The 'Savings' Grace of the Credit Union Pandemic Economy

During the past 12 months, ending in June, credit union savings balances grew 16.7%, according to CUNA Mutual Group’s latest “Credit Union Trends Report.” The report stated that number is “almost three times faster than the 5.7% average annual growth rate recorded during the last 10 years.”

The report showed “regular share deposits are currently growing at a 35% seasonally-adjusted annualized rate, the fastest pace in recent history as members have reduced spending due to the COVID-19 pandemic.”

CUNA Mutual Group Chief Economist Steven Rick warned, “We are forecasting below trend credit union growth for the next few years due to the COVID-19 pandemic” as credit union loan balances grew at a 5.6% seasonally-adjusted annualized growth rate in June, which is “significantly below the pace set over the last five years.”

According to the report, first mortgages slowed down in June to a growth of 1%. Since the pandemic began, credit unions have seen significant growth in first mortgages. In fact, the first half of 2020 saw a first mortgage rate growth of 7.3% as compared to the 3.4% in 2019.

New auto loan balances fell to a 5% seasonally-adjusted, annualized growth rate in June, according to the report. This is “the biggest negative reading since the summer of 2011,” according to Rick’s report, which also stated “On a month-over-month basis, new auto loan balances decreased 0.3% in June, slower than the 0.1% gain reported in June 2019.”

The report showed that credit unions gained 242,000 new members and the number of credit unions decreased by 15 to 5,354 credit unions in operation.

In the August 2020 “Economic and Credit Union Update” presentation created by Rick, he laid out what he called the “Top 12 CU Issues for 2021” as follows:

1. Record low net interest margins will lead to expense containment.
2. High unemployment rates will lead to larger collections departments and higher provisions for loan losses.
3. Monitor employee stress and morale during pandemic.
4. Invest in better technology for employees working at home.
5. Update business activity expectations and reallocate staff.
6. The new economic environment will create a new path for profitability.
7. Opportunities for prime real estate purchases and future branching.
8. Adopt COVID-19 related design changes for old and new buildings.
9. Excess liquidity will intensify search for higher yielding assets.
10. Monitor closely the drop in capital-to-asset ratios.
11. Focus on serving financially-stressed members to build brand loyalty.
12. Plan for post-recession opportunities.

A copy of the full report can be found on the CUNA Mutual Group website.