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Credit unions capitalize on strengthening Idaho lending market


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According to Market Intelligence, April 2023

Credit unions capitalize on strengthening Idaho lending market

Pent-up demand and growing consumer confidence in a strengthening economy have led to strong loan growth for Idaho credit unions.

The state's 36 credit unions saw 13.5% year-over-year growth in outstanding loans and leases at the end of the third quarter of 2016, and a 2.3% uptick from the second quarter to the third, according to SNL Financial data. On a nationwide basis, credit unions saw 10.4% year-over-year loan growth.

Meridian, Idaho-based Capital Educators Federal Credit Union's chief lending officer, Ethan Morriss, said in an interview that members have confidence in the economy that has translated into them doing more buying, especially in terms of homes. Morriss said just four years ago the credit union was doing about $5 million a month in mortgage production and now does about double that. Morriss pointed to the Twin Falls area as being particularly strong.

He said Idaho was hit hard during the recession in terms of home values, which led to a lot of belt-tightening from consumers. "So, I think we're enjoying some of that pent-up demand now," he said.

Idaho Central Credit Union, the largest credit union in Idaho, saw 18.8% loan growth on a year-over-year basis at the end of the third quarter of 2016 and 2.1% from the second quarter to the third. Chief Lending Officer Edward Tierney said the state economy is in good shape with low unemployment. And at the same time, the credit union is growing its membership, and that goes hand-in-hand with increased lending.

Tierney pointed to the Treasure Valley area in the state's southwest corner as a region that has seen particularly robust lending. "It's just one of those areas where there's growth and we continue to get a strong market share," he said. Chubbuck, Idaho-based Idaho Central is able to do a lot of cross-selling in that market and has been successful with home equities, mortgages and auto loans. It has seen a lift in many product lines in that region during the past two years, he said.

Idaho Central COO Brenda Worrell said all three of the credit union's primary lending lines — auto, mortgage and business lending — have been growing. The credit union even sold a large chunk of participation loans on the auto side recently to get its net worth ratio in balance. Idaho Central sells about 80% of its mortgage loans and would simply cut back on those sales if production should slip, but the credit union believes it can sustain the level of its recent loan growth. "So, from a growth perspective, we think we'll be strong in all those areas next year," she said.

In terms of member business lending, Worrell said Idaho Central has been operating in that space for about eight years and has seen strong growth for the past four or five of those years.

Wells Fargo & Co. has 25 branches within a mile of an Idaho Central branch, making it a primary competitor. Worrell said Idaho Central has not specifically targeted disgruntled customers of Wells Fargo, but in the past few months it has seen a lot of new deposits coming on board from those customers on both the consumer and business sides. "It took people a few months to start reacting, but every month that volume is picking up," she said. And once those customers are on board through deposits, the credit union should be able to sell them loans, Worrell said.

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But Worrell said it is actually more the regional and community banks that provide loan competition. There are also some mortgage bankers in the Idaho markets that provide some competition for those loans. Regardless of the competition, Idaho Central believes it can compete with anyone with its service levels, she said.

For Capital Educators FCU, the new NCUA business lending rule should have little impact as the institution has a conservative mindset to lending in that line, Morriss said. The credit union's niche market in commercial is with small business loans. "We don't entertain multimillion-dollar deals," he said. Instead, the institution is able to gobble up smaller loans that large banks such as Wells Fargo do not want.

Capital Educators saw total year-over-year loan growth of 11.2% at the end of the third quarter. Morriss said the credit union is shooting to keep growth right around that mark in coming quarters and should have no trouble achieving that. "I have absolutely no doubt that we'll hit that goal," he said. "We could probably do much greater than that if we wanted to."

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Company mortgage origination data can be accessed in the Mortgage Analytics application on the SNL website; to access the tool, click here.

For a recorded webinar on how to use the Mortgage Analytics tool, click here.