Re "Missing a Chance to Shine" [June 29]: Your story on credit union economic performance painted a one-sided and exceedingly negative picture of the credit union system. It is true credit union earnings have been strained, and the industry has seen some failures and conservatorships; no doubt there will be more. Credit unions didn't cause the financial meltdown and ensuing recession, but they are experiencing collateral damage from it. Still, it is important to keep a sense of perspective, which was lacking in your story. Consider these points:
• About 40 credit unions have failed since the beginning of 2009 while by comparison about 225 banks have failed over that same period;
• Credit unions are acting on their own to stabilize the corporate credit union system. We have not relied upon Tarp money as the banks have. The Credit Union National Association has a task force at work developing initiatives to further help the corporate system evolve and gain strength.
• Legislation enacted last year, which we advocated, allows credit unions to spread out the cost of stabilizing the corporates over six years. That has helped ease the strain on earnings. Return on assets averaged 7 basis points in 2008-9, but has grown to about 50 basis points in the 12 months that ended in March. We estimate full-year earnings will be about 0.50% after all assessments.
• Delinquency and chargeoff rates at credit unions are falling, and at the end of the first quarter, credit union delinquency rates were about one-third the level seen in the commercial banking sector, and credit union net chargeoff rates were only 40% of the level reported by banks.
• On lending to the small businesses so desperately in need of credit today, credit union portfolios grew at a 9% rate for the 12 months that ended in March 2010. Commercial bank rates declined by 9% over that same period. Yet credit union chargeoffs on small-business loans have been one-third the rate of banks. Credit unions will be able to do even more if Congress passes Sen. Mark Udall's amendment to the small-business lending bill that would raise the statutory cap on member business loans from 12.25% of assets to 27.5%.
Credit unions are coping with today's economic challenges and continue to shine. American Banker aside, the media lately has been filled with reports urging consumers to move their money to credit unions to take advantage of free checking, lower fees, better rates and more personalized service. Last year credit unions added 1.2 million new members and expanded their share of the U.S. household savings market to 9.8% from 9.2% at yearend 2008. That is a significant leap when you consider it took credit unions 14 years, from 1994-2008, to get from 8.0% to 9.2%.
Your story did make valid points about the impact that legislative and regulatory changes to overdraft protection and interchange fees will have on credit union balance sheets, and that these and other pressures are causing some credit unions to have to rein in growth. Since credit unions as member-owned cooperatives cannot issue stock, CUNA supports legislation that would authorize supplemental capital for credit unions. If time runs out in this Congress, it will be one of our major legislative priorities in the next.
Bill Cheney, president and CEO
Credit Union National Association