Credit unions, which have historically relied on branches and auto loans to attract new members, have seen both channels shrink during the pandemic. But they adapt and growth begins to rebound.
CUNA Mutual Group, an insurance and financial services company that monitors the credit union industry, reported that in November, credit unions added 4.7 million new members in 2021, an increase of 23.6% over the corresponding 11-month period in 2020. And the group expects the momentum to continue through 2022.
In many situations, membership growth has been a matter of haves and have-nots. Credit unions with assets of at least $1 billion saw their workforce grow 8.7% year-over-year at the end of the third quarter, while those with assets amounted to at least $10 million but less than $50 million saw their workforce decline by 14.4%, according to data from the National Credit Union Administration.
The credit unions that are bucking the trend and seeing membership grow are the ones that have kept pace, especially in the way they have relied on branch interactions and auto loans.
“We’ve adapted to a virtual world and seen strong results,” said Shane London, president and CEO of Deseret First Credit Union in West Valley City, Utah. The number of credit union members increased by 2%, to 72,509, at the end of 2021, compared to the previous year. But this new figure exceeds its pre-pandemic workforce of 71,158 at the end of 2019.
The institution with assets of $922 million is “moving fairly steadily” on membership growth after membership plummeted in 2020, London said.
Cars and branches
Some credit unions have been forced to temporarily close branches due to the COVID-19 pandemic, thus limiting opportunities for these institutions to interact with potential members. At the same time, a shortage of computer chips caused a new shortage of cars, which hurt car credit.
Dealerships continue to work with Deseret First, he said, but as inventory volumes dwindle due to global chip shortages, it has affected the volume of auto loans the credit union could produce.
The pandemic briefly slowed branch membership growth for $1.4 billion in Alabama Credit Union assets in Tuscaloosa after shutting down some lobbies for about six weeks. But ACU operates in multiple markets with a limited credit union presence and is able to compete on lending and deposit rates, according to Steve Swofford, the organization’s president and CEO.
“We’re doing a pretty good job converting [auto] customers into full ACU members – somewhere close to 20%,” Swofford said. “We’ve grown lending by more than 20% in 2021, and 2022 has also started strong, providing opportunities for membership growth similar to 2021.”
ACU membership was 112,684 at the end of 2021, an increase of 11% over the previous year. Swofford predicts membership growth of over 8% for 2022.
Bank consolidations provide an opportunity for the ACU as many customers are willing to move their accounts when their bank is sold, according to Swofford.
“In fact, we have people from national and regional banks who refer their clients to us for loans, saying the rates are so much better. In many markets, most bank employees are also ACU members,” Swofford said.
Annual membership growth in credit unions reached 4% in 2018, but has not returned to that level since plummeting at the start of the pandemic, according to data from CUNA Mutual.
But there are several signs of improvement.
Federally insured credit unions added 4.9 million members over the past year, and the number of credit union members at these institutions reached 128.6 million in the third quarter of 2021, according to the latest data released by the NCUA.
A year earlier, these institutions added 4.2 million members and the number of members reached 123.7 million.
Strong mortgages and a surge in hiring are two major factors behind the increase in credit union memberships, said Steve Rick, chief economist at CUNA Mutual. Job growth is a major driver of credit union membership growth, he said, and the U.S. economy gained 6.5 million jobs in 2021, according to the Bureau of Labor Statistics. .
For 2022, 3.6 million new jobs are expected to be created as the economy emerges from the COVID-19 pandemic and recession.
“With the mortgage refinance boom ending, job growth and new indirect auto lending will become more of a driver of membership growth. We expect membership growth to increase slightly to 4% in 2022, which would be the first time it has reached this level since 2018,” Rick said.
Deseret First predicts strong membership growth as consumers want to return to a more normal environment.
“Other financial institutions could experience a greater impact, but for us, I think our value proposition to new members is strong,” London said.