Virginia-Based Credit Unions Continue to Shine With Strong Earnings, Growth in 1st Quarter 2012

LYNCHBURG, VA (07/24/2012)(readMedia)-- Virginia-based credit unions continue to show remarkable resilience in the face of a slow recovery, recording improvement in virtually every aspect of their operations in the 1st Quarter of 2012.

Earnings improved and loan growth -- while still slow from a historical perspective -- far outpaced the drop in loan balances recorded in the 1st Quarter 2011.

"Virginia's credit unions continue their good work to serve the needs of their members," said Virginia Credit Union League President Rick Pillow. "The good news is that more consumers are discovering the benefits of credit union membership. With money to lend, better rates and service, and far fewer fees, credit unions are the consumer-friendly alternative to the nation's for-profit banks."

Virginia-based credit unions added 41,900 new members and 68,000 new share draft/checking accounts during the quarter. The uptick in new share draft/checking accounts is significant given that during the past 10 years, the state's credit unions added an average of 26,000 new share draft/checking accounts in the 1st Quarter.

Although many households have more than one share draft/checking account, a share draft/checking account is still a key measure in identifying a consumer's primary financial institution.

During the six months ended March 2012, Virginia-based credit unions added 141,000 new members, a rise fueled by Bank Transfer Day and positive media coverage credit unions garnered throughout 2011.

Earnings for the state's credit unions exceeded the national average, with net income (Return on Assets ) at 1.21 percent, compared to the 0.83 percent national average. This reflected a slight 4 basis point slip from the 4th Quarter 2011 figure. A basis point is 1/100th of 1 percent.

On the lending front, loan growth for the year ended March 2012, was fueled by increases in credit card lending (+12 percent), member business loans (+10 percent), and used auto loans (+8 percent).

Ironically, credit unions are lobbying Congress for authority to do more in the business lending arena, by seeking to raise an arbitrary cap on member business loans established more than a decade ago. Commercial banks still hold a majority of U.S. business loans, but credit unions are approving a higher percentage of loan applications, according to the Biz2Credit's small-business lending index.

Credit unions approved nearly 56 percent of such applications last month, compared to 47.5 percent approval among banks with less than $10 billion in assets. The study found bigger banks approved 11.1 percent of such applications.

Almost one-quarter of Virginia's 184 credit unions offer member business loans, currently holding some $810 million in such loans. Nationally, credit unions hold $39.7 billion in member business loans.

Savings growth continued to be concentrated in short-term, liquid accounts. Share draft/checking balances increased by 14 percent in the year ended March 2012, with regular shares and money market accounts logging 12 percent and 9 percent increases. IRA balances saw a small increase over the past year (+4 percent).

As consumers have worked to mend their finances following the recession, credit unions have seen a steady drop in delinquency rates and charge-offs, which has contributed to healthier balance sheets for credit unions. In fact, Virginia-based credit unions' delinquency and charge-off rate -- both stood at 1.08 percent -- are half the rates of the state's banks -- 2.48 percent and 1.96 percent, respectively.

Credit unions are not-for-profit, democratically-controlled cooperative financial institutions. Members of credit unions are owners, and each member-owner has an equal say in the operations of the credit union. Almost all Virginians are eligible to join a credit union. To find a credit union you may be able to join, visit www.aSmarterChoice.org.