Credit union finance leaders are grappling with how to manage the balance sheet amid economic turmoil brought on by tariffs, job cuts, inflation, and more — all of which has some economic forecasters predicting a recession.
Consumers are rattled, to say the least.
The White House has taken steps in the past four months to shrink the federal government by reducing the number of government employees. Many large private sector firms are also shrinking their workforce, with layoff announcements totaling nearly half a million in the first three months of the year. At the same time, the administration has announced a range of tariffs that are likely to raise prices for consumers on everything from groceries to cars, electronics, and more. Meanwhile, the Federal Reserve’s future moves remain unclear, consumer sentiment is down, and economic anxiety is rising as a result of widespread layoffs and economic uncertainty.
Given all of this, the response of credit union finance leaders runs the gamut from seeing how things develop to scrambling to adjust their balance sheets.
“My gut says we’re in for a rocky road,” says LeAnne McGuinness, CFO at The Summit Federal Credit Union ($1.4B, Rochester, NY). “Not like 2008-2010; I don’t think we have a fundamental underlying mess in our balance sheet. I think the combination of inflation and a possible recession at the same time could hurt the economy to the point where I’m not sure what we could do to get out of that easily.”
Save Or Spend?
Despite some general uneasiness, deposits are a bright spot. Some credit unions have increased their deposit outlook — The Summit raised its projection from 7% growth to 8% — and others have pulled back from deposit promotions. Uncertainty around the job market has also resulted in a flight to safety, and some CFOs say members are bringing in a larger-than-usual influx of deposits. The bigger question is how long those funds will stick around.
“Locally the demand for deposits is pretty high, especially on the community bank side,” says Seth Rudd, CFO at Leaders Credit Union ($1.1B, Jackson, TN). “We’d love to take this opportunity to pick up some market share and pick up deposits, but in our market deposit prices remain pretty high.”
For Rudd, the deciding factor is about the credit union’s mission.
“You’re running your balance sheet, but you’re also serving your membership,” he says. “They still need that car loan. They still need lending. For you to pull out because of economic uncertainty, you might want to think about what your mission truly is.”
So far, that hasn’t been an issue at Leaders. A high-yield savings account introduced a few years ago continues to attract new business, and many members are moving maturing CDs into that account. The credit union also is hitting its goals for new checking accounts, although Rudd says those balances are increasing at a slower pace than before.
“It does seem like people are keeping less in their checking account,” he says. “That begs the question: Are they moving it into high-yield savings, which we did see, or are they spending it? I think a lot of it is moving into the high-yield savings.”
That thesis is backed up by the fact that Leaders hasn’t seen a shift in spending patterns related to where members shop or dine.
The Lending Landscape
I think there are more than a couple of credit unions looking at what a bank charter might look like if forced to go that way.
Meanwhile, McGuinness at The Summit has already revamped her 2025 budget forecast, which she put together last fall when the economic mindset was more optimistic.
“I’m not feeling like loan growth is going to meet my original projections,” she says. “I redid the budget in the first quarter to look at a couple of scenarios — we did stress testing around what happens at various low-growth levels and loan loss levels. You can’t get blood from a stone.”
McGuinness and many other finance leaders say auto lending presented a small but unexpected boom during the first quarter, but the general consensus is that’s the result of consumers trying to buy before tariffs impact auto prices and isn’t likely to continue.
Some CFOs suggested rising car prices could also be a blessing in disguise if the economy goes south.
“We’re watching the price of [new and used] autos,” says Toni Davisson, CFO at Spero Financial Federal Credit Union ($702.1M, Greenville, SC). “If we have to do a repossession and sell at auction, what kind of values are we going to get?”
Although some credit unions have tightened their underwriting slightly, most haven’t taken that step yet. Some are even expanding their lending to reach consumers with weaker credit. Regardless, shops also are shifting pricing, particularly around deals with higher loan-to-value ratios, to compensate for changes in the market.
“We’re trying to get ahead if auto values go up — if tariffs stick and get passed on to the consumer,” says Dan LeClerc, CFO at Ent Credit Union ($9.8B, Colorado Springs, CO). “We’re still funding, but if it’s a higher LTV, we’re charging a higher rate to make up for it.”
