Utah-based Mountain America Credit Union is looking down the credit spectrum to diversify its portfolio with more nonprime and subprime loans amid increased competition in the Utah market, Jade Beckman, vice president of consumer loans, told Auto Finance News.
The credit union’s portfolio is roughly 80% prime and super-prime loans, which is “too top heavy,” Beckman said. “We can make some advances to be slightly more balanced.”
The problem is two-fold, he said. One, if loans are too concentrated in the prime tier then Mountain America is not adequately serving all of its members. Two, competition among Utah credit unions is fierce right now, and the race to lower rates has made those prime loans less profitable.
“The pressure to keep rates super low, that then puts pressure on your yield and if we’re too top heavy it’s a double whammy as yield goes,” he said. “I can’t get a very conducive rate to yield because of market pressures, and if I’m only getting that super low rate from the 80% of the portfolio then I’ll have [low yields].”
The company also feels comfortable making the change now because Utah’s economy is doing particularly well in 2017. Unemployment sits at 3.2% — well below the national average of 4.9% as of June, according to The Salt Lake Tribune. The state also ranked No. 1 in Wallet Hub’s state economic health research.
Those economic trends have kept the credit union’s delinquencies low despite rising delinquency rates and losses nationwide.
“Unemployment is super low, so I think we have some economic tailwinds behind us also contributing to [our low] delinquency rate,” Beckman said. “If anything, when our delinquencies are as low as they are it makes us question if we’re taking sufficient risk.”
