Credit Unions –What We’ve Seen & What We Expect – Brian Sullivan, CPA, Partner

What We’ve Seen in 2021:

+ Credit unions have faced many challenges from the COVID-19 pandemic in the last couple years causing more remote work, struggling to keep a full complement of staff, closed lobbies, drive-thru only services, and appointment only services.

+ With the uncertainties concerning the pandemic, credit unions saw a rise in provision for loan losses fearing the worst only to see an adverse effect. We saw lower delinquency, fewer charged off loans and a large increase in member deposits creating excess liquidity with very few options for investing. Net charge offs to average loans dropped from 0.56% to 0.27% from June 2019 to June 2021. We have also seen lower net interest margins. The decline in interest margin went from 2.83% to 2.57% in June 2020 and 2021, respectively.

+ As a result, we’ve seen a further strain on net income. Credit unions have been able to remain profitable as return on assets has grown 41 basis points from June 2020 to June 2021 due to a steady increase in loans as well as reduced operating costs.

+ The number of credit unions in the nation continues to decline but that decline has slowed due to the
recent pandemic. They are still seeing a 5.2% growth in membership and 5.2% growth in loans.

+ In the first half of 2020, the dollar amount of delianquent loans to loans has decreased to 0.45%, down 12 more basis points from a year ago.

+ Member savings grew 16.4% in the first half of 2021 along with 20.9% in 2020. Credit unions struggle to find avenues to re-invest the excess liquidity.

What we expect to see in 2022:

+ Interest yields will remain low through 2022.

+ Loans are expected to continue increasing as consumer spending rises in 2022, on average, as much as 9% loan growth and up to 4% in membership growth.

+ Savings are expected to decrease as economic spending rises in 2022.

+ More demand and affordability of mobile products and electronic services.

+ Technology advances will continue to change the member outlook on financial services as well as additional remote work capabilities. Along with the remote services for employees and members, there will be increased challenges related to cyber security and ID theft.

+ Addition of more value-added services to better serve the needs of members in the changing technology driven environment.