer told News Now. "It's imperative that they take a close look at these and make the necessary adjustments to correspond with economic conditions. They must take proactive steps toward reviewing their practices and review them on a regular basis."
Indirect lending in Nevada is especially under heat. "It's important for credit unions not to abandon the point-of-purchase lending as a way to generate loans," Meyer said. "Ninety percent of car buyers are getting their loans at the point of sale--at the dealership. Credit unions must work closely with members, and they need indirect lending with the dealership so they can be there for the members. Members will buy cars. Credit unions need to be there to capture that loan."
Credit unions have been able to maintain a high level of market share in auto lending. "In the past 18 months, they have increased their markets share to 22%-23% from 20%--share even with the current conditions," he said. Credit unions had 22.8% of the market share in second quarter. That compares with 30.7% for banks, 29% for finance companies, and 17.5% for captives.
Credit unions are consistent in their lending practices and in who they loan to, he added. "Dealers look to credit unions as a stable, true resource for auto loans. Other financial institutions can't say that."
The bottom line is Nevada credit unions are well capitalized at 7.84% for second quarter, said Penrod. "That's above the 7% standard NCUA (National Credit Union Administration) has set for well-capitalized credit unions. "Despite the struggles and issues Nevada credit unions face, they are maintaining their capital level and do the best to have as much leverage as possible to serve their members," he said.
Kertman noted that the league's annual convention Nov. 16-18 in Las Vegas will help out the Nevada's largest city, and it will address credit unions' financial condition for California and Nevada credit unions. "It will be one of the key topics." But holding a meeting there means that Nevada's credit unions are also conducting "business as usual," he said.
Courtesy of cuna.org