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Panel provides economic updates, outlook; NAFCU's Long reviews survey results
During NAFCU’s State of the Industry event Thursday, NAFCU Chief Economist and Vice President of Research Curt Long shared the results of the pre-conference survey ahead of a panel from the industry-leading economists of the Credit Union Economic Group for a full overview of the economic situation.
Survey respondents in all four regions expect delinquencies and forbearances to be above average a year from now. In addition, respondents in all asset classes represented also expect delinquencies and forbearances to grow on net.
In addition, the survey tackled credit unions’ experiences with teleworking before and during the pandemic. While the largest percent of credit unions to report regular teleworking for non-branch staff pre-pandemic came from credit unions with larger assets, all asset sizes report the experience from working from home to be going better than expected.
This suggests, Long noted, that there are some benefits to be had with teleworking when you are able to “enter the crisis, hit the ground running and remain productive in spite of the obstacles.”
The full results of the survey will be shared in a report to conference attendees and NAFCU member credit unions as soon as it is available.
Following the review of the survey results, Long was joined by Fred Eisel of Vizo Financial Corporate Credit Union and Scott Knapp of CUNA Mutual Group.
Long kicked off the panel to discuss major domestic concerns that are present when entering a domestic crisis, including widespread, long lasting job loss, plummeting household consumption, mass bankruptcies and inadequate fiscal support.
“A lot of the job loss totals, which are eyepopping, would still be categorized as temporary job losses,” Long said when discussing the concern of long lasting job loss. However, he noted, the number of permanent job losses – people who are not expected to be called back to their previous positions – is the number to watch.
In addition, Long discussed the economic impact stimulus payments, sent in April, noting that the fiscal support provided by the government through the CARES Act has been generous and helped bump the economy.
“Nearly half of the stimulus checks were spent in the market when they went out,” said Long.
Following Long’s presentation, Eisel explained the unprecedented influx of cash on balance sheets at credit unions and how credit unions may experience income challenges in the coming months due to lower fee income, less loan demand, and margins remaining compressed.
He encouraged credit unions to consider reviewing the prices they offer – including their share rates – and suggested making use of tiered rates based on credit score.
“In 2008, while loan yields fell, credit unions also had room to decrease deposit rates,” Eisel noted. “This time around, many cannot lower deposit rates any further, which will lead to additional margin compression.”
In addition to these challenges, Eisel discussed how credit unions may struggle to meet members’ varying needs. Some members, he noted, may be unemployed at this time while other members may be looking at the market as an opportunity.
Knapp wrapped up the session using crisis psychology to pinpoint how the market reacted amid the pandemic and how it often reacts in the face of panic.
Knapp broke down important characteristics that define a crisis, including:
- presenting challenges that are very difficult to solve;
- something extremely rare or unprecedented has happened; and
- if it seems long-term in nature or is likely to cause permanent change.
In addition, Knapp touched on the idea that “universal negativity skews the probability of market-moving surprises toward the positive” and reminded credit unions that depression-like numbers don’t signify the start of a depression in this case.
Sessions from the event, including Long, Eisel and Knapp’s presentation, will be available to watch on-demand online and on the event app Monday.