BY NICK BROWN
I know, it is cliché to say but WOW… Where did 2018 go? It is hard to believe that December is upon us and we stand, anticipating the start of the new year. What will the new year hold? For me, I am really looking forward to it.
With 2019 on the horizon, we have an opportunity to look back and review this year, the good, the bad and the surprising. As I have been working with my credit union clients, one thing that has really stood out to me was the lopsided growth that many credit unions have experienced.
Over the past 7 or so years, loan growth has been exceptional in the credit union world. Credit unions have really owned the auto market, they are making strides to capturing more of their member’s mortgage business, and sights are set on becoming their members first choice for credit cards as well. Lending is good, but deposit growth has been quite average. The average growth in deposits has finally caught up us, leaving many credit unions who are scrambling to find money to lend…
This lopsided growth is certainly a factor of the economy and the focus of consumers in the market. The economy is strong, and when it’s strong people spend. They spend their money and they spend a lot of other people’s money. That plus a vast majority of the population aging into what I see as “Mature Consumerism”. Which by interpretation means, Millennials are buying homes, cars, recreational equipment, and putting a large balance on their credit cards.
Okay, you may be wondering what does this has to do with sales? Well, to put it simply everything. Since The Great Recession, credit unions have been quite focused on lending. At first, because they were grasping for any loan volume at all to keep themselves profitable, then secondly to take advantage of the flood of opportunity that followed.
The result of this focus on lending is a well-developed lending channel which for many credit unions is flooding them with more opportunity than they can take advantage of. Not because of the capacity of the channel itself but the dollars on the back end to lend out. This has caused credit unions to tighten lending guidelines, sell their loan shares, and pull out of lucrative lending channels such as indirect lending to slow the follow, so to speak. While necessary for some, this reactionary approach may have unintended consequences.
One credit union executive I spoke with praised it this way: “We have a lending crisis. We simply have to stop lending so much.” While I empathized with her current plight, respectfully I disagreed. Credit unions have a deposit crisis. What’s great though is that this crisis can also be conquered.