Harper: Minority Credit Unions Performed 'Admirably' in 2021

The NCUA reported to Congress Tuesday that the 509 credit unions run by minorities and serving minorities performed “admirably” in 2021.

Their number fell from 520 in 2020. “This slight decline is largely due to credit unions that fell outside the specific MDI designation requirements,” according to the NCUA report.

Among credit unions, a Minority Depository Institution is a federally insured credit union in which minorities make up a majority of its members, board of directors and field of membership.

Among banks, an MDI is a federally insured depository institution that is majority owned by minorities who are U.S. citizens, or it qualifies if minorities make up a majority of its board of directors and the community that it serves is predominantly minority. The FDIC lists 143 banks that were MDIs last year, up from 142 in 2020. Their total assets were $325 billion, or an average of $2.3 billion per bank.

The credit union MDIs accounted for about 3% of the movement’s assets and members as of Dec. 31.

NCUA Chairman Todd Harper wrote in the report’s introduction that MDI credit unions saw growth in members, loans, assets, shares and deposits.

“During 2021, MDI credit unions continued to perform admirably, and many MDI credit unions provided the only source of insured financial services in their communities,” Harper wrote.

Harper noted that total loan balances among the MDIs grew 9.3% to $2.9 billion as of Dec. 31, compared with 8.3% growth for all 5,048 federally insured credit unions.

“This percentage increase in MDI credit union lending exceeded the increase recorded by all federally insured credit unions during 2021 and demonstrates that MDI credit unions are working within their fields of membership to assist in the economic recovery from the COVID-19 pandemic,” Harper wrote.

However, the report did not include loan originations. A CU Times analysis of NCUA data showed the MDIs originated $16.7 billion in loans in 2021, up 11.6% from 2020, while production among all credit unions rose 17.9% to $796.3 billion.

The MDIs did show higher growth in residential first mortgages. MDI originations rose 11.2% to $5.6 billion last year, while for all credit unions they grew 8.4% to $324.5 billion.

The MDIs also had higher net worth ratios. Their net worth ratio stood at 10.65% at the end of 2021, compared with 10.26% for all credit unions.

The report showed:

• MDIs’ net income as a percent of average assets was 0.88% last year, compared with 1.07% ROA for all 4,942 federally insured credit unions.
• The MDIs had higher operating expenses, representing 3.21% of average assets, compared with 2.83% nationally. The MDIs had 382 members for each full-time employee compared with 401 for all credit unions.
• The MDIs also had lower loan-to-share ratio: 66.3% compared with 70.2% for all credit unions.
• MDI membership growth was 1.5% compared with 4.7% for all credit unions.
• MDI loan quality was worse. MDIs had a 60-day-plus delinquency rate of 0.63% on Dec. 31, and a net charge-off rate of 0.36% for the year. All credit unions had a 0.41% delinquency rate and a 0.26% charge-off rate.

“Throughout 2021, the NCUA continued its support for MDI credit unions,” Harper wrote. “We expanded learning resources, better managed the MDI mentoring initiative, and provided grants and loans to assist eligible MDI credit unions in more effectively engaging their members and delivering much-needed services.”

This year Harper said the NCUA is increasing its available resources to support MDI credit unions. “For example, we will host an MDI track as part of the agency’s summit on diversity, equity and inclusion. And, we have provided field examiners with more time to offer technical assistance and support for MDI credit unions.”