credit unions

Credit unions weather tough market

The Web site for Agriculture Federal Credit Uniongreets visitors with a statement meant to drive home the safety and security of deposit accounts at the institution.

Credit unions are structured differently than their bank counterparts and, although they are far from immune to the mortgage and credit debacle, most of them may be getting through the current landscape in fairly good shape. Nevertheless, a number of credit unions are taking the same route as Agriculture FCU and attempting to allay any consumer concerns.

"The reason we put the message out there was more proactive," says Margie Click, CEO at Washington, D.C.-based Agriculture FCU. "I came through the failed savings-and-loan era and I want to make sure that our members know we're OK. We've had our challenges, although nowhere near what some of the others have had. I think that any financial institution that says they've had no impact isn't telling the truth."

Dan Kampen, CEO at The Rochdale Group in Overland Park, Kan., a consultant to credit unions in the implementation of new lending programs, says credit unions have found trouble when they've taken a different risk posture than is normal for a community-type institution.

"Credit unions are cooperatives -- profits flow to the members of the cooperatives; while bank profits accrue to the benefits of stockholders. Most of the credit unions where the failures hit the headlines probably involved themselves in programs -- whether an individual loan type or a purchase of loans from a third party -- where they didn't understand the risk, or they didn't have the mechanisms in place to adequately control and monitor the risk.

Kampen suggests that the cooperative nature of credit unions will be a key in staying financially healthy.

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"In the for-profit sector, given the level of competition, you probably wouldn't see those best practices being shared. Even credit unions in the same geographic region will sit down and talk about what works well in terms of mitigating the risks and lowering the losses."

U.S. credit union profile (as of March 30, 2008)
Number of credit unions8,208
Assets per credit union ($ mil)98.1
Total assets ($ mil)805,210
Total loans ($ mil)542,626
Total surplus funds ($ mil)230,278
Total savings ($ mil)679,098
Total members (thousands)88,898
Source: Credit Union National Association

Data from the Credit Union National Association (CUNA), a national trade association serving credit unions, show some interesting numbers at a time when the financial markets were struggling.

  • Fixed-rate first mortgages increased $6.3 billion (annualized rate of 24.21 percent) during the first quarter 2008 compared with same period in 2007.
  • Adjustable-rate first mortgages increased $2.3 billion (annualized rate of 12.04 percent) during the first quarter 2008 compared with the same period in 2007.
  • Aggregate loan delinquency decreased slightly from 0.93 percent to 0.91 percent of total loan outstanding.
  • Delinquent real estate loans in federally insured credit unions increased from 0.67 percent at year-end 2007 to 0.70 percent through first quarter 2008.

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