Elsewhere in the loan portfolio, the approach to housing largely isn’t changing, in part because the situation hasn’t changed. There’s still a shortage of available, affordable housing, and high prices and interest rates are locking many buyers out — particularly younger ones. But the overall housing picture remains top of mind for many.
“We’re watching local unemployment and real estate market trends,” says Simeon Tabakov, CFO at MyPoint Credit Union ($650.9M, San Diego, CA). “That can translate into consumer confidence or decreased spending, depending on which way it goes. If people feel confident, they spend money. The opposite is true, too.”
Whichever way it goes, credit unions are preparing. Although first quarter loan loss reserves overall held relatively steady compared to the previous quarter, they’re up 6.4% compared to the first quarter of 2024.
Tax Status And Regulatory Guidance
The constantly shifting economic news has made it difficult for many finance leaders to plan. EFCU Financial ($1.4B, Baton Rouge, LA) has modeled a variety of scenarios — from recessions to terrorist attacks and everything in between — but has yet to change its current plans.
“I was always taught to invest in good times and bad, but we’re here ultimately to serve the members,” says Tom Kuslikis, a former CFO and current CEO at EFCU Financial ($1.4B, Baton Rouge, LA). “We’re not going to scale back that investment. It’s critical for our long-term success.”
Delinquency and charge-off rates continue to be key indicators of trouble, but unemployment trends are also top of mind. Many of these credit union leaders say layoffs have not yet impacted their fields of membership, but local reductions in force could have a domino effect as layoffs would likely increase delinquencies, slow lending, hurt liquidity, and more.
Ent has raised its loss reserves, but LeClerc says that’s partly a function of CECL, which didn’t take effect until two years ago.
“We didn’t have CECL pre-2023, so it’s interesting to go back and do that testing,” he says. “We’re still learning, and we feel we have a much better grasp on it, but we realize how much economic forecasting plays a role in our reserves compared to what it used to.”
Regulation — and its impact on the balance sheet — remains a top-level concern. Nearly every credit union leader interviewed for this story cited worries about the future of the credit union tax status and NCUA board.
“I would rather have a little more direction and certainty from a regulatory standpoint than be whipsawed between two different administrations,” Kuslikis says.
Ongoing uncertainty on that front could alter the entire industry landscape — especially if some of the balance sheet advantages that come with being a credit union are chipped away.
“I think there are more than a couple of credit unions looking at what a bank charter might look like if forced to go that way,” says Mike Sacher, a credit union consultant and former CFO.
Here We Go Again
If you randomly selected a date from 2013 to 2025, you would probably find something to be worried about from an economic perspective. This is unusual because political forces are causing a lot of the concern, but that’s part of being in banking. It’s a natural part of trying to manage the balance sheet.
If there’s a silver lining, it’s that most finance leaders in the industry have been through this kind of thing before.
Although there hasn’t been a long-running recession in more than 15 years, an economic downturn and two-month recession brought on by the pandemic, widespread work stoppages due to shelter-in-place directives, rampant inflation, political turmoil, and more have occurred in the past five years.
“If you randomly selected a date from 2013 to 2025, you would probably find something to be worried about from an economic perspective,” says Rudd at Leaders. “This is unusual because political forces are causing a lot of the concern, but that’s part of being in banking. It’s a natural part of trying to manage the balance sheet.”
Industry leaders are confident they can handle whatever comes their way. The key, many say, is to remain focused on long-term goals and on the credit union mission of serving the underserved.
“We got through the Great Recession and the world recovered,” Sacher says. “There were lots of areas where you needed to defend yourself and strengthen internal and financial controls. We look back at that crisis and say, ‘Wow, the opportunities were unbelievable, will we ever have those opportunities again?’ I suspect we’ll look back in a couple of years and have those same kind of conclusions for what’s happening today.”
Equip Your Leaders With Data-Driven Insights To Navigate Uncertainty. Join a Callahan advisor for a complimentary 1:1 session to analyze your performance reports. We’ll benchmark your credit union against two to three peer groups of your choice and provide a detailed report of our findings at the end of the session to help your team make informed strategic decisions. Request your free session today.