Following the release of the NCUA’s Q2 2020 Credit Union Performance Data, the findings were not surprising: slowed membership growth, a halt in originations and an overall drop in net income. What I did find interesting from the report data, however, was the disproportionate impact on credit unions within each asset category. Credit unions under $1 Billion in assets saw membership decline by almost 6%, and a net worth decrease of 3.6%. While it is not unusual for this asset range to experience slowed membership growth, it is especially difficult during these times due to stalled loan originations and other revenue growth opportunities.

Because this current economic crisis is hitting the American people in drastically different ways depending on occupation type and region, the credit union’s field of membership is also a strong indicator of the impact the credit union will experience overall. Many credit unions under $1 Billion in assets tend to have a narrower reach and less diversified membership base which can result in larger percentage of members struggling financially based on unemployment statistics within their segment base. For some time, this will directly stall growth and put bottom lines in severe jeopardy.

In response, credit unions in this asset category are on the hunt for supplemental data elements that can help enhance their current methodologies and analytics used to revamp growth strategies, assess risk, and redesign debt management processes and practices. Specifically, we are seeing a growing demand for predictive modeling and scores that can provide valuable insights into members who are most impacted by this economic crisis and therefore, least likely to repay debt owed. By mapping the scores to each member in the credit union’s loan portfolio, this information can be leveraged as a scientific approach to make more informed and effective business decisions, support interaction with members, and forecast financials more accurately. More specifically, credit unions can use this information to size potential losses and set loss reserves, proactively engage with high risk members, implement smarter collection practices, and rationalize recommendation for Loan Modification or Deferrals.

Credit unions under $1 Billion in assets who take advantage of modeling focused on recession impact and likelihood to recover are taking action to lessen the damaging effects to overall performance due to the pandemic.