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Wisconsin CUs tell how they handle hits from economy
MADISON, Wis. (6/2/10)--Credit unions in south central Wisconsin have lower-risk lending and investment practices, but they too are seeing the impact of the recession on their members. In a Wisconsin State Journal (May 30) article about how the recession is affecting financial institutions' ratings by ratings agencies, Wisconsin Credit Union League President/CEO Brett Thompson points out that both banks and credit unions have been impacted by the tough economy. "Credit unions are not immune to that stress, although from a comparative perspective, I think they've come out of it pretty well," Thompson said. First American CU in Beloit noted that it while banks' recent loan losses are generally tied to commercial developments and home mortgages, First American's relate to business loans. Local mom-and-pop stores are hit by factory cuts in the Janesville area. CEO Tracy Blaske said the credit union's net income and reserve fund are improving, and the credit union is hopeful that businesses can turn around. Three small credit unions have increased their ratings. Members Serving Members of Beaver Dam, the Madison Fire Department CU and the Truax CU of Madison have had positive earnings. Steve Wright, president of Madison Fire Department, explained how his credit union had positive earnings: Firefighters have steady jobs and aren't likely to be hit by government cutbacks even during tough times. The credit union also limits services to mainly savings accounts and loans. "We just do a few (services) and try to do them well," he told the paper. Credit unions also benefit with their low-risk practices. Kim Brilowski, chief examiner for the Wisconsin Office of Credit Unions, noted that credit unions don't get involved in the type of investments and commercial lending that banks do. For most of the 236 credit unions in Wisconsin as of Dec. 231, net income and net worth decreased slightly in the past year, Brilowski said, but overall, their capitalization or reserve fund ratios average 10% or more. Mergers can affect ratings, too. Madison-based $1.4 billion asset Summit CU is the second largest credit union in the state. Its merger two years ago with Great Wisconsin CU increased its operating expense ratio temporarily last year, according to Kim Sponem, Summit president/CEO. But even after the merger, Summit's assets have grown more than 10%. Credit unions nationwide are attracting more members who are fleeing banks in a "flight to safety," said Thompson. In Wisconsin credit unions have 11% of the financial services market, the article said.
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