A Tale of Two Industries – As Large Credit Unions Boom, Small Credit Unions Wither

With apologies to Dickens, 2020 has been for credit unions both “the best of times and the worst of times,” with the largest credit unions – those with over $1 billion in assets – outgrowing, out-lending, and, in many cases, out-surviving their smaller counterparts.

According to the National Credit Union Administration’s latest Quarterly Credit Union Data Summary for the third quarter of 2020: “Total assets in federally insured credit unions rose by $248 billion, or 16.1 percent, over the year to $1.79 trillion in the third quarter of 2020.”

Membership in credit unions has grown by millions in 2020, too: “Federally insured credit unions added 4.2 million members over the year, and credit union membership in these institutions reached 123.7 million in the third quarter of 2020.”

How did this happen? It appears the credit union industry big guys feasted on the consolidations, closures, and failures of the little guys: “The number of federally insured credit unions declined to 5,133 in the third quarter of 2020, from 5,281 in the third quarter of 2019.”

According to NCUA, 2020 is shaping up to be a banner year for the largest credit unions with over $1 billion in assets (which, as we’ve noted, pay not a dime in federal income taxes):

• “The number of federally insured credit unions with assets of at least $1 billion increased to 364 in the third quarter of 2020 from 319 in the third quarter of 2019. These 364 credit unions held $1.3 trillion in assets, or 71 percent of total system assets. Credit unions in this category reported loan growth of 11.8 percent. Membership rose 10.6 percent. Net worth increased 11.9 percent.”

As the industry continues its massive consolidation of assets in $1 billion-plus credit unions, it’s been a real “2020” kind of year for smaller, true-to-mission credit unions:

• While increasing in total number year-over-year from 255 to 272, federally insured credit unions with assets of at least $500million but less than $1 billion declined 4.5 percent in memberships, 2.8 percent in net worth and 1.9 percent in total loans.
• Credit unions with at least $100 million but less than $500 million in assets increased to 1,063 in the third quarter of 2020 from 1,012 in the third quarter of 2019 but declined 6.5 percent in memberships, 3.5 percent in net worth and 6.1 percent in total loans.

The numbers look especially terrible for the smallest credit unions:

• “Credit unions with at least $50 million but less than $100 million in assets declined to 674 in the third quarter of 2020 from 682 in the third quarter of 2019 … [and] reported a 12.2 percent decrease in total loans. Membership fell 12.5 percent. Net worth declined 7.1 percent.”
• In the $10 million but less than $50 million asset size, 100 credit unions are gone compared to a year ago: “Declined to 1,561 in the third quarter of 2020 from 1,661 in the third quarter of 2019 … [while reporting] a 15.8 percent decrease in loans. Membership declined 13.5 percent. Net worth fell 10.4 percent.”
• And saving the worst news for last: “The number of federally insured credit unions with less than $10 million in assets declined to 1,199 in the third quarter of 2020 from 1,352 in the third quarter of 2019. These credit unions held $5.0 billion in assets, or 0.3 percent of total system assets. Credit unions in this category reported a 21.3 percent decline in loans. Membership fell 16.4 percent. Net worth declined 14.1 percent.”

None of these figures should cause much surprise for anyone familiar with credit union industry trends over the last several decades. The biggest get bigger – fueled by their no-federal-tax-paying status – and buy up banks and paste their names on stadiums and bowl games, while the smallest struggle to stay alive.  And next week, NCUA is poised to make this disparity even worse by allowing the biggest credit unions to raise capital from outside investors (think hedge funds buying up the debt in credit unions).  Not exactly the image of the small, close-knit cooperative of people sharing a common bond that credit union advocates try and paint.

You can read the full NCUA report here. We encourage you to do so.