MADISON, Wis.–Credit union leaders have been offered a dozen issues to be thinking about in 2021 by CUNA’s chief economist.
Speaking to Catalyst Corporate’s 2020 Payments Forum, Steve Rick outlined these 12 things to be planning for:
- Record low interest margins will lead to expense containment. Rick said credit unions will need to consider hiring freezes, delays in building facilities and cutting down on marketing.
- High unemployment rates will lead to larger collections departments and higher provisions for loan losses. “I know a lot of credit unions are already hiring the talent they need for collections,” Rick said.
- Monitor employee stress and moral during pandemic. “We are hearing reports of falling productivity of many workers, especially as kids are going back to school, which is putting a lot of stress on parents,” Risk told the meeting.
- Invest in better technology for employees working at home. Rick said credit unions may need to invest in two monitors for employees, as well as better computers, better chairs and better home offices.
- Update business activity expectations and reallocate staff. Rick noted many credit unions have moved employees into the mortgage lending, which is booming, from other areas.
- The new economic environment will create new path for profitability.
- There are opportunities for prime real estate purchases and future branching. Rick noted the coronavirus pandemic has led to the closure of more than 100,000 businesses, meaning a “lot of prime real estate now is up for sale and can be purchased at great prices. Maybe you could buy now and hold it and build out in 2022.”
- Adopt COVID 19-related design changes for old and new buildings. This means moving forward buildings will have better ventilation and a basic redesigns. “This will be one of the permanent changes coming out of the pandemic,” Rick said.
- Excess liquidity will intensify the search for higher yielding assets. “You may not have enough loan demand for all these deposits,” said Rick. “You might have to on to more of the 3% 30-year mortgages instead of selling them or looking to other investments.”
- Monitor closely the drop in capital-to-asset ratio. “The denominator in this ratio is going to grow over 25% in next few years,” said Rick. “Capital won’t grow as much due to weak ROAs. We could see a two percentage point drop in capital to 9.4.”
- Focus on serving financially stressed members will build brand loyalty. “There are still 11-million Americans not working today. Hopefully. that will help build brand loyalty and increase walletshare.”
- Plan for post-recession opportunities. “There are going to be a lot of opportunities,” Rick said. “Credit unions always come out of recessions stronger than banks.”
Mergers Forecast
Separately, Rick said he credit unions will not see a significant number of mergers in 2020 or 2021, as executives lack the bandwidth to entertain mortgage offers.
“But what we always see mergers after the recession is over, so by 2022, 2023 we will see a lot of small to medium credit unions saying we don’t have the digital capabilities, so we will merge,” Rick said.