Loan Growth Continues, With Western States Leading the Pack
September 19, 2017
This article was written by Dean Knudtson, Senior Portfolio Consultant for our Strategic Link Partner, CSCU.
Loan growth is a continuing macro trend, not a cyclical story. The trend has been fairly consistent since recovering from the great recession, albeit with some subtle underlying changes. For example, there has been a pivot from used auto to new auto loans as the fastest consumer loan growth area. Still, to have nearly 11 percent loan growth nationwide is phenomenal, but the West, with its concentration of technology, agriculture, population, and educated population, beat that average by an additional three percentage points.
While mortgages remain the biggest category in terms of dollars (41 percent) with another 30-40 percent in new and used auto loans, the biggest part of the remainder in the loan category is revolving credit card balances; good news – this remains one of the more profitable components of a credit union’s portfolio.
One potential fear is that the lending momentum is greater than the growth of share balances, with the potential for a liquidity crunch, but to date, that has not been the case. Loans remain less than 4 percent of the balance sheet with assets coming from the deposit side of the balance sheet.
Credit unions, having been successful at growing loan portfolio, need to turn their attention to good old-fashioned share growth. Fortunately, the states covered by the Northwest Credit Union Association (NWCUA) have been doing just that. Idaho, Washington, and Oregon are three of the only six states that achieved share growth over 8 percent. Reasons for this include the many corporate headquarters in these states; Microsoft, Cray Computers, AT&T, T-Mobile, Starbucks, Nike, Adidas, Columbia Sportwear, Albertsons, and Micron are just some of the marquee names buoying the growth in share deposits.
The bottom line for credit unions is now that loans are growing at 10 to 11 percent, now that there is tremendous positive momentum going on the lending side, it’s time to turn to the market department in each credit union to re-ignite programs to grow share balance. To support the growing need for capital due to lending, growth in deposits also needs to be encouraged, through rewards or incentives. And while certificates are hard to get in people’s hands post-recession, certificate balances are still well below 2008, which implies that there is additional capacity in this product which has always been viewed as safe and liquid, but held back by lack of attractive interest rates.
NWCUA’s Strategic Link provides the Association’s member credit unions with exclusive, high-quality, competitively-priced products and discounted services. Contact Jason Smith, Vice President, Strategic Resources, at 208.286.6794 or email@example.com to find out how Strategic Link can help your credit union save money while meeting its goals in 2017 and beyond.
Posted in Strategic Link.