Total assets in federally-insured credit unions jumped nearly 12 percent in 4Q 2021 to $2.06 trillion, according to the latest data released March 7 by the National Credit Union Administration.
Credit unions grew in other key financial indicators as well: Insured shares and deposits increased $166.8 billion or 11.4 percent to $1.63 trillion. The net worth of the credit union system grew $21.2 billion or 11.1 percent over the year to $211.6 billion. Total loans outstanding increased $92.7 billion or 8 percent in 2021 to $1.26 trillion. Insured shares and deposits rose $166.8 billion or 11.4 percent over the year ending in 4Q 2021, to $1.63 trillion. The median return on average assets was 50 basis points, up 10 basis points from the end of 2020. Federally insured credit unions added 5.3 million members in 2021, reaching nearly 130 million in the fourth quarter. The number of federally insured credit unions dropped to 4,942 late last year, down from nearly 5,100 during 4Q 2020.
“Overall, the credit union system performed well in 2021, despite the year’s many challenges,” said NCUA Chair Todd M. Harper. “This is a testament to the strength of the credit union system going into the pandemic and the skillful management of credit union CEOs, boards of directors, and staff over the last two years.”
However, Harper said the negative impact of Covid-19 on credit union portfolios and performance might not be over. “The potential for new COVID variants, continuing labor market and supply chain challenges, inflationary pressures, the prospect of rising interest rates, and current geopolitical tensions could negatively affect household finances and ultimately credit union performance going forward,” he said. “Credit unions and the NCUA, therefore, must remain watchful and ready to respond to these issues.”
These growth trends come as more credit unions than ever are acquiring banks. As reported by S&P Global, the total assets of banks sold to credit unions reached a high of nearly $5.9 billion in 2021, up from $3.93 billion in 2019. The deal count of 13 neared the record of 14 set in 2019. Charles McQueen, president and CEO of Michigan-based McQueen Financial Advisors, anticipates between 15 and 20 such deals this year.
These trends come as community banks continue to push back against credit unions having a tax-free status. The long-standing tension has been on display in Wisconsin, where Madison-based Summit Credit Union recently announced it intends to buy the $837 million, West bend, Ill.-based Commerce State Bank. The acquisition is the sixth purchase of a Wisconsin bank by a credit union over the last decade.
“Wisconsin taxpayers should be very concerned about this transaction as the state alone will lose over $1 million annually in future tax revenues with this sale because credit unions do not pay any state or federal income tax,” the Wisconsin Bankers Association stated.
The WBA had already been speaking out against a state bill introduced last year that would enable state-chartered credit unions to issue subordinated debt; allow non-members to be a party to a credit transaction; and give credit unions the chance to transfer and lease property, subject to guidance by Wisconsin’s Office of Credit Unions.
“With large credit unions becoming indistinguishable from tax-paying banks, it is time for the public and elected officials to question the public policy rationale for this significant tax benefit,” according to the WBA.