Fisher Center for Real Estate and Urban Economics

We estimated and compared models that predict failures of credit unions with models for commercial banks. Not surprisingly, our estimates bore many similarities to prior estimates of bank failure prediction models. Our estimated models of future failures of credit unions also bore many similarities to those that we estimated for banks. Both types of lenders had higher failure probabilities when more of their assets were in commercial mortgages.But, the differences were perhaps more interesting and informative than the similarities. We found that the estimated sizes and significance of many of the determinants of failures differed importantly between credit unions and banks.Unlike banks, for example, credit unions that had more residential mortgages and consumer loans had higher probabilities of future failure. Indeed, the larger banks were, the stronger was the evidence that residential mortgages reduced their probabilities of failure. Conversely, unlike credit unions, banks that had more non-real-estate business loans were estimated to have higher probabilities of future failure.