Credit union, banks report loan volumes on the rise
There are signs that the Michigan economy is rebounding — slowly, but surely. The following is the sixth in a series of stories that point to a more positive outlook in areas that affect Tecumseh and the surrounding communities.
One of clearest indicators of a rebounding economy is an up-tick in the number of loans that consumers are making with their local banks. Another positive marker that goes hand-in-hand regarding personal finances is the amount of money people are socking away in investments, with advice from financial consultants.
Banks and investment advisors in the Tecumseh area have perceived the same encouraging signals that local real estate agencies, manufacturers, and retailers have been beginning to see — a glimmer of better times on the horizon.
Some prognosticators keep an eye on the stock market for predictions, but a check with TLC Community Credit Union on the local loan action is a more accurate barometer for “Main Street” Tecumseh than any Wall Street stock-ticker.
TLC President Randy Smith reports that the economic outlook is brightening. “Loan volume for us is up,” he said. “Over the past two years we’ve seen a 30-percent increase.” He said what he refers to as the “Bear Gauge,” which like the New York Stock Exchange indicates a falling market, is in decline. “For YTD [Year To Date], our Bear Gauge is down 50 percent, and that’s a good thing,” he said. “Foreclosures are slowing and delinquent car loans are down, too. Things are not where they used to be, but we’re headed in that direction. People are still being cautious.”
The U.S. Federal Reserve interest rate has a strong influence on all credit unions and banks, and the “Fed,” as it is often referred to, has been keeping its interest rate historically low in an effort to increase the attractiveness of loans. The current Federal Reserve interest rate is hovering between zero and .25 percent, where it has been since Dec. 17, 2008. That rate is great for entities and people securing loans, but not so great for those investing in instruments such as certificates of deposit or treasury bonds.
As Smith put it, “The Fed has a definite bearing on credit unions and banks. A low interest rate has its advantages, but it hurts depositors and those on fixed incomes.”
First Federal Bank of Tecumseh branch manager Wendy Pizana deferred to her corporate parent company’s chief executive officer, chairman, and president, William Small, for comments on how the local economy is affecting the bank. Small, who directs the bank’s many branches through First Defiance Financial Corp in Defiance, Ohio, was pleased to report that the Michigan branches in both Tecumseh and Adrian were experiencing “good loan activity, which signals an improvement in consumer confidence.”
“The majority of the action has been in the refinancing of homes,” Small said, “but purchases are picking up, too. Home prices have been climbing for the past year-and-a-half, and now we’re seeing a shortage of homes for sale.”
Small agrees with local real estate agents that many homeowners who would like to sell are keeping their property off the market for the time being until the value rises. Frustrated buyers will be seeing more opportunities for purchasing homes in the near future, they agree.
First Federal Bank has been seeing a surge in car loans with customers finally feeling comfortable enough with the economy to consider an investment in a new vehicle. “As people went through the recession, they put off new car purchases,” said Small. “I was talking to an economist just the other day, and he said that the average age of the cars on the road now is 11-and-a-half years. Car purchases are beginning to thaw out now, and that helps not only the manufacturers but also the whole region. We’re expecting car loans to be strong for the foreseeable future.”
People are doing more than buying, however. They are looking to the future in other ways, such as investments for the short- or long-haul. A local certified financial planner who has witnessed the trend, Bryan Masten, of Masten Wealth Management with branches in Tecumseh and Ann Arbor, said, “Nationally, I’m seeing a tremendous amount of optimism, and I’m seeing this reflected locally with more interest in stocks and other good investment opportunities.”
Masten said that his advice to investors has not wavered, whether the economy is in the depths of a recession or the midst of a boom. “People must stay balanced in their approach to investment and wealth management,” he said. “People need an advisor to help them plan an approach and tailor their investments to their plan. Investors need to keep their emotions out of the stock market. There’s a tendency out there to invest in the market at the wrong time and get out at the wrong time. The key is to have a planned portfolio and stick to it.”
Masten said that there are different reasons for investing and different timeframes for drawing on the benefits of one’s investments. Older investors may be planning for retirement, but young investors may be planning for paying off student loans or purchasing their first house. “Each case is different, and each strategy has to reflect the investor’s goals and timeframe. It’s essential to develop a portfolio that builds toward the individual’s goal.”
Contrary to what some investors might think, Masten said, age should not be the primary consideration for investment goals. Tolerance for risk is an even more important component of investment strategy than age, and of course, people with a larger amount of disposable income are able to take larger risks.
In short, the bottom line from the people who know about bottom lines is that now is a good time for investing, whether it be in one’s individual retirement account, a home, or the stock market. In any case, it is wise to enlist the services of a professional before parting with hard-earned cash.