Credit Unions Can Still Hold Their Heads High

The recession may have put the squeeze on financially troubled banks and thrifts, but credit unions have actually strengthened this year. So says veribanc Inc., a bank-rating company serving consumers and small business.

According to veribanc's analysis of data released by the National Credit Union Administration, which covers some 12,000 credit unions, the nonprofit industry's return on assets was 0.63% in the first six months of 1991, the same level it averaged in the last half of last year. But the percent of credit unions with negative equity declined from 3.4% to 2.7%. And the size of problem loans, less loss reserves as a percent of equity, also fell, from 6.29% to 3.97%.

Why have credit unions stayed relatively healthy? "Even the largest are small compared to the size of most troubled banks," says Warren G. Heller, veribanc's research director, "and they have tended to avoid riskier lending areas." As of June 30, for example, foreclosed real estate amounted to only 0.4% of total property loans by credit unions, compared to 2.9% for banks.