Mostly-Healthy Credit Unions To Get Capital Boost

For the most part, credit unions have plodded on just fine during the financial crisis. Even so, a government plan is due this week that could tap as much as $41 billion to make sure the system that keeps credit unions viable continues to perform.
Millions of dollars in loans are expected for "corporate" credit unions which are large institutions serving as financing, investment and clearing service wholesalers for the more familiar retail credit unions typically associated with places of work.

While the retail credit unions have done well in general, some of the corporate ones have suffered losses because they got involved with corporate-backed securities. Losses have gone from $5.7 billion in May to $10 billion at the end of October, forcing some retail credit unions to remove some of their funds.

To help prop up the corporate credit unions, the National Credit Union Administration, a federal regulator, got approval in September to expand a lending facility from $1.5 billion to $41 billion. The funds are not part of the $700 billion federal bailout.

According to a two-part plan, retail credit unions will borrow from this lending facility at favorable rates of about 1.5 percent and then deposit the money into corporate credit unions. The injections of capital will keep things liquid and stable. Another program will provide up to $41 billion in new lending for retail credit unions.

NCAU reports that while many balance sheets showed positive growth for the first nine months of this year, return on average assets declined. Net income decreased 15.7 percent for the period. The loan to share increased to 83.73 percent. First mortgage real estate and lines of credit expanded to 13.6 percent while new auto loans dropped 5.4 percent. Loan delinquencies also rose.