While banks continue to get whipped around by the credit storm, credit unions for the most part are enjoying a comfortable spot out of the path of the headwinds.
"We have good capital and we can weather the storm," said Elaine Karins, president of the Sarasota Municipal Employees Credit Union. "We're just being careful and watching our home equity loans very carefully."
Unlike banks and other financial institutions, credit unions are typically small and don't have exposure to construction loans and the riskier mortgages that have wreaked havoc of late.
"Credit unions, they make a lot of personal loans, so their lending portfolio is a lot different than a commercial bank's," said Bart Narter, senior analyst with Celent, a Boston-headquartered financial research and consulting firm.
"That doesn't mean that credit unions don't do mortgages, but they don't bundle them and sell them off and get into all kinds of funky loans like the bigger banks do."
Second-quarter ratings from Bauer Financial Inc., a Coral Gables firm that ranks institutions on a star system for their financial condition, supports the idea that credit unions are faring better than banks.
The bulk of the 191 credit unions in Florida earned ratings of four stars or better in Bauer's system, which runs a worst-case, zero, to the best, five stars.
The four local credit unions were no exception.
Tropicana Federal Credit Union was rated at five stars, as was the West Coast Federal Employees Credit Union.
Sarasota Municipal Employees Credit Union received four stars and Sarasota Coastal Credit Union received three.
Though third-quarter rankings aren't out yet, Karen Dorway, president of Bauer Financial, doesn't expect much deterioration in the credit union sector.
"I think the credit unions have not been hit as hard with it as the banks have," Dorway said. "I think that's mostly attributable to the types of loan portfolios these institutions have. They don't have much in the way of the construction loans like those that have caused problems, particularly on the West Coast."
None of the credit unions in Florida received zero stars for the second quarter, while eight of the 390 banks in the state did. Two of them were in Bradenton - First Priority Bank, which was closed last month by regulators, and Freedom Bank, which has been struggling with non-performing loans.
That doesn't mean credit unions are completely immune to current economic conditions, Narter said.
Plummeting home prices can mean that home equity lines and mortgages issued through credit unions can cause future problems, Narter said.
"That's going to make credit unions riskier," he said.
Nationally this year, about eight federally insured credit unions have been forced into liquidation - essentially, closed because of their capital condition, said Cherie Umbel, spokeswoman for the federal National Credit Union Admini- stration.
Twelve were closed in 2006 and 10 in 2005, according to NCUA data.
The closures don't always reflect current economic conditions, Umbel said. For example, 14 credit unions were shuttered in 2004, when the economy was doing reasonably well.
"Many of them are very small institutions and sometimes the people who are running them get old and lose interest," Umbel said. "There are multiple reasons a credit union can fail."
Like the FDIC, the NCUA insures deposits at credit unions up to $100,000 and $250,000 in the case of a retirement account.
Membership in credit unions increased 1.3 percent to 87.9 million members in the first half of this year, according to the NCUA.
But membership is sometimes a barrier to individuals who want to join a credit union.
Many credit unions limit their membership to a particular employer or trade, as is the case with the Sarasota Municipal Employees Credit Union.
The Tropicana Federal Credit Union and Sarasota Coastal Credit Union are both community-chartered, meaning those who live, work or worship in the counties the credit unions are located can join.
Karins said she has been getting more calls recently from people looking to join her credit union.
"A lot of people are inquiring," Karins said. "But since we are closed membership, we are referring people who call here to Sarasota Coastal Credit Union because they are a community charter."
E-Mail
Print
Quick Job Search
@Nyx.replyAnswerText@