By Lisa Hochgraf
Today at CUES' Execu/Summit, Economist Bill Conerly, Ph.D., gave attendees (such as Center for Credit Union Board Excellence member Phillip Martinez, director of $796 million Texas Trust Credit Union, Mansfield, Texas, in the photo at right) an overview of what he sees in the economy today and next year. Then, he asked attendees to work together to identify areas of the forecast that might affect their credit unions and how. Here's what they said:
• Likely rise in interest rates. Interest rates have such a bearing on the mix of products and services we offer and how we plan for them over the next few years. Right now the spread is very small. If interest rates go up and the spread increases, it’s good news, unless you’ve locked in too many mortgages at the low rate.
• Local economy just as important as the national and global economies. For example, attendees from Canada and Texas reported being positively impacted by the current growth in oil. "Every credit union needs to know the economy of its area," Conerly summarized.
• Changes in savings rates could affect liquidity. Liquidity is needed to fund the loans. If people save differently in the future--like in a 401(k) rather than a certificate of deposit--that affects a credit union's liquidity and abilty to make loans.
• A potential increase in the remodel business is an opportunity to make new loans. Credit unions need to have programs in place to foster this. Home equity lines of credit would be an example.
• Risk-based pricing is a real opportunity. Getting away from high-grade paper and going after more profitable, lower-quality loans means more risk, but also more potential income.
• Small-business lending could be driven by larger numbers of multi-family housing starts. Business profits are projected to go up. However, CUs also need to look at the small-business failure rate and make sure they have technical expertise to get into this arena.
• Age of members is a real consideration. Credit unions must understand what the expectations of the groups are based on age and economic experiences. Most of CUs' membership is old and aging. While CUs can't afford to miss out on that transfer of wealth, they also will benefit long term from becoming lenders for younger people.
How would leaders at your credit union answer these similar questions?
1. Identify areas of the economic forecasts you read that might affect your credit union.
2. Describe the impact.
3. If you have a different view of the future from the predictions you've gathered, how would that impact your credit union?
Lisa Hochgraf is a CUES senior editor.
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