CUNA’s April Monthly Credit Union Estimates (MCUEs) provides a first comprehensive look at impacts the COVID-19 crisis is having on U.S. credit unions. While the effects are significant, they are in line with CUNA economists’ expectations and credit unions remain well-positioned to continue to serve members in the downturn.

The MCUE report reflects credit union operating results for the first full month of the crisis (April).  These include challenges wrought by immense fiscal and monetary policy responses. 

The data shows massive growth in credit union savings balances – due mostly to a flood of government stimulus deposits which greatly magnified normal seasonal savings inflows, CUNA Chief Economist Mike Schenk notes.

Overall, credit union savings balances grew 4.7% in April, an astonishing 56% annualized pace and the largest one-month increase in the 30+ years that CUNA has collected MCUE data.

“The increases occurred against a backdrop of rising equity prices – which staged a 13% rally during the month,” Schenk said.

Overall, savings balances increased 7.0% during the first four months of the year and 13.8% over the past 12 months.

Credit union members continued to keep savings short and liquid with share drafts and regular shares accounting for 93% of total savings growth in the month.

“While savings balances ballooned, anxiety related to the fast-spreading pandemic and a shocking wave of over 30 million job losses had most members hunkered down,” Schenk said. “Beyond stockpiling necessities, consumers were generally reluctant to spend or borrow: Overall, credit union loan balances were up only 0.1% in the month (an annualized pace of just 1.2%).”

Loans increased 1.0% during the first four months of the year and 6.8% over the year ending April 2020.

Loan balances declined across all but two portfolio segments in April:

• Low market interest rates continued to fuel mortgage re-financings and fixed-rate mortgages increased 1.2% in the month (a 14.2% annualized pace);
• In addition, the SBA’s $349 billion Paycheck Protection Program (PPP) rolled out April 3 and credit unions stepped in to help small businesses across the nation - reflected in the fact that commercial loans increased an astonishing 5.2% in the month (a 62% annualized pace). 

“Fast savings growth and weak loan growth pushed the credit union movement’s loan-to-share ratio down from 84.4% at the start of the year to a three-year low of 78.1%,” Schenk said. “No four-month period in MCUE’s 30-year history reflects a decline as severe as this 6.3 percentage point slide. Of course, declining loan-to-share ratios are typically associated with falling net interest margins and more challenging bottom-line results.”

Dollar delinquency as a percent of loans increased modestly – from 0.59% in April 2019 to 0.69% in April 2020. However, total dollar delinquencies increased by 10% in April and by 23% compared to year-ago levels.

Fast asset growth and more obvious earnings pressures combined to push the aggregate credit union capital-to-asset ratio down from 11.2% at the start of the year to 10.7% at the end of April.

The 0.5% decline is the most severe since the Great Recession, but overall capitalization levels are substantially higher than the 7.0% level seen as “well capitalized” by credit union regulators,” Schenk said. “Credit unions remain well-positioned to continue to serve members in the downturn.”

For more information on economic and credit union financial expectations over the next 18 months look to the CUNA Economic and Credit Union Forecast posted on CUNA’s web site at cuna.org/economics.