The Focus On series looks at a different industry each month offering first-person insight from local executives into some of the challenges each Utah industry faces. In this installment, Connect looks at the local banking and credit union industry.

Seeing the Big Picture Behind the Credit Crunch
By Scott Anderson
President and CEO, Zions Bank

To understand the current credit crunch, it’s important to look at the big picture. In the entire housing market, 94 percent of homeowners with mortgages are paying on time. That’s good news.

In the subprime market, which constitutes about 14 percent of the total housing market, 85 percent are paying their loans on time. As many adjustable rate mortgages (ARMs) reset in the next several months, delinquencies may increase, causing this number to slip. However, recent sharp declines in short-term interest rates suggest that ARM resets may be less “painful” than previously feared.

The majority of subprime loans are performing, and the majority of these borrowers are repaying. The data show that a subprime loan is not inherently “bad” — it’s just less than Grade-A.

Where do all the subprime foreclosures fit in this picture? For the most part, they are the result of higher risk loans made by unregulated participants in the mortgage market, such as mortgage brokers and investors who purchased the loans on the secondary market.

Zions Bank has not been active in subprime or other nontraditional types of residential mortgage loans, and has little or no direct exposure to those markets. Because we rely on traditional consumer and business deposits rather than wholesale funds for the majority of our funding needs, the current credit market problems have not adversely impacted funding of Zions Bank.

Most highly regulated commercial banks and savings institutions have simply refused to make the sorts of risky loans that are at the heart of the issue. Like Zions Bank, these institutions adhere to sound underwriting standards and the fundamentals of safety and soundness. We are ready and willing to be part of the solution. We’ll keep the mortgage dollars flowing to creditworthy borrowers and, in so doing, help prevent today’s market turmoil from becoming a major crisis.

Technology Gives Us an Edge — From Peace of Mind to Service Delivery
By Gordon R. Dames
President and CEO, Mountain America Credit Union

Technology is increasingly changing the way we do business, making it safer and easier. Consumers are more comfortable using technology. At Mountain America Credit Union, the 35th largest credit union in the United States, technology-driven efficiency ranges from making banking safer to allowing Mountain America to better measure how we are serving our members.

Security is a big issue when dealing with money and the account information. E-Statements and automatic bill payment are no-brainers in adding safety and peace of mind to banking. The consumer can avoid the possibility of identity theft using traditional mailed statements and checks to pay the bills. The consumer’s exposure is greatly decreased when receiving monthly statements online. And it’s catching on. Our online statement use has increased by 57 percent in just the last three years. Electronic statements cost us $1.25 less than paper statements and with no member exposure to mail theft. Bill payment alleviates the need to write out checks, use multiple stamps and expose your check with account information and a sample of your signature to theft from your mailbox.

We’ve also found a great technology resource that we call “Employee Voice.” It’s an electronic resource that lets us survey employee engagement. We survey segments of our employees every other month. This system is easy for employees to use, easy for us to track and create reports that help us manage more efficiently.

In fact, it works so well that we are now developing a “Member Voice” edition that will be a Web-based member/customer comment tool to let us know how we are doing in delivering service to our members. It will make data gathering and our measurement process simpler, more consistent and easier for the member to use.

These are only a few ways that technology helps us address data security, overall efficiency, measurement and management of service that make us stand apart in the marketplace.

Managing Credit Lines for Small Businesses
By Dick Chappell
President and CEO, Family First Federal Credit Union

As a small business owner, your most difficult task will be finding the right type of money to efficiently operate your business. When seeking a loan for your small business, it is important to remember that the cookie cutter lending approach may not always apply. Often small business owners complain that loan officers lack the understanding of how their business works and what type of loan should apply to their situation.

Credit Unions and other lending institutions cite risk factors as their main reason for turning down small business loans for a startup. These risks are very real as small business startups are susceptible to for a high failure rate.

To minimize these risks, it is important to do your homework and understand what type of loan or line of credit will best fit your needs. Small business owners along with his or her loan officer need to clearly understand the appropriate use of the loan proceeds. They need to agree upon how the loan is going to be monitored. Together you and your officer can then determine what type of loan will best fit your needs.

Sometimes all you may need is a line of credit. However, it is important to understand that lines of credit are meant for short-term needs and never should be used for long-term financing.

If it is determined that a line of credit is the best option, small business owners should consider the following:

>> Relationship — work closely with your loan officer to make sure that he/she understands your issues.

 >> Interest rates are important; however, that is not only cost of money involved. Shop around; often credit unions will have lower rates than banks.

 >> Understand the fees involved. Is there an annual fee or other origination fees associated with the loan? Is it a one-time fee or an ongoing fee? Be sure and read the fine print.

One good way to control your credit can be to use a corporate credit card. I often recommend to small business owners that they set spending limits on individual cards to control expenditures. For example, if you run a construction company and your foreman has a company credit card, set his limit at $500 for gas each month. Controlling expenses by setting limits ensures that your employees will stay mindful of price and budgets.