Credit unions weather tough market |
| By Laura Bruce • Bankrate.com |
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The Web site for Agriculture Federal Credit Union greets 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.
"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."
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| U.S. credit union profile (as of March 30, 2008) |
|
|
| Numbers of credit unions |
| Assets per credit union ($ mil) |
| Total assets ($ mil) |
| Total loans ($ mil) |
| Total surplus funds ($ mil) |
| Total savings ($ mil) |
| Total members (thousands) |
|
| Source: Credit Union National Association |
Data from the Credit Union National Association, or 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 loans 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.
"For the first three months of 2008, loan originations by credit unions went up dramatically vis-à-vis where they
were historically," says Walter O'Haire, senior analyst in the banking group at financial consulting firm Celent. "The large lenders
still dominate, but credit unions went from having less than 2 percent of the
first-mortgage market share to over 3 percent versus the first quarter of 2007.
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