Local lenders see strong recovery from pandemic | New
From the perspective of local banks and credit unions, it’s almost as if the COVID-19 recession never happened.
Last year’s shutdown of a significant part of the local economy and the accompanying layoffs of many hospitality and healthcare workers appear to have had little lasting effect on the capacity of most local borrowers to meet their loan repayment obligations.
Kern County financial institutions attribute two main factors: forbearance agreements that allow people more time to pay off their debts – even if they don’t need it – and money from government recovery for individuals and businesses going through tough times.
The result was relatively clean second quarter balance sheets at local credit unions and commercial banks. Even lenders are surprised at the rebound.
“I didn’t expect it to come back so quickly,” said AJ Antongiovanni, chairman and CEO of Bakersfield-based Mission Bank. “I think people went out and spent money, especially in hospitality, travel, the entertainment industry, and restaurants.”
Chuck Smith, senior vice president and director of loans at Valley Strong Credit Union, also based in Bakersfield, added Chuck Smith: “What looked like a really, really dark time 15 months ago, has not come to fruition. “
Credit institutions say it may be a little too early to claim victory over the recession. The global supply chain has still not recovered and signs of inflation are emerging, not to mention the risks that the highly contagious Delta variant could lead to a return to COVID-19 closures.
An equally significant threat to some bankers is that consumers who hang on because of government stimulus payments will not be able to keep up after aid ends.
“The wild card is what happens when all of the stimulus goes away,” Smith said.
Yet, given the depth to which the recession has disrupted society, borrowers appear to have done remarkably well.
Very few signs of the recession appeared in the second quarter financial reports filed by Bakersfield-based Safe 1 Credit Union.
The amount of loans that had to be written off until June 30 due to default, $ 492,737, was less than half of what it was the previous year. And that was less last year around this time than it was a year ago.
In addition, fewer members of the credit union filed for bankruptcy on June 30 than at the same time in 2019, by a margin of 54 to 61.
In a clear indication that people were not paying their debts on the same schedule as before, Safe 1’s share of overdue loans to total loans increased slightly as of June 30 to just over a third. by 1 percent versus a quarter of a percent at this point in the previous two years.
CEO David King said that was to be expected in light of the credit union’s forbearance program. Borrowers have been offered extra time to make their payments, and although they haven’t technically fallen behind, regulations require this to be flagged in the credit union’s own financial update as a default. of payment.
Only a small portion of the credit union’s loans are still in arrears, he said. Meanwhile, Safe 1’s loan delinquencies are at their lowest in a decade, and hardly any of its members are asking for extra time to make loan repayments.
Ironically, perhaps credit unions and banks have seen a sharp increase in deposits that King allocates to people receiving government stimulus payments at a time when there was little opportunity to spend money at home. outside the house.
“People have crouched down and the government has provided a lot of stimulus,” he said.
Smith of Valley Strong compared the situation to consumers “weathering the storm”.
His credit union saw its share of delinquent loans to total loans decline between the second quarter of last year and the second quarter of this year. Loan write-offs also fell, 62% year-on-year.
Much of the credit goes to the government’s intervention, he said. Generous unemployment benefits and personal payments averted what could have been a disaster, while the federal paycheck protection program helped keep businesses alive.
Mission Bank was generous with the forbearance agreements during the early days of the pandemic, Antongiovanni said. Some customers who didn’t need it took full advantage of the offer just so they could hold onto money, he said, adding that the institution has since terminated all such deals.
The bank now has less than $ 1 million in loans classified as distressed, which is low by its own historical standards.
For Antongiovanni, the big challenge now is to find a way to relieve the unemployed of their unemployment benefits in order to help companies fill the vacant positions.
He attributed his bank’s strong overall performance to the fact that consumers who couldn’t get out of the house during the California stay-at-home order can finally get out and have some fun.
“I think there was pent-up demand and you see people going out and spending money,” he said.