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Credit unions are getting the first look at economic numbers from the beginning of the coronavirus outbreak. While the numbers from March don't sound as jarring now, it's what is potentially down the road that could be even more alarming.
On Friday, CUNA Mutual Group released its "Credit Union Trends Report" for the month of March, when the unemployment rate increased to 4.4% and consumer spending fell -7.5%. The most recent numbers put the unemployment rate around 20%, and consumer spending has plunged by a record -13.6%.
How far we have come.
According to CUNA Mutual Group Chief Economist Steven Rick, March wasn't all bad news for credit unions. "The loan growth in March, on a seasonally-adjusted annual basis was actually rising at an 8.8% base. Very strong!" he said in his recorded video update.
The report showed that credit union member savings rose at about a 9% pace in March and Rick forecast a "very robust" savings growth of 12% for the year.
According to Rick, delinquency rates had already been creeping up in March. "Delinquency rates came in at 0.63% in March of 2020, up from 0.58% in March of last year." In the monthly report, Rick provided some context of where delinquency rates could be headed. "The labor market is now in free fall, however, with the unemployment rate close to 20%, which is significantly above the 4.7% considered to be full employment. With the unemployment rate expected to remain above 10% through 2021, we can expect the credit union loan delinquency rate to rise above 2.2% over the next few months."
In the second quarter of this year, Rick said credit unions should expect car sales to be down 50% and home sales to be down about 30%.
Looking beyond the second quarter, Rick said, "With the lowest rates in history and the highest unemployment rate in modern history, expect credit union assets to only be 0.20% for this year and then falling even further; the return on assets of -0.35% for next year."
Rick said he expects credit unions to see loan losses triple by the end of 2021, compared to what they were in 2019. He said credit unions should also prepare themselves for a 25% drop of yield on assets, from 4% to 3%.
Other highlights of the report, as of March 2020, included:
- There were 5,407 credit unions, 27 fewer than in February.
- Credit union membership grew by 147,000.
- Credit unions increased their loan portfolios by 0.3%.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
