Although Connecticut is home to three of the nation’s 14 credit union failures this year, the industry has weathered the weak economy fairly well.
Connecticut credit unions avoided the pitfalls of subprime lending and have seen deposits flowing in. But a deepening recession and mounting job losses in the state are beginning to take a toll.
Net income for the state’s 143-federally insured credit unions fell 19 percent to $26.6 million through the first three quarters of 2008, compared $32.9 million during the same period last year.
Delinquent loans rose 33 percent from a year ago, and as of Sept. 30, $36.8 million in loans were at least one month overdue. That was a 21 percent increase since June 30, when credit unions had $30.3 million in overdue loans.
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Failed CUs Were Small
The three Connecticut failures were all very small institutions. Regulators moved quickly earlier this month to close the ailing West Hartford Credit Union, which had assets of $2.9 million and served 1,206 members.
In July, regulators shut down New London Security Federal Credit Union and Meriden F.A. Federal Credit Union. They had $12.7 million and $337,968 in assets, respectively.
Despite the challenging times, industry executives remain optimistic.
“Connecticut credit unions, as a group, have held up extraordinarily well,” said Ed Danek, president and CEO of Hartford Federal Credit Union. “The majority are well capitalized and profitable.”
Connecticut credit unions had nearly $7 million in overdue fixed-rate mortgage loans and about $1 million in overdue adjustable-rate home mortgages.
Delinquent credit card loans equaled about $5.2 million in the third quarter.
Despite rising loan troubles and slimmer bottom lines, most Connecticut credit unions are not having liquidity issues and continue to lend without changing their underwriting standards, said Tony Emerson, president of the Credit Union League of Connecticut.
Last month, more than a dozen credit unions agreed to a joint partnership with the state in which they put up $17.5 million to provide low-interest loans to Connecticut college students.
The program, which will run for one year, offers students who live or go to school in Connecticut education loans with interest rates capped at 6 percent or 5.75 percent.
Participating credit unions put up at least $100,000 to participate in the loan program.
“We don’t have to deal with the fallout of the subprime crisis which allows us to be more proactive in terms of providing loans,” Emerson said.
Emerson said people view credit unions as a “flight to safety,” during difficult times, and he expects them to pick up depositors in the coming months.
