The U.S. credit union industry is generally healthy, offers considerable competition to banks and other financial institutions, supports a variety of financial instruments through investments, and has been changing in recent years to meet new demands and new opportunities. The industry has done well up to the present and is now planning for new challenges in the future, making use of the financial base offered by credit union members to advance into new markets, new financial instruments, and other opportunities as they arise. At the same time, the industry has experienced some problems associated with changes in the marketplace, shifts in capital from one instrument to another, and problems in the banking industry which have affected the credit unions as well. In addition, the unions have to face the vagaries of the stock market and shifts in public perception of the health of the economy as a whole.
The total assets of U.S. credit unions have been rising in the 1990s, and the industry has shown steady health. Figures for 1994 show that assets stood at $296.8 billion, a 7.6 percent increase from June 1993 and a 28 percent increase from the midyear 1991 figures. According to Veribanc, credit unions had accumulated almost $27 billion of equity, more than 9 percent of their total assets. At the same time, though, it was noted that there was a 12 percent drop in earnings in the first quarter of 1994 and that the number of unprofitable unions had increased to 10.7 percent. Perhaps one problem was that credit unions had concentrated a lot of their debt in real estate mortgages at a time when real estate prices were dropping. In mid-1994, credit unions held $55.6 billion in mortgages, a 7.1 percent increase from 1993 and a 14.4 percent increase from 1991. A number of institutions had 90 percent or more of their loans in mortgages. credit unions also had $17.8 billion in derivatives, and this included collateralized mortgage obli...