As consumers and workers face economic uncertainty going into late 2023, deposit account products and savings interest rates remain front and center for households that are managing their financial livelihood — something evident within second-quarter credit union trends.
Deposits declined by $3.2 billion across locally headquartered credit unions in California and Nevada (combined) from June 2022 – June 2023 (scroll down for statewide deposit and loan trends). Simultaneously, households continued their healthy borrowing, providing steady lending and economic growth across both states.
These sturdy loan trends only masquerade the obvious: price inflation on goods and services for working households in a job environment where wage-and-salary gains haven’t completely caught up. It means credit union members in nearly all socio-economic tiers across California and Nevada will need to take a serious look at their financial situation going into 2024, all while economists and financial experts pin their hopes on a continued disinflationary environment.
“We need to see continued disinflation as a result of the Federal Reserve’s policies, as it informs the economy that higher interest rates are working,” said Robert Eyler, contract economist for the California and Nevada Credit Union Leagues. “This is likely to come at a cost, with job losses and a cooling labor market, which policymakers have been waiting for since interest rate hikes began. Lower job levels should eventually cool inflation faster — although recent events in the Middle East may exacerbate fuel costs in the short term.”
‘At Some Point, It All Runs Out’
Steve Rick, chief economist for TruStage, noted in his latest U.S. credit union trends report that for the first time since 1948, the U.S. money supply is declining.
“In fact, it’s down more than $1 trillion since its high-water mark of $21.9 trillion set in April 2022,” Rick said. “This 5-percent reduction in money supply and deposits is having a major liquidity impact on banks and credit unions.”
Elliot Eisenberg, chief economist of Graphs and Laughs, said during an Origence credit union industry economic forecast webinar this week that although today’s approximate U.S. consumer savings rate is 4 percent, it’s not commensurate with healthy job growth and a very low unemployment rate.
“Even with all this excess COVID-era savings, we still can’t save any money today,” Eisenberg said. He noted how national “excess” household pandemic savings was recently revised higher and won’t run out until sometime in 2024.
“Real disposable income (adjusted for inflation) should be much higher in a time like this,” Eisenberg added. “Unemployment is low, which is keeping our economy going — but how much longer can we go before higher interest rates hit us? At some point, it all runs out. Higher wages never fully came back to feed higher inflation. Households cannot leverage their credit cards higher forever.”
For perspective on where the industry stands going into late 2023, below are deposit, loan, and membership trends for 263 locally headquartered credit unions across 36 counties in California, as well as 14 locally headquartered credit unions in eight counties across Nevada.
California’s 2Q 2023 Credit Union Trend
All California state-level credit union industry trends are year-over-year as of June 30, 2023:
California’s Member Trends
- Members: 13.5 million (3 percent increase); 445,000 new members; hit a record (prior historical peak was 8.6 million in 2009).
California’s Total Loans: $193 billion (14 percent increase)
- Hit a record (prior historical peak was $76 billion in 2008); 80 percent loan-to-deposit ratio (loaned out).
- First-mortgages: 10 percent increase; hit a record of $89 billion (prior historical peak was $16.8 billion in 2008).
- HELOCs/home equity loans (combined category): 37 percent increase; hit a record of $14.7 billion (prior historical peak was $11.4 billion in 2019).
- New auto loans: 21 percent increase; hit a record of $22.8 billion (prior historical peak was $21 billion in 2019).
- Used auto loans: 9 percent increase; hit a record of $28.2 billion (prior historical peak was $10.3 billion in 2008).
- Credit card lending: 16 percent increase; hit a record of $6.9 billion (prior historical peak was $6 billion in 2019).
- Personal loans: 21 percent increase; hit a record of $7.4 billion (prior historical peak was $2.1 billion in 2008).
- Business loans: 16 percent increase; hit a record of $13.5 billion (includes landlord real estate loans). Category has fluctuated greatly between 2008 – 2023 from $4.9 billion – $13.5 billion.
California’s Total Deposits: $241 billion (-1 percent decrease)
- Declined from a record $244 billion (category has always risen from 2008 – 2022); $293 billion in assets.
- Checking accounts (share drafts): -2 percent decrease; declined to $49.7 billion (record high was $50.6 billion in 2022).
- Savings accounts (regular shares): -11 percent decrease; declined to $78.1 billion (record high was $87.8 billion in 2022).
- Money market accounts: -22 percent decrease; declined to $50.3 billion (record high was $64.1 billion in 2022).
- Certificates of deposit: 63 percent increase; hit a record of $50.2 billion (prior historical peak was $36.7 billion in 2020).
- IRA/Keogh accounts: -1 percent decrease; declined to $8.6 billion (record high was $9.2 billion in 2010).
California’s Operations: $2.5 billion spent (quarterly)
- Quarterly monies spent on employee payroll, benefits, property, office equipment, occupancy, and vendor contracts (estimated annual figure is $10 billion).
- About 33,290 individuals were employed (4 percent increase).
Nevada’s 2Q 2023 Credit Union Trends
All Nevada state-level credit union industry data trends are year-over-year as of June 30, 2023:
Nevada’s Member Trends
- Members: 398,000 (3 percent increase); 12,700 new members; hit a record (prior historical peak was 382,000 in 2008).
Nevada’s Total Loans: $4.5 billion (18 percent increase)
- Hit a record (prior historical peak was $3 billion in 2008); 65 percent loan-to-deposit ratio (loaned out).
- First-mortgages: 8 percent increase; hit a record of $1.2 billion (prior historical peak was $800 million in 2008).
- HELOCs/home equity loans (combined category): 34 percent increase; reached $284 million (record high was $417 million in 2006).
- New auto loans: 52 percent increase; hit a record of $642 million (prior historical peak was $608 billion in 2008).
- Used auto loans: 21 percent increase; hit a record of $1.2 billion (prior historical peak was $483 million in 2008).
- Credit card lending: 9 percent increase; reached $79 million (record high was $85 million in 2018).
- Personal loans: -4 percent decrease; declined to $123 million (record high was $251 million in 2020).
- Business loans: 8 percent increase; hit a record of $600 million (includes landlord real estate loans). Category has fluctuated greatly between 2008 – 2023 from $139 million – $600 million.
Nevada’s Total Deposits: $6.9 billion (-2 percent decrease)
- Declined from a record $7.1 billion (category has always risen from 2008 – 2023); $7.7 billion in assets).
- Checking accounts (share drafts): 0 percent change; remained at a record $1.7 billion (category has always risen from 2008 – 2023).
- Savings accounts (regular shares): -12 percent decrease; declined to $3 billion (record high was $3.5 billion in 2022).
- Money market accounts: -14 percent decrease; declined to $1.3 billion (record high was $1.4 billion in 2022).
- Certificates of deposit: 63 percent increase; reached $770 million (record high was $977 million in 2008).
- IRA/Keogh accounts: -3 percent decrease; declined to $214 million (record high was $352 million in 2009).
Nevada’s Operations: $100 million spent (quarterly)
- Quarterly monies spent on employee payroll, benefits, property, office equipment, occupancy, and vendor contracts (estimated annual figure is $400 million).
- About 1,275 individuals were employed (2 percent increase).
