Maryland credit unions shine in gloomy economic times

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BALTIMORE (Map, News) - Maryland’s 110 federally insured credit unions are handling the nation’s economic doldrums better than the state’s 97 commercial banks and thrifts in the first quarter 2008, National Credit Union Administration and FDIC reports indicate.

“We are insulated from the subprime mortgage crisis by our underwriting standards,” said Adrian S. Johnson, treasurer of Baltimore’s Municipal Employees Credit  Union.

MECU earned $2.3 million in first-quarter 2008 and had a return on average assets of 1.61 percent, which is well above the industry average.

Statewide, net income for federally insured credit unions topped $27.7 for first-quarter 2008, and  Maryland’s 55 for-profit banks and 42 savings and loans earned $19 million and $7 million, respectively, for the same period.

These banks and thrifts had earned $118.0 million and $15 million, respectively, in first-quarter 2007 and $131 million and $30 million in first-quarter 2006.

The sizable earnings slide for both charters is largely attributable to the effects the subprime mortgage and companion credit crises have had on for-profit banking.

But as not-for-profit financial cooperatives, credit unions follow conservative lending and investment strategies and must return earnings to their member-owners in the form of dividends, loan-rate cuts or capital improvements. This has kept their subprime lending exposure low.

“[In serving members, credit unions] emphasize long-term financial growth instead of short-term profits that tend to evaporate when times get hard,” said J. Wesley Bone, chairman of the Maryland and D.C. Credit Union Association.

Credit union earnings were also down for the quarter year-over-year, but not nearly as much as banks and thrifts. For first-quarter 2007, federally insured Maryland credit unions posted net incomes of $34.5 million.

Total deposit dropped for Maryland banks in first-quarter 2008, decreasing $10.6 billion to $22.8 billion year-over-year, and total loans and leases fell $8.9 billion to $22.3 billion.

In the bellwether area of return on average assets, Maryland credit unions outstripped counterpart banks and thrifts, with the not-for-profits posting a 0.75 percent first- quarter 2008 return compared with .25 percent for banks and .28 percent for thrifts.

“We’re running around 1.0 percent ROAA, which is excellent,” said Richard Webb, chief executive officer of Hunt Valley’s Atlantic Financial Federal Credit Union.

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416 days ago: Credit union providing alternative to banks