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Thursday, Sep 29, 2022

First-Quarter Loan Growth Is Welcome Sight for Credit Unions

Like their banking brethren, credit unions have dug themselves out the hole from the Great Recession and have been making more loans in the last few years.

Overall loan growth in the first quarter of this year increased 2.2 percent from the first quarter of last year, according to a recent report from the California Credit Union League. It was the first time since 2009 that first quarter had loan growth, the Credit Union League said.

The big reason, of course, is that the state’s economy is recovering. Since 2012, California has added about 1 million nonfarm jobs, and with more consumers getting back on their feet, they’re more likely to borrow, said Dwight Johnston, the CCUL’s chief economist.

The effect of the state’s housing recovery is also having an impact, Johnston said.

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“While the demand for mortgage refinancing has retreated compared to last year, credit unions are still seeing demand as many homeowners who were once in a negative equity situation on their homes are now eligible to refinance,” he said.

Practically every lending segment showed gains in the first quarter, which has historically been slow, the CCUL said. Auto loans had the biggest increase, with new and used car loans rising 5.8 percent and 2.9 percent, respectively. Business loans were up 2.6 percent; first mortgages grew 2.4 percent; and second mortgages were up 1.4 percent.

The CCUL, which includes credit unions in Nevada, represents some 400 institutions and their 10 million members.

North Island Credit Union, the area’s fourth-largest credit union with about $1.1 billion in assets, exemplified the findings of the CCUL report, reporting a 6.7 increase in its loan balance as of March 31 compared with the like period of 2013.

The biggest driver of that growth is an increase in mortgage lending, said Steve O’Connell, CEO of North Island Credit Union.

“In the first quarter, we saw a shift to more purchase-related [mortgages] rather than the refinancing activity that made up the bulk of that lending last year,” he said.

The credit union also saw a nice uptick in its commercial lending, as well as auto loans, O’Connell said.

Total loans increased to $693.4 million. Total assets stayed flat at $1.14 billion, and total deposits were also about the same — at $1.02 billion — as the like quarter of 2013.

North Island CU’s net income in the first quarter was $4.6 million, up from $2.9 million in March 2013.

The credit union’s delinquencies were also heading in the right direction at $7.2 million, or 1.04 percent of total loans, compared with 1.91 percent in the prior year’s first quarter.

And those problem loans are more likely to pay off than be charged off, O’Connell said. The improved jobs picture and the increase in housing prices are helping reduce the default situation and charge-offs, he said.

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Bank earnings decline from year ago: The 6,700 banks and savings institutions insured by the Federal Deposit Insurance Corp. reported net profits of $37.2 billion for the first quarter, down 7.6 percent from the like quarter of 2013. The reduced profit was the result of a drop in mortgage activity and the fees banks get from that, and from reduced securities trading revenue, the FDIC said.

More than half of all lenders had year-over-year growth in profits, and only 7 percent were unprofitable. The average return on average assets was 1.01 percent, down from 1.12 percent in first quarter 2013.

The number of “problem banks,” a vague FDIC classification because the names are not revealed, fell to 411 as of March 31 from 467 at the end of last year. At the peak, the problem bank list was 888 in the beginning of 2011.

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California rated low for bank affordability: According to a recent report from GoBankingRates, California was ranked sixth worst in the nation for the overall affordability of financial services. The ranking was made on the basis of interest rates paid for deposits and fees charged on such products as checking and savings accounts, and ATM fees. The most affordable state offering bank services was Arkansas, followed by Iowa and Oklahoma. The least affordable regions were Arizona, Connecticut and Washington, D.C.

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Global Equity opens new division: Global Equity Finance, a mortgage lender based in the Morena district, said it launched a reverse mortgage division.

William Teed, the co-director of the division, said because most of its marketing is through word of mouth, it can pass a much larger amount of funding to clients.

“Reverse mortgages have the potential to become a much more prominent part of the financial landscape in the coming decades, as baby boomers are living longer and requiring supplementary income in their retirement years,” Teed said.

• • •

Small Change: Seacoast Commerce Bank opened its 12th loan production office in Boise, Idaho. The office is managed by Craig Sherle, who has more than 16 years of experience with SBA lending. … Banc of California, the Irvine bank that got its start in Chula Vista as Rohr Employees Federal Credit Union and moved to Irvine in 2011, switched from the Nasdaq exchange to New York Stock Exchange last month. It keeps the same ticker symbol — BANC…. Jerry Englert, one of the founders of Bank of Internet USA, now BofI Federal Bank, died May 29. Englert served as the bank’s president and CEO from 1999 to 2004, and its chairman from 1999 to 2009.

Send any news about locally based financial institutions to Mike Allen via email at mallen@sdbj.com. He can be reached at 858-277-6359.


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