What Happened in the Credit Union Industry Last year?

With challenges, hurdles, and innovations, 2023 was a big year for the credit union industry. From the early 1900s with the first credit unions in the United State to 2023, the financial landscape has been completely transformed through technology and changing member trends. 

This blog post goes over major numbers from last year and what they mean for your credit union. Plus, keep reading to have an even better year in 2024. All of the statistics in this blog post are from the 2023 NCUA quarterly report found here

In this post, we'll cover...


 

Growth in Total Assets: A $79 Billion Surge in Assets

The credit union industry witnessed a substantial growth in total assets, marking a remarkable increase of $79 billion or 3.7%, ultimately reaching a staggering $2.23 trillion. This statistic unveils significant insights into the evolving landscape of the credit union industry.

What This Means for Your Credit Unions

This surge in total assets is indicative of the industry's resilience and adaptability in navigating through dynamic financial landscapes. For your credit union, this growth signifies enhanced financial strength and the ability to serve their members more effectively. The increased assets provide credit unions with greater lending capacity, enabling them to support the financial needs of their members and communities.

Moving Forward into This Year

Core Processor Solutions

In the pursuit of a prosperous 2024, your credit union can leverage advanced core banking solutions. Your core processor needs to be scalable to allow your credit union to grow. 

Digital Transformation

A digital transformation can significantly support a credit union in increasing its asset size by enhancing operational efficiency, improving member experience, and unlocking new revenue streams. Utilize automation, personalization, and digital transactions to make asset growth seamless. 

If your credit union's asset size did not grow over the past year, check out this blog post for growth ideas. 

 

Delinquency Rate and Net Charge-Offs in the Credit Union Landscape

The credit union industry faced challenges as the delinquency rates reached 72 basis points, showing an increase of 19 basis points from the previous year. Additionally, the net charge-off ratio rose to 56 basis points, marking a 25 basis points increase compared to the third quarter of 2022.

What This Means for Your Credit Union

This statistical shift in the delinquency rate and net charge-off ratio indicates potential challenges in loan repayment and an increased proportion of loans that may not be recovered. For your credit union, it's a call to closely monitor and manage the credit quality of your loan portfolio. Understanding the financial health of your members and implementing proactive strategies to address delinquencies becomes crucial to mitigate risks and maintain stability.

Strategies for Mitigating Risks This Year

Strengthening Credit Risk Management

In response to the rise in delinquency rates, focus on strengthening credit risk management practices. Utilize advanced credit scoring models, conduct regular reviews of loan portfolios, and implement early intervention strategies to identify and address potential delinquencies before they escalate.

Leveraging Technology for Data Analytics

Digital lending empowers credit unions to leverage extensive data sources, enhancing risk mitigation strategies. Through advanced analytics, digital platforms analyze borrower data, enabling more accurate risk assessments. This data-driven approach allows your credit union to make informed lending decisions, identify potential risks early on, and offer personalized financial solutions. In turn, this promotes responsible lending practices and strengthens the overall financial health of your credit union and its members.

Check out FLEX's digital lending eGuide here!

 

Dynamic Shifts in Loan to Share Ratio: Adapting for Financial Resilience

The credit union industry witnessed a significant shift in the loan to share ratio, standing at 84.8 percent, a notable increase from 78.4 percent in the same period of 2022. This key metric unveils changes in the balance between loans and member shares, shedding light on the evolving financial landscape.

What This Means for Your Credit Union

The substantial rise in the loan to share ratio suggests a higher proportion of funds being utilized for lending activities compared to member shares. For your credit union, this shift signifies increased lending and potentially higher revenue from interest-bearing loans. However, it also calls for prudent management to ensure the balance between lending and liquidity remains optimal.

Strategy for Managing the Shift in Loan to Share Ratio in 2024

Optimizing Lending Strategies

Given the increased loan to share ratio, focus on optimizing lending strategies. Utilize data analytics and member insights to identify profitable lending and cross-selling opportunities while maintaining a diversified loan portfolio. This approach ensures your credit union maximizes the benefits of increased lending activity.

 

Unprecedented Growth: Adding 4.5 Million Members to Credit Union Family

In a remarkable feat of expansion, federally insured credit unions welcomed an impressive 4.5 million new members over the year. As of the third quarter of 2023, credit union membership in these institutions reached a staggering 138.8 million. This surge in membership is not merely a statistic; it's a testament to the trust and preference members place in credit unions as their financial partners.

What This Means for Your Credit Union

The substantial increase in membership signals a growing recognition of the value and benefits your credit union provides. As part of this expanding community, your credit union has a unique opportunity to deepen relationships with existing members and foster connections with new ones. It's a chance to enhance member engagement and offer a wider range of financial products and services.

Strategies for Embracing Membership Growth in 2024

Member-Centric Approach

With a growing membership base, prioritize a member-centric approach. Tailor your services to meet the diverse needs of your members, offering personalized solutions and experiences. Leverage technology, such as cash back programs, early pay, and change saver accounts, to serve your members in the best way possible. 

Digital Onboarding and Services

With an increased number of members, streamline onboarding processes through digital solutions. Digital onboarding and eSignatures make it easier for new members to join and access your credit union's services. Emphasize the convenience and security of digital platforms to attract and retain tech-savvy members. 

Interested in digital onboarding? Click here to download your free eGuide here!

 

Driving Financial Momentum: An Increase in Total Loans Outstanding

Total loans outstanding experienced a substantial increase of $132 billion or 9.1 percent over the year, reaching an impressive $1.59 trillion by the third quarter of 2023. This dynamic shift in lending patterns unveils a growing demand for credit union loans and underscores the crucial role credit unions play in meeting the financial needs of their members.

What This Means for Your Credit Union

This growth in total loans outstanding signifies an opportunity for your credit union to contribute significantly to member financial well-being while driving its own growth. As members seek diverse financial solutions, your credit union can strategically position itself to meet these evolving needs, fostering a stronger connection with members and enhancing your lending portfolio.

Strategies for Harnessing Loan Growth in 2024

Diversification of Loan Products

With the substantial increase in total loans outstanding, consider diversifying your credit union's loan products to protect yourself. After evaluating your credit union and its members' needs, consider HELOCs and auto loans. You can also do participative, indirect, and direct lending. 

Loan Modification and TDR Tracking

Loan modification and TDR tracking can benefit your credit union by fostering member retention and financial stability. Adapting loan terms helps members facing challenges, reducing default risks. Effective tracking ensures compliance, transparent financial reporting, and informed decision-making, strengthening your credit union's reputation and overall portfolio health.

 

Looking Forward to 2024 & Accomplishing Credit Union Goals

The industry will continue to change over time. Taking on the new year will require your credit union to keep innovating and staying on the forefront of cutting-edge technology.

At FLEX, we understand how important technology is for your credit union for this coming year. We have been crafting and evolving our core for decades to provide the best, flexible, scalable technology to help your credit union grow. Click the button below to find out what FLEX can do for you. 

FLEX Core Integrations eBook

 

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