Credit unions in California and Nevada are posting records in memberships, loans and deposits, but an economist has raised concerns growth rates may slow in 2018.

According to a report released by the California and Nevada Credit Union Leagues, there were 318 credit unions headquartered in California as of Sept. 30, 2017. At the close of the third quarter, these CUs were serving more than 11.4 million members, a 7 percent year-over-year increase, representing 734,000 new members. The total of 11.4 million is a record high in credit union membership for the Golden State, and up 50 percent from 7.6 million in 2002.

Credit unions in California had $123 billion loaned out within the local community, a 14 percent year-over-year increase, the report said. That figure is up 81 percent from a post-recession low of $68 billion, recorded in 2011, and represents a record outstanding dollar amount. The total includes first mortgages, second mortgages, HELOCs, business loans, new and used auto loans, credit cards, and sometimes other consumer loans. The last historical peak was $81 billion in 2008.

As for the Silver State, 16 credit unions were headquartered in Nevada as of Sept. 30, 2017, serving 354,000 members – a 5 percent year-over-year increase, or 18,100 new members. The NCUL said this was “an outstanding number, hitting a level not seen since 2010.” Nevada CU membership has risen 10 percent from the most recent low in 2013 of 322,000. The last historical peak was 387,000 in 2008.

Credit unions in Nevada had $2.7 billion loaned out within the local community, a 13 percent year-over-year increase. That figure represented a 44 percent increase from a post-recession low of $1.9 billion recorded in 2013, and hit an outstanding dollar amount not seen since 2009. The historical peak was $3.1 billion in 2008.

How long will the good times last?

“The trends will last as long as the economy continues to perform well,” Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues, said in a statement. “The big regional areas of Southern California and the Bay Area will perform the best, and larger credit unions will outperform smaller credit unions. 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.”

Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues
Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues

According to Johnston, there are a few areas of concern – starting with a tight labor market. He said employers are having increasing difficulty finding workers, which will be a limiting factor for the economy “to some degree.”

Another limiting factor is first mortgages. Johnston said in California, the supply of homes in most markets is 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. Also, the refinance market will continue shrinking if interest rates keep rising.

Overall, said Johnston, “There is nothing that suggests an economic slowdown is imminent – making the overall picture for credit unions bright. In fact, the business-skewed tax bill should accelerate growth through at least the third quarter of this year.”

Johnston expressed a concern the economy may start “running out of steam” by late 2018. Consumer spending might be “good,” but he predicted the growth rate could still disappoint. If Wall Street reacts negatively to these growth numbers, businesses could somewhat pull back on spending and hiring plans, he asserted.

“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,” Johnston said. “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.”