Georgia Credit Unions Continue to Add Members
Wednesday, April 17th, 2013
Credit union membership and deposits in Georgia grew in 2012, continuing a national trend that began with Bank Transfer Day in the fall of 2011. Bank Transfer Day was a viral campaign that encouraged consumers to transfer their money from big commercial banks to credit unions on Nov. 5, 2011. Since then, growth in new credit union members has been two to 2.5 times higher than it had been before Bank Transfer Day, according to Mike Mercer, president and chief executive officer of Georgia Credit Union Affiliates (GCUA).
“Deposit growth has been strong as well. Although it has slowed in recent months as investor confidence in the stock market has grown,” Mercer said.
Loan growth at Georgia credit unions has also been healthy. However, consumers are still cautious about taking on more debt. For example, auto sales are growing more than auto loans.
“More consumers are using savings to buy a car rather than borrow money,” Mercer said. “Most people have either experienced a cut back in hours worked or they know someone who has, so they are reluctant to borrow.”
The refinancing boom for home loans is slowing, according to Mercer, as most homeowners with positive equity have already refinanced. New home purchases are picking up, but it’s not a “landslide.”
“Now applicants have to prove their ability to repay. With job growth picking up, people are starting to qualify,” Mercer said.
Profits Still Under Pressure
“Probably the toughest thing for credit unions across the country is making money in the current low interest-rate environment. They are earning almost nothing on assets unless they lend them out to members,” Mercer said.
“Of course, they are dependent on their members to borrow in order to make loans.”
On the positive side, loan delinquencies are down considerably from their peak during the financial crisis.
“Most credit unions used the past couple of years to shake out the excesses and they continue to make progress,” Mercer said.
A Cap on Business Lending
Business lending is one area that has slowed for credit unions in recent months. Federal law limits commercial-purpose loans at credit unions to 12.25 percent of assets. Commercial-purpose loans are defined as loans greater than $50,000 whose proceeds are used for a business purpose.
“Members who run their own business may come to the credit union for a loan on their office building, for example. We’re seeing a lot of demand from small business owners, especially in Georgia where 80 banks closed over the last four years. But growth in these loans has slowed as credit unions start to run up against the ceiling,” Mercer said.
The industry has proposed legislation to raise the ceiling to 25 percent to 27 percent of total assets. The legislation is opposed by commercial banks, and was stalled in the last session of Congress.
“With the new session under way, we are concentrating our efforts in the Senate,” Mercer said. “We’re trying to get more capital for business with the support of small business and real estate industry groups.”
More information on Georgia credit unions and the Georgia Credit Union Affiliates is available at www.gcua.com.