The National Federation of Community Development Credit Unions (the Federation) recently completed its semiannual report, Financial Trends in Community Development Credit Unions: A Statistical Analysis, which analyzes and tracks the performance of its 221 member community development credit unions (CDCUs) as of June 30, 2006.
The study reveals that the CDCU sector continued to experience rapid expansion in the second quarter while also showing significant improvement in financial performance.
The report found that CDCUs maintained greater rates of growth in membership, assets, loans, shares, and net worth than federally insured credit unions (FICUs) as a whole. The only notable exception was CDCU net worth, which stayed level.
Membership growth at CDCUs was especially notable; continuing to substantially outpace FICUs, expanding to 3.56%, more than two-and-a-half times the national FICU rate of 1.41%.
Equally important, all critical performance ratios for CDCUs showed significant improvements. Especially notable were the declines in delinquency and charge-off ratios: delinquency declined from 1.85% to 1.71%, and charge-offs from 0.88% to 0.69%. At the same time, profitability jumped sharply from 0.64% to 0.82%.
“This data is quite significant,” explained Federation Director of Policy Research Greg Gemerer, “Despite operating in difficult low-income, low-capital environments, continued growth and improvements in financial soundness should help community development credit unions make further progress toward mainstream performance standards in traditionally challenging areas such as net worth, delinquency, and charge-offs.”
The analysis also found a notably steep decline in member bankruptcies at CDCUs, which dropped from 0.35% to 0.13% of total membership and a drop of 63% in outstanding loans subject to bankruptcy. These dramatic declines were mirrored by mainstream FICU data and are likely a result of newly introduced bankruptcy laws.
The full study is available by clicking here.