May of CUNA Monthly estimates from credit unions (MCUE) is the best comprehensive summary of the movement, in near real time, of the impact of the COVID-19 crisis on U.S. credit unions. As was the case in April, the effects of the crisis are significant, but in line with the expectations of CUNA economists.
More importantly, credit unions remain well positioned to continue serving their members during the crisis, said Mike Schenk, chief economist at CUNA. The May MCUE report reflects the operating results of credit unions for the first two and a half months of the crisis.
“The effects of immense fiscal and monetary policy responses are evident: low market interest rates and the SBA’s paycheck protection program have clearly helped spur loan growth, while the combination of big stimulus payments and rich unemployment benefits have driven deposit balances to incredible levels. pace, ”Schenk said.
Overall, credit union loan balances increased 1.0% in May – an annualized rate of 12%.
“This is the fastest monthly increase in almost two years (the June 2018 increase was 1.1%),” Schenk said. “Fixed rate mortgages (+ 2.0%) and PPP-related growth in commercial lending (+ 6.7%) accounted for most of the gain, although used cars (+0.6 %) have also increased at a decent rate. The 12-month increase in loan balances stood at 6.8%, slightly less than the result for 2019 “.
By May 20, all states that had imposed stay-at-home or on-site accommodation orders had started lifting the restrictions and in many areas people were allowed to return to restaurants, offices and places. of worship.
These developments suggest that loan growth could accelerate further in the coming months. However, the recent spike in COVID cases in many states will dampen the prospect of a surge in demand for short-term loans.
“On the general ledger deposit side, data from the MCUE continues to show massive growth in credit union savings balances. Savings balances rose 2.6% in the month of May, a sharp annualized increase of over 31%. The 12.0% increase since the start of the year in May is a record high in more than 30 years that CUNA has collected MCUE data, ”he said. “It is interesting to note that these increases occurred against a backdrop of a general rise in stock prices and a general decline in financial market volatility since the beginning of April.
Credit union members continued to keep savings short and liquid, with regular stocks and stock drafts accounting for about 85% of total savings growth during the month.
Rapid savings growth and weak loan growth pushed the movement’s loan-to-share ratio down from 84.4% at the start of the year to a four-year low of 76.9%.
“No five-month period in the 30-year history of the MCUE reflects a drop as severe as this 7.5 percentage point drop,” Schenk said. “Of course, lower loan-to-equity ratios are generally associated with lower net interest margins and weaker financial results. “
The dollar’s delinquency as a percentage of loans remained stable, starting the month at 0.69% and ending in May at 0.70% – matching the reading at the start of the year.
Rapid asset growth and more obvious earnings pressures combined to lower the overall capital-to-asset ratio of credit unions from 11.2% at the start of the year to 10.5% at the end of the month. of May.
“The 0.80% drop is the most dramatic five-month drop since the Great Recession, but overall capitalization levels are well above the 7.0% level considered ‘well capitalized’ by cooperative regulators. credit, ”Schenk said. “And credit unions collectively remain well positioned to continue to serve their members during the crisis.”
For more information on the financial expectations of credit unions and the economy over the next 18 months, check out CUNA’s Economic and Credit Union Forecast, available at CUNA.org/economics.