Credit unions should focus on new car loans

by. Dean Borland

These days my waking hours are divided relatively evenly between exploring financial products, facilitating strategic planning, and doing my best to help spoil a gaggle of granddaughters. For the past few years, two of the three have merged into emphasis on looking for opportunities to help credit unions make more loans.

To be honest, in terms of the average loans to assets ratio, the Cornerstone states (Arkansas, Oklahoma, and Texas) are almost exactly where they were ten years ago. But, that does not mean we have been treading water. Credit union assets in the region almost doubled over the past ten years, growing from just under $48 billion in September 2003 to nearly $95 billion in September 2013. Back in the third quarter of 2003 our loans to assets ratio was 61.55%. At the end of September 2013 the average loans to assets ratio for the region was 62.86%. So, total loans outstanding actually grew from $29 billion to almost $60 billion in ten years!

Armed with that little bit of trivia, one could say, “Wait! Loans are not the problem! The problem is we are getting nothing for investments!” You would be right. The average yield on investments for Cornerstone region credit unions in September 2003 was 2.41%. In September 2007, the average yield for Cornerstone region credit unions topped out at 5.01% (just before Recession was declared). In September 2013, the average investment yield was 1.01%. Yep, declining interest rates have taken a toll on income and we have felt it in our bottom line. (Let’s not even mention stabilization – this is a “G” rated publication…)

However, something else happened while we were gathering deposits, watching interest rates decline, and doing everything humanly possible to control operating expense. We lost the new car war.

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