Sunday, August 22, 2004
Copyright © Las Vegas Review-Journal

SOUTHERN NEVADA ECONOMY: All due credit

Local credit unions generally buoyed by strong economy, officials say

A customer approaches the entrance to Silver State Credit Union on Aug. 11. A Silver State executive says the credit union is showing strong growth. Photo by John Locher. Click image for enlargement.

Southern Nevada credit unions appear to be thriving along with the state's economy.

"Credit unions in Las Vegas are doing well, and we are fortunate to be part of a very strong economy," said Brad Beal, chief executive officer of Nevada Federal Credit Union, the state's largest credit union.

As a rule, credit unions, like other financial institutions, do well when the economy grows because consumers are generally more willing to spend and borrow money when times are good. Loan delinquencies also may diminish during economic growth because people have more money to pay off loans more quickly.

However, lenders generally suffer when economies contract because people are less willing to borrow.

Although many credit unions are succeeding now, Las Vegas U.P. Employees, a small federally insured credit union for Union Pacific workers, is an exception.

The $6 million-asset institution reported 9.5 percent of its total loans were more than 60 days delinquent at the end of March, the latest period for which figures are available from federal regulators.

However, Malcolm Clark, manager of the credit union, said the institution's delinquency rate looks worse than it is. A large portion of its delinquent loans are owed by Navajo Indians who work seasonally for the railroad company and repay the loans through payroll deductions, he said. When they go back to work, they resume paying, he said.

Serving the Indians fits the credit union's mission, Clark said.

"We're serving the underserved. That's the purpose of credit unions," Clark said. "The credit of the people who borrow from us is not very good."

As high as 9.5 percent sounds, it's only 2.4 percentage points higher than the delinquency rate of other small credit unions in its peer group, Clark pointed out.

Furthermore, Clark said although his credit union's loan delinquency rate is relatively high, so is its net worth. Las Vegas U.P. has net worth of 24.05 percent, almost one quarter of its total assets. That's 10.5 percentage points more than its peers, according to the federal government.

The railroad credit union, which serves employees as far away as Barstow, Calif., and Milford, Utah, has been building its capital reserves since it was founded in 1952, Clark said.

"It's just been a conservatively operated credit union with low overhead," he said.

Silver State Credit Union reported some "really good" numbers, too, Chief Executive Officer Dave Rhamy said.

"We're enjoying strong growth. We're growing about 20 percent a year," thanks to continually increasing employment at Clark County public schools, he said.

The company reported a 7.8 percent rise in assets to $646.8 million in the first quarter. Annualized net income totaled $4.8 million, 6 percent lower than a year ago. The government multiplies quarterly numbers by four to get comparable annual figures, Rhamy said.

The credit union reported an 0.8 percent return on assets in the first quarter, which lenders use as a measure of profitability. Its delinquent-loan rate was 0.4 percent, which is among the lower bad-loan rates.

Nevada Federal is doing relatively well, Beal said. "Versus the competition, we're doing great," he said.

"(However) we sense a little bit of softening out there for car loans," he said. "People are just being a little conservative right now. There have been a lot of new cars bought over the last two years. Maybe folks are taking a break here."

Demand for mortgage loans remained strong, as did demand for second mortgage loans, sometimes called home equity loans, he said.

Nevada Federal, which reported a delinquent loan rate of 0.28 percent, has never before posted such a low percentage of bad loans, Beal said. The bad-loan rate, which was the lowest percentage of any Southern Nevada credit union, compared to a 0.43 percent rate at similar credit unions.

Deposits at Nevada Federal totaled $674 million, up 3 percent from a year ago.

SWG Federal, which serves employees of Southwest Gas Corp., reported 7.1 percent growth in assets over the first quarter last year, although it is one of the smaller credit unions with $22.2 million in assets.

WestStar, which has $148.5 million in assets, reported a 2.08 percent return on assets, the highest among area institutions with federal deposit insurance. Community One Federal Credit Union earned 0.59 percent, the lowest return on assets among the federally insured, but its net income was up 200 percent over a year ago.

Among credit unions relying on private deposit insurance, Clark County Credit Union earned the highest return on assets, 2.47 percent. Kolob Credit Union lost money in the quarter, with a 1.21 percent negative return on assets. All of the privately insured credit unions in Southern Nevada reported delinquent loan rates that were less than 1 percent of their total loan portfolio.