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Deposits continue to rise at valley credit unions, albeit slower than earlier in the pandemic

SteveM-Headshot

Steve Matejka works as executive vice president and chief operating officer at Bakersfield-based Valley Strong Credit Union.

Deposits have soared at Central Valley credit unions during the pandemic and they're still way up — a sign of economic strength that could bode well locally for the holiday season and beyond.

The California Credit Union League reported savings and other money held in accounts at three dozen valley financial institutions hit a record high of $14.1 billion in September. That represents an unprecedented 45 percent increase over two years.

One outcome has been a jump in new loans as credit unions work to turn the influx of cash into investments that may drive future earnings. The league said that since the start of this year, its Central Valley members have experienced overall quarter-by-quarter growth — including significant increases in the third quarter — across all lending categories except first mortgages.

The numbers point to strength on a few levels, including workers' and their employers' financial condition.

"As workers entered the COVID-19 crisis point and came out the other side, their increased deposits have built a financial cushion as local economies and businesses navigate heavy churn, dislocation, repair and renewed hiring needs with the job market, as well as employee decisions amid the so-called 'Great Resignation,'" the credit union trade group said in a news release, referring at the end of that statement to workers who left their jobs or remained outside the labor force.

Valley Strong Credit Union is among those experiencing record high deposits, though Executive Vice President and COO Steve Matejka noted the Bakersfield-based institution's rate of new deposits slowed significantly in the third quarter. A representative of the trade group mentioned the same trend but provided no data for measuring it.

There's been no recent decline in deposits at Valley Strong, which Matejka said would normally be expected around the holiday season. He added the credit union is increasing its lending to compensate for the higher deposits, and said the local economy looks strong even as its membership remains cautious about elevated levels of inflation.

As for what's behind the surge in deposits, Matejka attributed it to government stimulus money not being spent "because our members have been very conservative and are preparing if the economy should worsen."

There may be several factors behind the higher deposits, Cal State Bakersfield economist Richard Gearhart explained in an email.

People who traditionally don't use accounts would have had to open one in order to receive stimulus money, and Gearhart said that by itself may have boosted deposits in the aggregate.

Or, some of the cash being deposited in valley credit union accounts may be student loan money, he wrote, pointing to national figures showing credit card debt is down generally but student loan money held by consumers is actually up.

Gearhart also said mortgage debt has increased across the country and that some borrowers may have put in for more money than they really needed for home purchases.

He also noted consumers were able to sock away more money than usual because of deferred student loan, mortgage and rent payments, not to mention reduced child care costs as more parents kept their kids out of school because of the pandemic.

Another possibility Gearhart brought up is that people have been saving up for the holidays or family trips when the economy fully reopens.

"I think once we do reopen," he wrote, "a lot of these (account) balances are going to be drawn down as repayments and child care restart."