MADISON, Wis.–Mid-year data for credit unions indicate the credit union industry average net worth ratio has declined approximately 140 basis points below where it stood at the beginning of 2020. And even though the decline is greater than that which occurred during the Great Recession, it isn’t the result of write-offs and loan losses, according to CUNA.
Instead, it’s a reflection of all the deposits that have flowed into credit unions over the past 18 months—and inflow that is expected to continue, according to Mike Schenk, deputy chief advocacy officer for policy analysis and chief economist with the trade group.
Schenk said CUNA is projecting the net worth ratio will continue to drop as families receive additional stimulus payments.
‘Significant Pressure’
“It has nothing to do with a decline in asset quality,” said Schenk. “It’s purely the result of fast savings and asset growth. Data show savings balances increased about 15% (at mid-year) year over year. With the child tax credit on the horizon, credit unions should expect significantly more growth.
“Loans are up about 5% year over year,” continued Schenk during a call with the media. “There is a very significant pressure on credit union earnings. Investment portfolios are growing quickly and they, of course, yield close to zero.”