You can never be too rich or too thin…or have too much loan growth, right? To suggest otherwise would be akin to looking a gift horse in the mouth, wouldn't it?
But it turns out, there actually is such a thing as too much of a good thing, and while credit unions are right to celebrate yet another quarter of solid loan growth, there are some hidden pitfalls credit unions need to consider.
For every loan, there is paperwork—lots of it. Does your credit union have the systems in place to handle that paperwork efficiently?
For every loan, there is underwriting—does your credit union have systems in place to ensure quick turnaround on decisions?
And are the decisions based on solid underwriting? Because for every loan, there is also the risk of default and delinquency.
When Credit Union Journal started working on the lending special report for this edition, in which we asked whether there might be a dark side to loan growth, we got some strange looks. Who would ever suggest there could possibly be anything bad about loan growth?
But for every new loan, there is another opportunity for something to go wrong.
Of course, lending is the bread and butter of credit unions, and credit unions have proven time and again that they are very, very good at it, even when other financial institutions have been forced to back away from it, as happened during the most recent financial crisis just a few years ago.
But here at Credit Union Journal, we're not just going to trumpet the numbers and report the latest set of quarterly results. We're asking the questions that drive real analysis of what those numbers mean.
And we're not afraid to ask what might at first appear to be a silly question. Because, to twist yet another old saying—every silver lining also must have a cloud.
In our special report, read more about some of the problems credit unions can experience during times of strong loan growth—and how to manage those issues.
Editor in Chief Lisa Freeman can be reached at
