Overview: Overall, 91 million U.S. consumers are member-owners of, and receive all or part of their financial services from the nation’s 7,794 credit unions. Credit unions are not-for-profit financial cooperatives, serving members who share something in common: employment, association membership, or residence in a particular geographic area. As not for profit cooperatives, credit unions generally offer more attractive savings and loan rates as well as generally lower fees. Surveys consistently rank credit unions first among financial institutions in consumer satisfaction.
Philosophy and Structure: Credit unions are democratically owned and controlled institutions that take pride in their “people helping people” philosophy. Credit union boards of directors are elected by members; each member has an equal vote, regardless of how much he or she has on deposit. Only members may serve as directors, and directors serve without remuneration. Volunteers are an important credit union resource. Presently, approximately 100,000 Americans volunteer for their credit unions, serving as board members, committee members or providing other assistance. Finally, credit unions have no outside stockholders, so after reserves are set aside, earnings are returned to members in the form of dividends on savings, lower loan rates or additional services.
Safety and Soundness: Credit unions primarily engage in consumer lending and, to a lesser degree, residential real estate lending with their members. Because credit unions are portfolio lenders and are member-owned cooperatives, they were not part of the recent widely-reported sub-prime crisis. Credit union asset quality remains very high in the current shaky market with 1st mortgage delinquencies at 1.93% and overall loan delinquencies at 1.69% at the end of the third quarter 2009. Credit union capital is equal to 10 percent of total assets (a level that is well above the regulatory “well capitalized” 7 percent threshold) and the equity ratio of the federal insurance fund, National Credit Union Share Insurance Fund (NCUSIF), has operated with an equity-to-insured share ratio of at least 1.25 percent for sixteen consecutive years.
Insurance Fund: Since 1984, credit unions have operated their own federal deposit insurance fund on a pay-as-you-go basis. In that year, credit unions voluntarily deposited 1 percent of their insured member savings in NCUSIF, to bring its equity ratio up to 1.0 percent. This recapitalization resulted in a one-time reduction in the federal deficit. Each year, credit unions deposit sufficient funds to ensure that the fund’s equity ratio is maintained at or above 1.2 percent. Like the Federal Deposit Insurance Fund coverage, NCUSIF protects member deposits to $250,000 and is backed by the full faith and credit of the U.S. Government.
Regulation and Supervision: Federally chartered credit unions are regulated by the National Credit Union Administration (NCUA), an independent agency. NCUA’s three board members are nominated by the President and confirmed by the Senate. State chartered credit unions are regulated by their state credit union department. NCUA administers NCUSIF,and has authority to subject all federally insured credit unions to insurance examinations. No taxpayer money is used for regulating and overseeing credit unions, as all activities of NCUA and NCUSIF are funded by credit unions.
U.S. Organization: Overall, 88 percent of credit unions, both federally and state chartered, representing 87 percent of total credit union assets, are affiliated with the Credit Union National Association (CUNA), and its state-based affiliates (leagues). CUNA maintains offices for fee-based services in Madison, Wisconsin, and the offices of the president and governmental affairs in Washington, D.C.
Market Share: Credit unions are a small, but constant presence in the financial services industry. Credit unions hold about 6.7 percent of household financial assets as of September 2009, a market share that hasn’t changed significantly in over 25 years.