Credit Unions

Moderated by Scott Simpson, president of the Utah Credit Union Association

July 9, 2013


John Lund, America First; Scott Simpson, Utah Credit Union Association; Shane London, Deseret First; Todd Adamson, Cyprus; Thomas Gourdin, Firefighters; Bret VanAusdal, Utah Community; Bryan Norton, Holland & Hart; Sherilyn Olsen, Holland & Hart; Kerry Wahlen, Goldenwest; James Hofeling, Jordan Federal; Randy Gailey, Horizon; Brad Barber, Members First; Ken Payne, Freedom; Darin Moody, Utah First; Sterling Nielsen, Mountain America

Utah’s credit unions are trying to stay ahead of the curve when it comes to new technology and new regulations. Industry executives discuss the role credit unions play for members, small businesses and the financial industry as a whole—and the challenges that keep them nimble.

We have been through five or six of the most difficult years in retail finance in our career spans. How is the credit union space looking today?

NIELSEN: Last year was a good year. It was very challenging for a while. But we’ve come out stronger. We’re coming out as a group showing that we took care of the members and we’re being rewarded for that right now with additional growth and membership.

ADAMSON: I think the bad times are behind all of us pretty much as
an industry.

HOFELING: I still see a lot of concerns from membership. And I don’t think any of us are seeing the loan growth or even an increase in membership like we’ve had in years past. We have a lot of people out there that are waiting for Uncle Sam or someone to tell them it’s the end so they’ll feel better and start doing things.

LUND: The delinquency ratio on the consumer side is at record lows. That’s a sign that people are borrowing less, but they’re also being very careful about their affairs and with debt.

Lending is a challenging area right now. Not a lot of demand, other than maybe automobiles. And the real estate market seems to be improving a bit with home starts.

PAYNE: I’ll throw in a contrary point, which maybe is related to economies of scale; I think we’re the smallest credit union. A couple years ago we ran our forecast for the next few years and ran two scenarios: If interest rates start going up, how do things look? And if interest rates stay really low, how do they look? Three years ago, if interest rates stayed low, about year three that net interest margin starts to get really squished. But, we thought, surely rates won’t stay that low that long. And so now we’re seeing that the interest component is really under a lot of pressure and we’re having to get creative on where to go with that.

GOURDIN: One of the things that’s happened for all of us over the last few years is that we have become more efficient. We’ve learned to cut expenses where we could and better utilize the funds we have available.

MOODY: I think, Jim, you’re right that consumers are slow to feel comfortable about where things are. But at the same time, I get the sense that there is an increase in confidence and that folks are just finally realizing that this is the way it’s going to be. And because of that, they’re getting comfortable. They’re being more conservative than they were a few years ago, but we get the sense that consumers are starting to move forward regardless of the environment because it’s the new norm.

HOFELING: It’s the new reality. Life’s never going to be like it was before. It sucks right now. OK. So that’s where we are. We’re not going to die, so let’s go on and live.

ADAMSON: But as home values have improved, we’ve started to see our members’ confidence improve. They’re willing—far more than in the last couple of years—to go get loans. Over the last year, really, we’ve seen a lot more confidence in our members. And I think this year we’re going to see substantially more because their home values have increased. No, it’s not going to be back the way it used to be where I could use my home as the piggy bank. It’s going to take awhile for that to happen. But as a society we have short memories. And at some point home values will have increased enough that people can then start to pull equity out and go buy whatever car they want, or at least get in debt knowing that they can fall back on their homes as a safety net.

HOFELING: If you look back, Utah has one advantage, and that’s that we’re slow. We’re always behind the economy. When California crunched, we were going, “Things seem pretty good.” And then we get the crunch later. We’ve always been slow going into a recession. We’ve always been slow going out. Looking back, it always gives us an advantage because we watch the West Coast and say, “Oh, so that’s where they’re going. Well, then X number of months or years later, we’re going to be in the same boat.”

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