Getting Back to Work:  The State of the Credit Union System at September 30, 2024

As the new administration’s post election appointments and policy directions are implemented, the credit union system is on a stable foundation.

There are still latent issues of vital importance, most of which the NCUA board has adeptly avoided.  But the macro-financials reported in Callahan’s 3rd Quarter Trend Watch overview yesterday are strong and heading in the right direction. This is the link to the 72 slide deck. The full recording is available here.

Some observations  I noted:

Improving liquidity: In Alloya Corporate’s economic summary they presented their balance sheet trends to show the industry’s improving liquidity position as demonstrated by the growth in members’ deposit balances.

For all natural person credit unions, total borrowings have fallen and are now only 5.2% of assets, loan and share growth are in even balance, and the market value in underwater investments has recovered another $9 billion in value.  Liquidity is coming back.

Slow Growth

The overall theme for this quarterly  update was balance sheet growth much less than the industry’s CAGR over the past 20 years.  The September 2024, 12-month share increase was 3.2% versus  6.3% over the past two decades.  For loans, the latest 2.59% growth is less than half the 20 year average of 7%.

An interesting statistic about the 2.5% in additional members is analysis showing credit unions with organic growth grew faster than those institutions relying on third party loan originations, a common means of adding members.

The upside of this modest growth was that the various measures of total capital and net worth(10.8%) have all increased versus one year earlier.

Takeaways In a Changing Administration

The credit union system was financially strong before the election.   Nothing has altered this fact.  A change in regulatory leadership is coming.   Questions credit unions might consider as this political turnover occurs might be:

How will this change affect your members’ lives?   Will the direct governmental assistance of the COVD era and programs such as student loan forgiveness end?

How will reliance on market outcomes affect lending opportunities such as climate related projects or electronic vehicle sales?

Will the new normal in the Fed’s overnight rate settle in an expected range of 2.5-3.0%–or will fiscal policy drive a higher or lower level?

With a more market-oriented administration, will the unique role of credit unions be sustained, or will the industry just be seen as another option in an ever expanding lineup of fintech, bitcoin and other financial providers.

In a future blog I will explore issues of regulatory policy and present a case study of a prior time of major change in administration.

The Good News

The good news for credit unions at this moment of national policy changeover is that they are in a sound position to deliver for members on all of their traditional service options.

They can continue to help members who feel vulnerable or overlooked.  And maybe they can bring to those struggling with inflation or even bigger goals such as buying a home, even more responsive financial solutions in the four years ahead.

 

 

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