It was great getting together with many of you last week for another successful Hike the Hill meeting. The best part was, after hosting all our prior HTH meetings virtually, our meeting with Senator Cramer was held in-person right in the Senator’s Bismarck office. While we do appreciate the opportunity to meet with some of the other members of our Dakotas’ congressional delegation virtually, it’s just not quite the same as being able to get together and discuss some our issues and priorities face to face. Check out Jeff Olson’s President’s Perspective in Monday’s Memo for a full recap of our very productive meeting with Senator Cramer.
Effects of Stimulus Payments on Capital.
One topic that we discussed with Senator Cramer as well as with the other members of our Dakotas’ congressional delegation is the downward pressure the past three rounds of economic impact stimulus payments have had on credit union capital levels, not just here in the Dakotas but across the nation. As the latest round of payments continue to be distributed as well as the possibility of more payments being approved later this year, we believe this downward pressure will continue well into 2021.
According to CUNA’s research, in 2020, 95% of credit unions reported asset increases, with the median asset growth for all credit unions coming in at 14.3% during the year. 91% of credit unions reported a decline in their net worth ratio, and the median decline was 108 basis points. Nationally, the median credit union net worth ratio fell from 12.0% to 10.9%. Even still, 99.3% of credit union assets remain in credit unions with net worth above 7% at the end of 2020, which is nearly unchanged from the 99.7% level at the start of the year.
The New York Federal Reserve also released a study last week detailing that Americans are using the majority of the money they receive to pay down debt and for savings. A much smaller percentage is going toward actual spending. As a result, as detailed above, 95% of credit unions saw their assets increase during 2020. The use of stimulus payments for spending, saving and paying down debt have remained stable during each round of payments which you can see in the table below.
The study concluded, “As the economy reopens and fear and uncertainty recede, the high levels of saving should facilitate more spending in the future. However, a great deal of uncertainty and discussion exists about the pace of this spending increase and the extent of pent-up demand.”
We continue to advocate for both our state and federal examiners to take these issues into consideration during their credit union examinations and continue to work with credit unions as they continue to navigate their way through this ongoing pandemic response. The receipt of these economic impact payments and the resulting increase of deposits and downward pressure on capital are out of the credit unions control, but regardless, they must work to mitigate their effects as best as possible while keeping their members’ best interest in mind.
You can read the full New York Federal Reserve Study here.
Donations Needed for Summit Auction!
We are asking each credit union to donate items for the GAC silent auction fundraiser and gift card raffle. The money raised supports our GAC and specifically, scholarships to attend those important Hike the Hill events. To maintain our current level of assistance scholarships, we are asking that these items have a minimum retail value of $75 to $100 (or more). We are very excited to expand participation in our fundraiser to include not just those attending the Summit in person, but those of you who won’t be able to join us this year. You will have the opportunity to bid on donated items in a silent auction or buy raffle tickets for the opportunity to win gift cards. Here are some suggestions for popular auction items:
To effectively promote our fundraiser, we will be publishing the list of prizes prior to the start of the Summit. Kindly submit your donation on our ClickBid interactive site, where after approval it will then appear with all donated items. Since it is virtual – even if no one from your credit union is able to attend, we still welcome donations! If you need assistance or have any questions be sure to reach out to me, Jay Kruse, at 701-250-3928.
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