For the firsttime in 51 years, Carolyn Sanders and her husband don’t have a bank account.
The Milwaukee couple switched accounts in 2008 from U.S. Bank to Landmark Credit Union. They did so after six months of not getting a penny of interest on the $2,000 in their checking account. After the move, they received $3.47 in interest from Landmark.
“I felt almost guilty leaving,” says Sanders, who had been with U.S. Bank for 31 years. “But you’re using my money, you can pay a few cents interest.”
Credit unions were the only financial institutions to grow during the Great Depression, according to the Credit Union National Association. In the current recession, they are positioning themselves as an alternative to banks struggling with falling profits, government bailouts and a battered public reputation. Dean Wilson, president of Focus Credit Union in Wauwatosa, practically apologizes about its boffo performance in 2008.
“We’ve having one of our better years,” he says. “I almost whisper that.”
By contrast, M&I Bank lost $393.8 million through the first three quarters of 2008 due to bad real estate loans in Arizona and Florida. It was forced to allocate $886 million to cover its bad loans and got a $1.7 billion federal government bailout. Statewide, commercial bank earnings fell 73 percent in the third quarter, according to the Federal Deposit Insurance Corp. WaterStone Bank in Wauwatosa lost $25.6 million for the quarter. Guaranty Bank lost $9.5 million.
Wisconsin’s 257 credit unions, meanwhile, posted a 3 percent increase in net operating income through the first three quarters of 2008, according to the state’s Office of Credit Unions. And they had few delinquent loans – just 1.21 percent of all loans.
They’ve been largely untouched by the nation’s economic woes, says Suzanne Cowan, director of the state’s Office of Credit Unions. Brett Thompson, president of the Wisconsin Credit Union League, puts it this way: “We don’t hit those deep valleys because we don’t hit those high highs.”
Credit unions are nonprofit cooperatives that, unlike banks, don’t pay corporate income taxes or dividends to boards of directors. (Banks have long lobbied to end this tax exemption, arguing it’s unfair.) This allows credit unions to charge lower fees and offer higher interest rates.
Credit unions pride themselves on being owned and run by the customers they serve. First started in Germany in the 1850s, credit unions got a boost here from Wisconsin’s Germanic roots. Milwaukee opened the state’s first credit union in 1923, well before the federal government passed a national credit union law in 1935.
Despite this early start, Cowan says, credit unions only account for some 6 percent of Wisconsin’s financial institution holdings, which is about average among states. But, she adds, Wisconsin still has more credit unions per capita than most states because their average size here is so small.
That smallness appeals to some customers. Sanders was impressed that Landmark Credit Union had a receptionist and a children’s play area. She fondly recalls the regal First Wisconsin Bank – which became U.S. Bank – in Downtown Milwaukee, where she never waited for service because there were so many tellers. Now, at the U.S. Bank branch near her house, people sign a legal pad and wait in line to see a teller. Just another reason, she says, to switch to a credit union.
