Credit unions, which have historically relied on branches and auto lending to bring in new members, saw both of those channels shrink over the pandemic. But they are adapting, and growth is starting to rebound.
CUNA Mutual Group, an insurance and financial services company that monitors the credit union industry, reported that through November, credit unions added 4.7 million new members in 2021, an increase of 23.6% from the corresponding 11-month period in 2020. And the group expects the momentum to carry into 2022.
In many situations, membership growth has been a case of the haves and have nots. Credit unions with assets of at least $1 billion saw membership rise 8.7% on a year-over year basis at the end of the third quarter while those with assets of at least $10 million but less than $50 million saw membership decline 14.4%, according to data from the National Credit Union Administration.
The credit unions that are bucking the trend and seeing membership rise are the ones that kept up with the times, particularly in how they relied on branch interactions and auto lending.
"We adapted to a virtual world and have seen some solid results," said Shane London, president and CEO of Deseret First Credit Union in West Valley City, Utah. The credit union’s membership rose 2%, to 72,509, at the end of 2021, from a year earlier. But this new figure exceeds its prepandemic membership of 71,158 at the end of 2019.
The $922 million-asset institution is “moving along in a pretty steady manner” when it comes to membership growth after membership fell in 2020, London said.
Cars and branches
Some credit unions have been forced to temporarily
Dealerships continue to work with Deseret First, he said, but as inventory volumes decline due to global chip shortages, it has affected how much auto loan volume the credit union could produce.
The pandemic slowed branch member growth briefly for $1.4 billion-asset Alabama Credit Union in Tuscaloosa after it closed some lobbies for about six weeks. But ACU operates in several markets with limited credit union presence, and is able to compete on loan and deposit rates, according to Steve Swofford, president and CEO of the organization.
“We do a pretty good job converting indirect [auto] customers into full fledged ACU members — somewhere near 20%,” Swofford said. “We grew loans over 20% in 2021, and 2022 has started strong as well, so that provides membership growth opportunities similar to 2021.”
ACU’s membership was 112,684 at the end of 2021, an 11% increase from a year earlier. Swofford predicts member growth in excess of 8% for 2022.
“We actually have national and regional bank employees referring their customers to us for loans, saying the rates are so much better. In many markets, most of the bank employees are also ACU members," Swofford said.
Bouncing back?
Annual membership growth at credit unions hit 4% in 2018 but has not returned to that level since falling 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 in the past year, and credit union membership in those institutions reached 128.6 million in the third quarter of 2021, according to the latest data released by the NCUA.
A year earlier, those institutions added 4.2 million members, and membership reached 123.7 million.
Strong mortgage lending and the surge in hiring are two major factors driving the rise in credit union memberships, said CUNA Mutual chief economist Steve Rick. Job growth is a major factor determining credit union membership growth, he said, and the U.S. economy gained 6.5 million jobs during 2021, according to the Bureau of Labor Statistics.
For 2022, 3.6 million new jobs are expected to be created as the economy exits the COVID-19 pandemic and recession.
“As the mortgage refinance boom ends, job growth and new auto indirect lending will become more of a factor in membership growth. We expect membership growth to rise slightly, to 4%, in 2022, which would be the first time it has risen to that level since 2018,” Rick said.
Deseret First anticipates strong membership growth as consumers want to get back to a more normal environment.
“Other financial institutions could be experiencing more of an impact but right now for us I think our value proposition to new members is strong,” London said.
