Credit unions touting their strength

BRADENTON — The ad doesn’t pull any punches.

“Now is the time for change! Who’s folding? ... Not us! Solid as a rock!”

It’s a spot for the Tropicana Federal Credit Union that’s running in a local newspaper and plays on the fact that banks are having a pretty rough time right now.

Suanne White, marketing director with the Tropicana Federal Credit Union, said she has received more inquiries lately from people concerned about the safety of banks.

“We had someone in here just a few minutes ago that because of the scare in the banks, it has made her look at credit unions,” White said. “I think that people are really beginning to look at that.” There are four credit unions in Manatee and Sarasota counties.

The most recent round of ratings by Bauer Financial for the credit union sector in Florida shows the financial institutions are faring better than some banks.

Bauer rates financial institutions on a star scale from zero (the worst) to five (the best), based on their financial condition, exposure to nonperforming loans and other criteria.

Only one of the 188 credit unions in Florida carried a zero star in the second quarter — Eastern Financial Florida Credit Union in Miramar. The credit union lost $16.8 million in the second quarter and was carrying $67.3 million in delinquent loans, according to an article in the South Florida Business Journal.

However, nine of the 384 banks in the state received zero stars for the second quarter. Two of them were in Bradenton — First Priority, which regulators closed in August, and Freedom Bank, which is working to raise capital to offset an abundance of non-performing loans.

The ad Tropicana Federal Credit Union is running advertises its five-star rating from Bauer, as well as its ability to offer home equity loans, vehicle loans and other traditional banking services.

Patrick Keefe, spokesman for the Credit Union National Association, a trade association for the industry, says business at the nation’s 8,300 credit unions is growing because of the current financial turmoil.

“We have seen lending take off at credit unions, particularly over the summer months, because credit unions have continued to lend while others have clamped down,” Keefe said. “That’s been very encouraging for us. First mortgages and business loans have gone up 15 percent in the last year.”

Keefe acknowledges that all credit unions aren’t perfect, but says most have been able to stay away from riskier subprime lending that banks and other financial institutions have engaged in.

“Seventy percent of mortgage portfolios are held by credit unions, as opposed to selling them off to another investor or institution,” Keefe said.

It does bother Keefe that many news programs and articles fail to mention that most credit unions are insured in the same way banks are covered by the Federal Deposit Insurance Corp. The National Credit Union Association provides insurance on individual deposits up to $100,000 and $250,000 for retirement accounts, which is the same as coverage by the FDIC.

The absence of media mention of the credit union insurance has not gone unnoticed by those in the banking industry.

“People are saying, ‘Keep your money in an FDIC-insured account at a bank,” said Alex Sanchez, president and chief executive officer of the Florida Bankers Association.

“I’ll tell you something. While Wall Street may need more regulation, the FDIC institutions have plenty of oversight. They’re well regulated.”

Sanchez pointed to the troubles the Eastern Financial Florida Credit Union in Miramar has experienced as one reason credit unions aren’t above scrutiny.

“If I were a Floridian I would want my money in an FDIC-insured bank account,” Sanchez said. “Not one penny has been lost in an FDIC-insured bank account since Franklin Delano Roosevelt signed the legislation into law 75 years ago.”

Tom Randle, president of the Sarasota Coast Credit Union, which received a three-star — or adequate — rating from Bauer, said he hasn’t noticed a dramatic increase in customers in light of the financial crisis,

But he and other officials at the credit union with 27,000 members have discussed playing up its strengths, particularly with ongoing mergers and acquisitions in the banking industry decreasing competition.

“I think there’s no question that as banks get bigger there’s going to be less competition and they’re going to raise their fees,” Randle said. “I think it’s a great opportunity for us. I feel that less competition is never good for the consumer.”