CUNA is now America's Credit Unions.
A stronger voice to advance the credit union industry.
How do credit unions compare?
As noted earlier, credit unions, like all financial institutions, have experienced tight liquidity and many are concerned about Federal Reserve interest rate increases. Unrealized losses on investments securities have grown. That’s simple mathematics.
But credit unions are unlike big banks in a number of important respects. Unlike big banks, credit unions don’t have stockholders. Stockholdings in these institutions aren’t actively traded on exchanges and few investment professionals spend any time “following” them.
This alone reduces the risk of bad press which should arguably help to buoy confidence in these segments of the depository arena.
A fundamental concept in economics is that incentives matter. Incentives drive behavior and behaviors influence outcomes. Big bank CEOs are under almost constant pressure related to quarterly earnings calls. And big banks CEOs are more likely to both be compensated with so-called “high-powered” compensation (variable pay-for-performance) and have higher proportions of high-powered compensation compared to CEOs of similarly sized credit unions.
As a consequence, big banks are more likely to take on more risk to maximize annual compensation.
Significant differences between banks and credit unions are clearly reflected in the prevalence of uninsured deposits. Bank uninsured deposits dwarf those observed in the credit union arena.
The typical bank reports 25% of deposits are uninsured, whereas the typical credit union reports just 3% of deposits are uninsured.
CUNA’s review of FDIC data at year-end 2022 shows that 799 federally insured banks report at least 40% of their domestic deposits are uninsured. These banks represent 17% of the nation’s 4,713 banks.
The average asset size of these institutions is $19 billion and the median asset size is $822 million. Collectively, these banks hold 64% of banking industry assets: $15.2 trillion in total.
In contrast, NCUA data at year-end 2022 shows that only 11 credit unions report at least 40% of their shares and deposits are uninsured. These credit unions represent 0.2% of the nation's 4,758 credit unions.
The average asset size of these institutions is $51.4 million and the median asset size is $41 million. Collectively, these credit unions hold only 0.02% of credit union industry assets: $397 million in total.
What can board members do?
Credit unions have been uniformly positive about how consumers are behaving and interacting with them. Specifically, they’re reporting few instances of members inquiring about the safety of their deposits and, more importantly, reporting high levels of deposit retention and modest though healthy growth in deposit balances.
CUNA’s 2023 National Voters Poll, conducted in January, reveals that 90% of credit union members trust their credit union. Overall, so-called “high intensity” results that focus on those that are most likely to say they trust their institution (i.e., those that are not just “positive” but “very positive” that they trust their institution) show that credit union members are 1.6 times more likely than nonmembers to reflect this level of certainty.
The CUNA team—in cooperation with our state league partners—has consistently made supportive comments about the health of the system generally and of the National Credit Union Share Insurance Fund in particular.
We’ve built a page on our website here that outlines that credit union deposits are insured, safe, and secure, insured up to $250,000 per individual depositor—the same level as any federally insured financial institution.
Furthermore, credit union members have never lost a penny of insured savings at an insured credit union. And we urge visitors to learn more about the credit union difference at YourMoneyFurther.com. The page also includes media kits and messaging guidance.
As an engaged director, encourage your credit union to use these resources. It’s critically important to ensure your credit union continues its messaging around your institution’s safety and soundness.
In addition, ask good questions. Whether in full board meetings or in committee meetings, be sure that your credit union provides valuable information around general risk trends including reliance on uninsured deposits, access to liquidity, and interactions with members.
In an uncertain operating environment when confidence matters most, that’s not just what you should do—it’s what you must do.
MIKE SCHENK is deputy chief advocacy officer and chief economist at Credit Union National Association.