Northwest Credit Unions Drive Strong Loan Growth in Fourth Quarter

Three credit union executives share their lending strategies and allowances for possible market changes in 2019.

4/2/2019

The U.S. economy grew at a strong pace in 2018, and Northwest credit unions followed suit, posting positive fourth quarter growth in all categories. According to National Credit Union Administration data, Northwest credit unions saw positive loan growth in 2018, with Idaho, Oregon, and Washington credit unions all ranking among the top 12 states for growth among credit unions nationwide.

But the trend for continued credit union growth and strong loan portfolios may soon change. With industry forecasts predicting overall credit union performance resetting to a more sustainable rate of growth in the coming months, credit unions could face new lending challenges. Three Northwest credit union executives provide insight, share their 2018 successes, and how they’re positioning their lending strategy for 2019.

Phyllis Adkins, TruGrocer Federal Credit Union President and CEO.

At Idaho’s TruGrocer Federal Credit Union, loans increased just over 12 percent in 2018. Used vehicle lending saw the greatest growth, which President and CEO Phyllis Adkins attributes to pent up demand within the membership and competitive lending rates. The credit union’s main strategy focused on modernizing their lending policies and guidelines, and seeing members for more than their “numbers” when making credit decisions.

“We focused on taking the time and effort to find out the story behind any past credit problems a member presented and used that information to determine if the member would pay their loan back or not,” said Adkins. “Our delinquency has actually decreased since taking this approach.”

Though Adkins expects loan growth to decline in 2019, the credit union does not have plans to change its strategy and doesn’t expect to lose 2018 gains.

At Mid Oregon Credit Union, more than 55 percent of its 2018 loan growth came from indirect sources. The Oregon-based credit union reported a 31 percent increase in loan growth for 2018, totaling $37.5 million.

According to Mid Oregon President and CEO Bill Anderson, the categories that saw the greatest increase were indirect auto and recreational vehicle lending, and mortgages. He credited their success to the strong economy, Central Oregon’s growth, and the credit union’s sustained relationships with the auto and RV dealers. Additional strategies included providing dealer incentives, maintaining regular contact with mortgage brokers, and the use of non-conforming mortgage products.

Mid Oregon Credit Union President and CEO Bill Anderson.

When asked about Mid Oregon’s future lending strategy that would best sustain this growth or minimize losses, Anderson pointed to slight modifications to the 2018 strategy.

“We are intentionally slowing growth a bit,” said Anderson. “It provides less pressure on liquidity. Attracting additional deposits to cover high loan growth is causing us to outgrow our equity to assets position.”

The credit union will also offer competitive dealer incentives, rates just above market, non-conforming mortgage loan options, and grow mortgage product availability in-house.

Continuing a focus on strong loan growth but slowing it slightly for additional liquidity in 2019 is also a strategy for Washington’s Verity Credit Union. The credit union saw loan growth of just over 15 percent in 2018, with the strongest portion in indirect auto loans at nearly 65 percent followed by fixed second mortgages.

Verity Chief Financial Officer Brad Tanberg credited this growth to the addition of Verity’s new Chief Lending Officer, Tina Narron, in 2017. “Tina has brought extensive lending knowledge to the credit union and was able to quickly transform our lending programs,” said Tanberg.

To position itself for future lending success, the credit union completed a full profitability review of all of its lending products and has diligently analyzed its indirect auto program.

Verity Credit Union Chief Financial Officer Brad Tanberg.

“We are evaluating all of our loan products to help find opportunities where we can add more value for our members,” said Tanberg. “It will be key for us going forward to understand how to properly price each product and make informed decisions on loan volumes based on strong analysis.”

For credit unions considering an indirect lending program to supplement their future loan growth, Tanberg recommends proceeding with a complete understanding of costs and possible charge-off scenarios.

“Without disciplined analysis and good controls, these programs can get out of hand quickly,” said Tanberg. “Credit unions should have a thorough understanding of costs associated with indirect lending to insure they know the risks and are pricing loans appropriately.” 

For more information on each state’s 2018 fourth quarter performance, see NCUA’s Quarterly posting positive fourth quarter growth.