TRAVERSE CITY, Mich.–Credit unions were the subject of a positive profile in a national report by CNBC.
The report began with the story of a Michigan painting contractor who turned to 4Front Credit Union for a PPP loans, saying he did so "based on the more personal feeling relationship” than he had with a bank.
“It's not surprising that many Americans have received loans in the past year given record low interest rates, but research shows that credit unions tend to lend more than commercial banks during times of crisis,” the CNBC report stated. “That's because their mission is to support Main Street, unions and the local communities they serve. According to (CUNA), credit unions continued to lend and even increased lending during the Great Recession and current pandemic crisis. By comparison, banks have tended to pull back or even reduce lending during crises.”
The report noted between year-end 2019 and Sept. 2020, credit union memberships increased by 3.37 million, or 2.8%, to 125.11 million, and loan portfolios at credit unions rose 6.6% in the 12 months ending Sept. 2020, a period during which banks experienced 4.9% growth in loans.
“Because credit unions are not-for-profit entities, they return earnings to members through lower loan rates than commercial banks, higher deposit rates, and lower and fewer fees,” the report stated. “But that doesn't mean that credit unions regularly do more business than banks. During "normal" times, banks tend to lend more.”
A Payback for CUs
CNBC noted that before the recession in 2008, 24% of all mortgages from banks were subprime compared to about 3% at credit unions. When the crisis hit, banks pulled back a lot more, the report stated, quoting CUNA economist Jordan Van Rijn as saying he's seeing CUs seeing more mortgage volume as a result, as well as other consumer shifts.
As an example, the report cited a small credit union with teachers and firefighters among its members. "These folks need you even now more than ever. Credit unions are gonna be more likely to still do those loans, even if they're a little bit riskier," Van Rijn told CNBC. By contrast, a bank is less likely to lend to the same people because it needs to maximize profits and minimize risk for its shareholders, he said.
The report quoted an executive with New Jersey-based Affinity FCU, and cited a surge in loans made by Mississippi-based Hope Credit Union.