Week ahead: Credit union balance sheets under stress, Congress returns

Register now

Credit unions begin the week with a clearer picture of how the coronavirus pandemic has affected the industry’s financial performance.

New data from the National Credit Union Administration shows a sharp increase in allowance for loan losses and a drop in net income as many key loan categories slow and deposits rise. However, that data — which only goes through June — could still be a preview of what’s to come.

The Credit Union National Association this week is expected to release its own economic outlook, and Mike Schenk, chief economist at the trade group, said during a Monday morning press call that some figures for July could be just as notable. CUNA’s data shows savings balances increased 1.5 percentage points during July alone, said Schenk, which puts year-over-year savings balance growth at 18.9%.

“This is unprecedented,” Schenk said, adding that balance sheets could still be in for additional stresses as deposit balances rise.

The good news is Friday’s better-than-expected jobs report could be a sign that labor markets are improving more quickly than expected. The National Association of Federally-Insured Credit Unions, however, pointed out that there are elements of the federal jobs data that raise concerns.

"One glaring problem area was a big jump in workers suffering permanent job loss,” NAFCU Chief Economist Curt Long said. “That figure did not change in July, but increased by 530,000 in August. There are now 3.4 million such workers, which is halfway to the peak of the Great Recession.”

The House and Senate are both back in session this week after an August recess, and the key questions facing lawmakers will be whether Republicans and Democrats can come together on new coronavirus relief legislation, along with a package to keep the government funded through the election.

“Congress seems to work its best when facing a crisis and a deadline, and certainly those dynamics are in play,” said Ryan Donovan, CUNA’s chief advocacy officer.

As Congress mulls additional legislation, industry groups continue to press for making changes to NCUA’s Central Liquidity Facility permanent, loan forgiveness measures for the Paycheck Protection Program, liability protections for businesses, a credit union exemption to the current extended credit loss standard and more.

Lastly, with the general election less than two months away, Rhode Island will hold the nation’s final primaries this week, with six incumbents on the ballot supported by the Credit Union Legislative Action Council. Among them are U.S. Sens. Jeanne Shaheen, D-N.H., and Jack Reed, D-R.I., and House lawmakers in both states. All six are expected to win renomination.

For reprint and licensing requests for this article, click here.
Law and regulation CUNA NAFCU Coronavirus
MORE FROM AMERICAN BANKER