Six strategies for loan portfolio growth during a recession

Credit unions tend to lend more than banks during times of crisis, as they are driven by their mission of continuing to support their communities. For example, during the pandemic, we saw credit unions do everything possible to continue lending, from modifying rates on individual loans to adjusting the underwriting process, while many banks pulled back.

Since lending is a major source of income for financial institutions, we expect it to remain a priority in 2023. In fact, earlier this year, a Jack Henry survey reported that 67% of credit union and community bank CEOs are focused on growing loans in the upcoming months. However, choppy economic waters usually scare people away from opening a new business or buying a home, especially in the current high interest rate environment. As a result, maintaining or increasing loan portfolio growth in the next year could become challenging. Here are some ways to continue lending in a recession.

Step Out of the Comfort Zone

Credit unions should examine the evolving needs of their communities and work on niche loans to tap into new opportunities. For example, does the town need funding for a new transportation hub, or are local staffing companies in need of help due to a nationwide limited supply of talent? And what services are going to increase in demand during a down economy (e.g., debt consolidation or emergency expenses)? Credit unions know their communities better than anyone else, and although departing from the comfort zone of real estate lending might sound daunting, niche lending will better support members and build resilience in the face of a downturn.

 

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