Credit unions prospering even as banks fail
BankRate.com looked into how credit unions are prospering while conventional banks are taking hits across the board. It found that the success was linked to credit unions being quicker to share best practices even with those in the same market, and due to the fact that the credit unions faced lower write-offs and delinquencies than traditional banks.
Not only are credit unions doing well in avoiding write-offs, but many of them are boasting increased membership. Further adding to the health of credit unions in a tumultuous environment is that for the first quarter of 2008, as a whole, they issued more loans than they have historically. Analysts place this rise on the willingness of credit unions to utilize their local knowledge and sit down with individuals in order to provide smart lending.
This throwback to the old-fashioned, highly human-involved method of banking may be one part of what protected the credit unions from the current fallout, not to mention a good way for individuals to continue to get loans to get the economy back on track, at least on a small scale.
I recently spoke with a local credit union official in charge of lending to get his take on how credit unions will perform in the current market and to investigate the safety of banking at this type of institution. He let me know that, as far as monetary safety, credit unions offer the same $100,000 insurance that banks do, just through a different organization. He also explained that since many credit unions sell mortgages after originating them, the institutions have suffered less in the current lending crisis. He did go on to state that even though the credit union is doing well it has seen an upward trend in write-offs of auto and RV loans linked to layoffs and high food and fuel costs. Despite these losses he does not know of any credit unions closing recently but notes that it is common for them to merge in times of trouble.
I have had great experiences with credit unions in my many years of banking and the actions which seem to have insulated them from large scale failures only reinforce my desire to make use of them for loans. Part of me does worry about their future ability to lend money as more and more people move to high yield online savings accounts. I find it comforting to know that the institutions I trust with my day to day money are faring well as a whole!