Mike Schenk
CUNA Chief Economist Mike Schenk

Serving struggling rural areas

As more jobs move to urban areas, opportunities in rural areas decline.

November 18, 2019

Although the nation is the midst of a record-breaking, 11-year economic expansion, government data reveals rural America faces obvious dislocations and increasing signs of decline.

It’s also clear, however, that not-for-profit credit unions have stepped in to provide these communities with capital infusions, trusted advice, and solid financial value. In return, rural families and their communities increasingly recognize and embrace the credit union difference.

According to the Census Bureau, about 97% of the nation’s land area lies within rural counties. Roughly 60 million people—almost 20% of the U.S. population—reside in these areas and roughly 1% of the population lives on farms.

In 1900, by contrast, 60% of the population lived in rural areas and 40% lived on farms.

These massive long-run shifts are reflected in more recent data. The changing landscape is obvious in the U.S. Department of Agriculture’s (USDA) 2018 “Rural America at a Glance” report, which paints a picture of persistently weak employment gains, weak population growth, and disproportionately high poverty rates.

Jobs move to urban areas

Agricultural employment is changing and shrinking as corporate farms absorb family farms. Recent trade policy (tariffs in particular) is having far-reaching negative effects.

As manufacturing has become more automated, manufacturers have sought workers with more technical skills. To reduce costs, they move to be closer to transportation and communication infrastructure.

The movement of these jobs toward urban cores combined with global competition and automation led to rural areas losing nearly a quarter of their manufacturing jobs over the past 20 years—a trend that, not surprisingly, accelerated during the Great Recession.

The number of good employment opportunities in rural areas is declining and the evolution of jobs to those with lower incomes and lower benefits compels an increasing number of rural residents to migrate with the jobs to urban or suburban hubs.

The result in many areas is a substantially smaller and older population.

‘Poverty rates are disproportionately high in rural areas.’


As a result, businesses and services may decline until they cease to operate. Government shrinks and halts services as the tax base declines.

Not surprisingly, in this context poverty rates—any way you cut them—are disproportionately high in rural areas.

In the aggregate, according to USDA analysis, roughly 16% of those who reside in rural areas now live in poverty. Today, the nation’s rural population is almost 30% more likely than those living in metro areas to be poor.

Nonmetro poverty rates are higher than metro poverty rates across each broad geographic area the USDA examines. The difference is especially pronounced in the South, where 21% of the population is poor—nearly six percentage points higher than the figure in Southern urban areas.

Compared with metro areas, nonmetro poverty rates are also higher across racial and ethnic groups, all family types, and all age groups.

In many of the nation’s small towns the presence of an active, engaged financial institution is critical in helping to slow and–more importantly–offset these trends.

Infusions of capital help to increase affordable housing and revitalize businesses. And loans to assist young people in advancing their education and improve their skills help to stem the tide of rural manufacturing flight.

Credit unions play a critical role in this regard.

NEXT: Rural institutions deliver big benefit

Rural institutions deliver big benefit

As of June 2019, nearly 1,200 U.S. credit unions (about 25% of all U.S. credit unions) are headquartered in rural areas across the nation. These credit unions report having 29,000 full-time employees (FTE) and account for 80,000 FTEs across the nation.

According to the IMPLAN database CUNA economists use, rural credit unions directly accounted for approximately $4.8 billion of economic activity nationwide in 2018 and an all-in total of $13.5 billion in economic activity (which includes direct, indirect, and induced effects).

These credit unions manage $106 billion in total assets and serve approximately 10 million memberships—nearly 20% of the total population in rural areas.

Rural Credit Union Loan Growth

Click to enlarge.

Despite population declines, rural credit union memberships are up by more than 15% since 2013, and they’ve grown by an average of 2.5% per year over the past five years. That’s roughly 25 times the rate of population growth in these areas.

Rural credit unions delivered an estimated $1.1 billion in direct financial benefits to their members in the year ending June 2019. These benefits arise from the credit unions’ not-for-profit structure and member-ownership.

Of course, credit unions pass profits to members, not outside stockholders, in the form of lower loan rates, higher yields on savings accounts, and fewer and lower fees compared to banks.

Auto loans lead the way

Rural credit union loans have increased by $26 billion since 2013 with annual average growth of nearly 8% over that time. Annual increases in rural credit union loans have consistently outpaced those in the for-profit sector in recent years (“Rural credit union loan growth”).

In percentage terms, new and used auto loans led the way with annual growth rates in balances outstanding averaging 12.2% and 9.7%, respectively, since 2013.

Combined new and used auto growth totaled more than $12 billion in that period. Of course, owning a reliable car is especially important for those living in rural areas.

Beyond auto lending, credit union commercial loans increased by an average of 7.2% since 2013, a $2.5 billion increase in the period. Small business is the lifeblood of the American economy and is critically important to small towns.

While many rural credit unions are exempt from income-related taxes, the IMPLAN database estimates their 2018 direct federal tax payments totaled more than $390 million and their direct state and local tax payments totaled nearly $160 million.

Therefore, these institutions made total direct tax payments of more than $500 million in 2018. Adding indirect and induced tax payments to that total brings the aggregate tax impact to $1.7 billion in the year.

NEXT: Strong financials

Strong financials

Rural credit unions stand ready to continue to serve in the future. Collectively, they reflect strong financials with healthy earnings and solid capital positions—proving it’s possible to do well while doing good.

Return on assets (net income as a percent of average assets) came in at an annualized 0.83% during the first half of 2019 and has averaged 0.71% since 2013.

Net worth as a percent of total assets finished mid-year 2019 at 12.1%, up from 11.5% at the end of 2013.

Credit unions alone can’t solve the problems rural Americans face. But the record is clear: Credit unions are engaged and committed to these communities, providing substantial capital infusions and significant financial benefits.

Rural America increasingly recognizes and embraces credit unions—and the credit union difference.