Banking Commissioner Says Credit Unions 'Stable' / Their Structure, Philosophy 'Gives Them an Advantage'

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While 21 Oklahoma banks have failed and five state-based savings and loan associations have been placed in receivership this year, no credit union has been closed.

"Credit unions are stable," said Oklahoma Banking Commissioner Wayne Osborn.

In fact, only two credit unions have been closed during Osborn's term as a state regulator in Oklahoma since 1979.

"Although there have been some mergers," he said. "The NCUA (National Credit Union Administration) tries to merge credit unions rather than liquidate."

The structure and philosophy of credit unions has given them an advantage over other types of financial institutions.

"Credit unions are different because they don't compete against each other," said Pam Voorman-Reed, director of marketing for the Oklahoma Credit Union League. "The nature of credit unions is more cooperative. They maintain a philosophy between each other."

Credit unions are also different, because they are non-profit and member-owned, Voorman-Reed said.

"Banks and savings and loans have to make a profit to pay stockholders," she said. "The credit union doesn't have a select group of stockholders. Instead of returning dividends to stockholders, it returns savings to members in the form of higher interest paid for share draft accounts or lower interest on loans."

Profits also go back to members in dividend payments. During the second quarter, state-chartered credit unions alone reported $39.96 million in dividends.

"Recently in Oklahoma and nationwide there have been a number of bank and savings and loan failures," Voorman-Reed said, "and a lot of publicity of insurance plans and recapitalization.

"Credit unions have avoided the problems. There have been no closings in Oklahoma."

Credit union representatives said failures in other segments of the financial industries have contributed to the growth of credit unions in Oklahoma.

"The failure of other institutions has added significantly to our growth," said Marvin Cottom, president of Weokie Credit Union in Oklahoma City. "Consumers are drawing money down to insured limits (at banks and savings and loans) and depositing it in the credit union."

Credit unions are recieving larger amounts of deposits being taken elsewhere than any other institutions, said John May, president of Tinker Credit Union.

They agreed customers are withdrawing funds that exceed the $100,000 insured limit at banks and savings and loans and depositing them in credit unions. As with banks and savings and loans, credit unions also insure deposits up to $100,000.

On the other hand, Osborn said consumers are not withdrawing funds from banks or savings and loans institutions for the purpose of depositing into credit unions.

"People still bank for convenience," he said. "They recognize the insurance is there for savings and loans and banks."

The National Credit Union Share Insurance Fund, administered by the National Credit Union Administration, is the healthiest of the three federal funds, said Jerry Coursen, deputy regional director of the regulatory agency in Austin.

The credit union's insurance fund, covering $1.29 for every $100 insured, exceeds the Federal Deposit Insurance Corp. ratio of $1.19 for every $100 and the Federal Savings & Loan Insurance Corp. ratio of 21 cents for every $100, he said.

"Credit unions are doing better than banks or savings and loans," Coursen said. "They are the fastest growing financial institutions.

"I can't say we haven't had our share of problems, but credit unions have not been plagued with as much insider trading and downright poor management that caused the fall of savings and loans. …