WASHINGTON–The gap between expenses and revenue is narrowing as revenue growth begins to catch up with operating expense growth, according to a new analysis by Callahan & Associates.
“Operating expenses have outpaced revenues since the start of the pandemic, but that is changing thanks to surging loan demand and tightening liquidity,” Callahan’s said. “The gap between revenue and expenses was as wide as six percentage points as recently as the first quarter of 2022; however, by Sept. 30, it had shrunk to just 1.2 points.”
Callahan & Associates further stated that fueled in part by a hot labor market, employee compensation accounted for slightly more than half —51.9% — of all operating expenses. The average annual growth rate for operating expenses was 8.15% through the first three quarters of 2022, the company said.
“Looking forward, growth in employee benefits and compensation expenses could slow along with other non-farm payrolls, which were down from one year ago,” Callahan & Associates said. “Interest income is also likely to rise as loan demand increases and cooperatives allocate more funds to lending versus to cash or investments.”
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