ONTARIO, CA (March 29, 2021) —
Fourth quarter 2020 year-over-year trends (annualized as of Dec. 31, 2020)*
A surge in record-high savings deposits at local credit unions across California and Nevada will play an integral part in economic growth and consumer spending as the second quarter of 2021 kicks into gear, with experts saying the economy is poised to outperform original expectations.
Meanwhile, the latest fourth-quarter 2020 California Credit Union Snapshot data was released today — as well as fourth-quarter 2020 Nevada Credit Union Snapshot data — by the California and Nevada Credit Union Leagues.
A third round of U.S. congressional relief-and-stimulus payments has already arrived on local households’ personal balance sheets, in addition to the second round in December of 2020. Lower income individuals and families will spend much more of these dollars than higher-wage workers and households.
However, many economists are forecasting that ALL consumer/household income-tiers could likely spend money at faster paces (in aggregate) than the initial two rounds of federal payments last year since state/local COVID-19 business, retail, event, and gathering restrictions are steadily loosening (in combination with quicker local job growth). This is in addition to paying down debt and saving money.
Simultaneously, year-over-year deposit and loan trends for California and Nevada credit unions at the end of fourth-quarter 2020 revealed the following: consumer deposits continued their steep climb higher, as well as residential mortgages and loans to businesses (commercial mortgages and residential landlord mortgages) — depending on the region.
Statewide & Local Snapshots: Members, Loans, Deposits
In California, credit union membership, total loans, and total deposits reached record-high levels by Dec. 31, 2020 compared to the year-ago period — 12.9 million members, $218 billion in deposits, and $146 billion in loans. Trends broken out by 10 local regions are: Bay Area, California, Central Coast, Central Valley, Greater Napa Valley, Northern California, Sacramento County, San Diego Region, Southern California, and Ventura County.
In Nevada, credit union total loans and total deposits reached record-high levels by Dec. 31, 2020 compared to the year-ago period — $5.8 billion in deposits and $3.5 billion in loans (and 373,000 members). Trends broken out by three local regions are: Nevada, Northern Nevada, and Southern Nevada.
What’s Happening at the Local Level
In California (289 locally headquartered credit unions) and Nevada (15 locally headquartered credit unions), the fourth quarter of 2020 revealed that:
For new and existing members in either state:
This trend, driven by “new” consumers choosing credit unions to be their financial services provider and existing members becoming new members of other credit unions, did not stop.
Homeowners and vehicle owners looking to refinance their loans as interest rates remain in historically low territory aided the inflow of some consumers becoming new members, as well as emergency loans offered throughout the COVID-19 pandemic.
Small business owners scrambling for the latest round of Paycheck Protection Program (PPP) forgivable loans issued by the U.S. Small Business Administration and the Treasury Department also played a role in new membership, although not quite as much as the prior quarter (third quarter) since by the fourth quarter’s end much of these funds allocated by Congress were nearly depleted.
For total deposits in either state:
Checking and savings accounts mostly saw the highest growth rates. In many cases the regional percentage increase was between 20 – 30 percent, with some areas hitting within the 40 percent range. The impact deposits are having on declining loan-to-deposit ratios at credit unions in all regions (also known as loan-to-share ratio) is significant, making the industry more “liquid” than before the pandemic (inquire for more details).
This increase in consumer deposits came from less spending and more savings by many existing members and even new members, assisted by federal monies received by workers/households who were suddenly unemployed and qualified for extended/continued unemployment insurance payments and additional emergency pandemic unemployment insurance payments. Also, many congressional relief/stimulus funds deposited earlier in the year by employed (and even some unemployed) members were not completely spent as of late December 2020.
For total loans in either state:
First mortgages of all types (fixed rate, adjustable, etc.) were the main sub-drivers of the much larger total/headline loan growth as mortgage rates remained historically low and homeowners refinanced into new mortgages with lower monthly interest expense. The positive impact of this one category cannot be overstated.
Business loan growth (includes landlord real estate loans) in many regions helped as PPP lending was facilitated to local business owners seeking payroll/employee cost relief, although not at the same pace as the prior quarter (third quarter).
The fact that used auto loan growth did not decline as much as other loan categories (depending on the region) — or in some cases experienced zero percent change or even slightly positive growth — also helped bolster and buffer total/headline lending trends. Used vehicle prices relative to new autos, combined with very low interest rates, are making pre-owned cars and trucks relatively much more attractive to some buyers during the economic recovery.
Three loan categories declined significantly as continued local/state government pandemic shutdowns and/or restrictions halted economic activity: home equity/HELOC, credit card, and new auto-vehicle lending.
* Please note: some highlight trends may or may not be completely applicable to a local region. View your local region’s report (linked above) for exact data.
Headquartered in Ontario, California, the Leagues exist to help credit unions change people’s lives by supporting their operations, guidance, strategy and philosophy. Our trade association helps local credit unions in California serve nearly 13.8 million members and those in Nevada serve almost 400,000 members. Credit unions are for people, not profit!
Brandi Gleason
Provost and Chief Operating Officer
Western CUNA Management School
brandig@wcmspomona.org
