ONTARIO, Calif.—Many credit unions in California and Nevada are entering 2018 in much the same way as they did 2017, by hitting new records in membership, loans and deposits, according to the California and Nevada Credit Union Leagues.
The year ahead should hold strong growth for many, the league is projecting, although one factor could help keep a lid on growth in the two states.
Even those CUs not setting new records are making “major inroads” in returning to where they stood as the Great Recession hit CUs hard in two of the so-called Sand States a decade ago, the leagues added.
“The trends will last as long as the economy continues to perform well,” said Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues. “The big regional areas of Southern California and the Bay Area will perform the best, and larger credit unions will outperform smaller credit unions. The percentage growth rates in loans should slow a bit, but only because the base number is bigger. Also, Nevada credit unions should enjoy another year of good growth. The state still has an ample pool of available workers, and reasonable home prices make it attractive for relocation."
The one area of concern is the tight labor market. Employers are having increasing difficulty finding workers, which will be a limiting factor for the economy “to some degree,” Johnston said.
Another limiting factor, according to Johnston, is in first-mortgages. The supply of homes in most markets are reaching historic lows and could tighten further as homeowners stay put due to the upcoming decrease in property tax deduction stemming from the new tax law, according to Johnston. In addition, he noted the refinance market will continue shrinking if interest rates keep rising.
Overall, however, “There is nothing that suggests an economic slowdown is imminent—making the overall picture for credit unions bright,” he said. “In fact, the business-skewed tax bill should accelerate growth through at least the third quarter of this year.”
Johnston does have concerns the economy may start running out of steam by late 2018. Consumer spending might be “good,” but the growth rate could still disappoint, the leagues said in a statement, adding, “If Wall Street reacts negatively to these growth numbers, businesses could somewhat pull back on spending and hiring plans.”
“As long as inflation remains contained, I think the Federal Reserve might surprise us this year by raising short-term interest rates less than forecasted,” he added. “But that isn’t necessarily good news for longer-term rates. The supply-demand equation for bonds will shift dramatically next year as central banks reduce or eliminate their securities-buying programs. At the same time, the federal government’s deficit will mean a sharp rise in the issuance of bonds. I’m not looking for a bond market meltdown but a return to normal.”
California’s 318 credit unions serve 11.4 million members, while Nevada’s 16 CUs serve 354,000.
More information can be found in the California Credit Union League’s 3rd Quarter Credit Union Trends Report.