June 11, 2009 |
For millions of Americans their “bank” is not a “bank” at all, but rather a credit union, a cooperative financial institution owned by its depositors and loan customers, rather than stockholders.
There are nearly as many credit unions – 7,909 at the end of March, compared with 8,255 banks. But most of them are small and as a group, they hold only $869 billion in assets, compared with more than $13 trillion for the nation’s banks. The largest credit union, Navy Federal, based in Merrifield, Va., with $38.7 billion in assets would be just the 45th largest bank. The largest bank, JPMorganChase, has nearly twice the assets of all the credit unions combined.
As is the case with banks, credit unions are supervised by state and federal banking regulators, and their deposits (technically called “shares”) are insured up to $250,000 per depositor, just as with banks. The federal regulator is the National Credit Union Administration . And if a credit union becomes insolvent, the NCUA steps in to take over, just as the FDIC does for banks.
Historically, credit unions were established to serve the needs of small groups of workers, frequently just the employees of one company or one manufacturing plant or government agency. They cashed paychecks, made loans for cars or signature loans, sometimes tiding strapped members over until the next payday.
Of course, times have changed in the financial industry, and credit unions are not what they once were. While many have stayed true to their roots, others have become important regional financial services providers, as Congress has updated laws to allow credit unions to serve wider audiences, including in some cases, large geographic areas. Some of these larger institutions also have gotten more deeply involved in real estate lending and some have taken on more business customers.
For the first time for any news organization, the Investigative Reporting Workshop has analyzed the results for every credit union in the nation, using quarterly data reported by the credit unions to the NCUA. Here is what the analysis found:
- The recession is taking its toll on credit unions as more members face layoffs and find it more difficult to pay their loans on time. “Delinquency ratios have gone up and they have gone up a lot,” according to Mike Schenk, vice president for economics and statistics at Credit Union National Association , the trade group representing the industry.
- As a group, credit unions lost about $3.2 billion in the first quarter, with more than three quarters of the institutions posting losses, according to the NCUA data. A year ago in the first quarter credit unions made $1.19 billion. However, some, if not most, of the losses will be reversed because of an accounting change, Schenk said. Most credit unions took charges to cover the collapse of two large wholesale credit unions in March, but Congress now has acted to change the way those losses are covered, he explained.
- Credit unions seem less bogged down with nonperforming loans and foreclosed property than the nation’s banks. That is primarily because they still have relatively small real estate and business loan portfolios. At the end of March, the amount of loans more than 60 days past due and foreclosed property was $9.47 billion, up from $5.34 billion a year earlier. “We weren’t making the toxic mortgages, we weren’t doing the liar loans,” Schenk said
- The somewhat conservative approach has given credit unions some insulation from the worst effects of the financial crisis and put less stress on their capital levels from troubled assets. According to the Workshop analysis of NCUA data, 51 credit unions had more troubled assets on their books than capital and loan loss reserves on March 31. A year ago 42 credit unions had a “troubled asset ratio” of more than 100.