Bank and credit union executives here say they anticipate healthy growth in loans and deposits in the coming year, although perhaps slightly softer gains than they’ve seen this year as historically low interest rates that have lingered for years since the Great Recession finally begin to rise.

The Federal Reserve was scheduled to meet earlier this week, and was expected to raise the federal funds rate—the interest rate that banks charge other banks on overnight loans—from about zero percent currently to as high as 0.25 percent. The federal funds rate is an important benchmark in financial markets and affects many other loan rates.

Although interest rates on commercial and consumer loans would remain low by historical standards, the bank and credit union executives interviewed say they expect the rate hike still could have a slight dampening effect on loan and credit demand.

Larry Sorensen, chief financial officer at Spokane-based Washington Trust Bank, which has led banks in deposits in Spokane County for six straight years, says he expects that institution to see loan and deposit growth of around 5 percent and 6 percent, respectively, in 2016.

That would be roughly on par with the growth it’s experienced this year, he says, but he adds the Fed rate hike could lower the loan portfolio growth rate slightly.

Washington Trust’s loan growth rate has been “much higher than GDP (gross domestic product) growth in the last six years, running at around 9 percent for a couple of years before slowing a bit in 2014 and this year,” Sorensen says. 

“We’ve been on a pretty good trajectory,” and that should continue next year, even factoring in the Fed rate hike effect, he says.

Kurt Walsdorf, Bank of America Merrill Lynch’s market president for Spokane and state president for Idaho and who last fall also was appointed to head up Bank of America business banking in much of the western U.S., also was optimistic about the coming year.

“Here in Spokane, I see a community poised for growth, and our business reflects that,” he says. “The bank has invested in commercial banking and wealth management groups to capture the opportunity for growth we’re seeing in the market.”

For some national context, he pointed to the bank’s 2016 CFO Outlook released late last month, in which surveyed chief financial officers rated the U.S. economy at its highest level since the 2008 recession. Seventy percent of responding CFOs said an interest rate hike would have no impact on their investment strategies.

“While speculation about short-term interest rates makes some grumble, it’s an indicator that the economy is improving,” Walsdorf says.

Dan Hansen, spokesman for Spokane Teachers Credit Union, the Spokane area’s largest credit union, says, “We had a really good year for loan growth, and we’re expecting 2016 to be almost as good but not quite.”

Contributing factors to the projected slight slowdown, he says, are increased market competition, interest rate uncertainty, and regulatory-related issues.

“Consumer confidence has shown slow, steady growth. We’ve been in such uncharted ground for so long as far as interest rates that I don’t think anyone can forecast how consumers will respond (to an interest rate hike),” Hansen says.

STCU had membership growth of about 10 percent this year, helping it surpass 145,000 members in all, he says, adding, “We expect to see similar growth in 2016.”

The credit union will open the Qualchan Branch, its 19th branch overall, in the Latah Creek Plaza in southwest Spokane in the first half of next year, Hansen says.

Jeff Adams, president and CEO of Horizon Credit Union, which is the Spokane area’s third-largest credit union as measured by local deposits and has absorbed two smaller credit unions over about the last year and a half, says, “We expect to see continued expansion in most of our markets.”

Adams predicted the credit union will see organic loan growth of 7 percent to 8 percent next year, and slightly lower deposit growth.

“This has been our strongest year we’ve ever experienced in terms of growth. The coming year will be shaking out the model a little bit, seeking continued opportunity in consumer lending and residential home loan growth,” he says.

He says an interest rate hike could have some impact on loan demand, but adds that “it still should be a very favorable climate” for consumer borrowing.

—Kim Crompton