Are Credit Unions Weathering the Pandemic Storm?

September 8, 2020 at 9:48 am Leave a comment

Good morning folks.  Welcome to the unofficial start of Fall.

One of the things I did over the weekend was take a look at the industry’s 2nd quarter numbers, and for what it’s worth, for me they are like this past summer: they weren’t great but it could have been much worse.

For an industry that had to endure the first artificially induced economic coma in our nation’s history, the industry’s numbers reflect pretty much what you would expect minus any signs of more dramatic troubles ahead.  For example, people rush to put money safely away in their deposit accounts.  Total assets increased $132 billion, or 8.8%, over the year ending in the first quarter of 2020, to $1.64 trillion.  In addition, credit union membership continued to increase with aggregate membership increasing to 121.4 million in the first quarter of 2020, an increase of 4 million members.

Losses are up but not as dramatically as one might have anticipated.   The delinquency rate at federally insured credit unions was 63 basis points in the first quarter of 2020, up 6 basis points from one year earlier. The net charge-off ratio was 58 basis points, up slightly from 57 basis points in the first quarter of 2019.

Incidentally, banks are seeing an even larger influx of cash deposits.  Bank deposits expanded by more than $1 trillion for a second consecutive quarter, in fact the insurance fund ratio for banks is in danger of falling below 1.30%.

So, is the industry’s glass half empty or half full?  That largely depends on if you think these numbers reflect the nadir of economic activity or are a portent of things to come.  If you are a member of the “glass half full” group then the numbers released on Friday showing that the unemployment rate continues to decline is proof that the economy is doing better than expected.  If you are a member of the “glass half empty” gang then the numbers demonstrate that while the economy continues to grow so does the numbers of permanent job losses.   Either way, the industry is being buffeted by macro-economic trends to an extent not seen in a decade.

 

Entry filed under: COVID-19, Economy, econony. Tags: , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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