by
Catalyst Corporate | Oct 06, 2023
This year’s Economic & Payments Forum came with a few announcements and crucial insights into the challenges credit unions may face due to the current economic environment.
Among the speakers were Greg Michlig, Chief Engagement Officer at CUNA, and Steve
Rick, TruStage Chief Economist. Michlig spoke to the proposed CUNA/NAFCU merger into a sole entity named America’s Credit Unions, while Rick gave a captivating and timely economic forecast.
CUNA/NAFCU merger
Announced earlier in the year, Greg Michlig gave an update on the CUNA/NAFCU merger activities. Members of both organizations have until November 1 to vote on the merger.
CUNA’s CEO Jim Nussle will head the combined organization if the vote passes, but the leadership team has not been defined yet, Michlig said. However, NAFCU and CUNA have worked together to create 11 different “workstreams” that are necessary to create the most effective organization possible.
Michlig praised the collaborative model as being particularly effective. “What do they have and what do we have, and what are the best things that we can bring together to make America’s Credit Unions the best possible association for credit unions?” Leaders from both organizations were selected to lead these workstreams and combine what they believe will create the most effective plan forward.
Steve Rick’s economic forecast
Steve Rick, Chief Economist at TruStage, gave a particularly well-received presentation because of the frank outlook on the economy and how it directly impacts credit unions.
“There is stress in the market, indicative by the large bank failures earlier this year, but the stress is also present in the credit union space.”
“About one out of every 23 credit unions will be merged by the end of the year,” Rick said.
This stress is due to the fastest rise in interest rates in 40 years. “We know why they’re doing this, it’s to control inflation,” but that doesn’t make it any less difficult for credit unions.
“For the first time in 32 years of doing this speech, we’re predicting 0% deposit growth for credit unions this year. Next year, we’re projecting 3%, where the average over time is 6-7%.” These next two years are going to be very weak years because of the interest rate increase.
Following his presentation, Rick gave six summarizing statements for credit unions:
- Slow economic growth for the next year
- Falling inflation rate during the next two years
- Unemployment rate rising to natural state in 2024
- Short-term interest rates above long-term interest rates in 2024
- Credit union loan growth slowing in 2024
- Rising net interest margins in 2024
Are you prepared for the short run?
Shrinking net worth ratios and lower earnings by credit unions make it important to tighten up your balance sheet. Catalyst can help with solutions from ALM management to a subordinated debt issuance to rebalancing your net worth ratio.
If you attended the Forum this year, take advantage of the recorded sessions online to support your strategic planning meetings.