Credit Unions – What We’ve Seen and What We Expect

Brian Sullivan, CPA, Partner

What we saw in 2022:

  • Historic loan growth, 15.40% as of June 2022 while savings have only grown 8.10%, nationally, causing strain on liquidity, which we have not seen in many years.
  • Lower liquidity levels as loans to savings ratios have risen to 74.90% as of June 2022, the highest it’s been since 2019.
  • 25-year high in Return on Assets in 2021 at 1.07% and continued to see a very strong ratio of 0.84% through June 2022.
  • Yield on assets remained low at 3.03% through June 2022 as loans are still being booked at lower rates.
  • Funding costs remained low at 0.36% as of June 2022, however, a sharp increase throughout the second half of 2022 causing strain on interest margins.
  • Fee Income stayed low at 0.45% as of June 2022 as overdraft protection and NSF fees are under scrutiny.
  • Other non-interest income continues to decline with a yield of 0.67% as of June 2022, due to lower gains on sales of mortgages, fewer mortgage refinances and the continued threat of lower interchange income.
  • The number of credit unions in the nation continue to decline, however, they are still seeing a 3.0% growth in membership and 15.4% growth in loans.
  • In the first half of 2022 the dollar amount of delinquent loans to loans has stayed historically low at 0.48%, while net charge offs as a percentage of average loans has stayed the lowest it’s ever been at 0.28%.

What we expect to see in 2023:

  • Now is the time, the new Current Expected Credit Losses (CECL) standard is here! Remember, upon adoption, your credit union will record a cumulative-effect adjustment to retained earnings to adjust your CECL general ledger balance to agree with your model. 
  • Credit Unions can plan to see increased strain on margins due to higher operating expenses, tighter interest margins and less income earned on mortgage refinances. 
  • Loans are expected to continue increasing as consumer spending rises in 2023, on average, as much as 20% loan growth but only 5% in savings growth. This will cause additional strain on liquidity levels.
  • 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.