Real estate prices in the eight Eastern Montana counties with the Bakken Wells behind the oil boom have increased 30% in two years. In November, the state's Revenue Department said home prices across Montana, except in Bozeman and Kalispell, have rebounded to their 2008 pre-crash level.

With all these positive signs, Montana credit unions should be flourishing. But the state's ROAA averaged 68 basis points as of Sept. 30, 2012, compared to the national average of 86 basis points. That's not exactly a boom, but no bust, either.

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“The eastern part of our state is in the middle of an oil boom which means, that many (credit unions') longtime members are cash rich and not borrowing much,” said Tracie Kenyon, president/CEO of the Montana Credit Union Network.

Kenyon said some other factors contributing to lower-than-average profitability include the fact that in general, Montana lags behind the rest of the country, so the recession has hit later there than in other areas. In some areas, that meant high delinquencies, and members are still cautious about borrowing.

“Many of our individual credit unions are experiencing some moderate loan growth and some are simply holding steady,” she said.

The $103 million Billings FCU pumped out a booming 1.39% ROAA as of Dec. 31, 2012, and President/CEO Tom Boos says he knows exactly why his credit union is performing so well.

“We keep a laser-like focus on loan growth,” he said. “We're good at approving loans for credit impaired members that most other financial institutions turn down; hence, we generate a higher loan yields than most of our peers. We also generate more non-interest income than our peers.”

Delinquencies are low at 0.61% as of year-end, and Boos said his loan quality success is the result of aggressive underwriting and counseling for high-risk borrowers.

“We make sure our members understand we are putting our faith in them,” Boos said. “We explain that we expect their payments to be made on time, and if they're unable to make their scheduled payment, we expect them to contact us to share their circumstances. Lastly, we promise these members we will collect on the loans aggressively if they fail to live up to their commitments, and we execute on that promise.”

This Montana credit union ended 2012 with an annualized loan growth of 10.7%, mostly because Billings FCU developed a niche seven-year mortgage product called a Mortgage Accelerator Loan. This is an in-house product targeted at members with relatively low mortgage balances, good credit and low loan to values who haven't refinanced because of high closing costs. The credit unions charges a $600 origination fee and is currently offering a 2.49% APR on the product.

“We've found a good niche, and members are excited about taking advantage of the offer, “ Boos said.

About 350 miles away, things are looking a little different.

Missoula FCU has assets of $379 million and a three-county community field of membership in Western Montana. It is also a college town, the home of the University of Montana, but no oil fields.

Missoula FCU's ROAA is improving, climbing from -0.08% a year ago to 0.54% as of Dec. 31, and Senior Vice President of Marketing Joni S. Walker remains hopeful despite a shrinking loan portfolio.

“We are seeing ever-increasing deposits despite lowering our rates, and our loans continue to decline,” she said. “Our investment portfolio is now larger than our loan balances. We subscribe to the 'total return' philosophy on our investments, whereby we balance our portfolio and measure the actual cash returned rather than chasing yield.

“This has contributed to our interest income and offset a little of the loss in loan interest income. Plus, a lower corporate stabilization assessment expense helped move our ROAA higher.”

The Missoula credit union is generating more fee income and working to reduce its non-interest expenses where feasible, she said. Attrition has reduced full-time staffing and management has found ways to re-deploy staff internally to better match their skill sets and the needs of the organization.

“We have had to add staff in the collections, audit, compliance, risk management and finance areas to keep up with ever-changing regulation and examiner requirements — all but one of these moves have been internal staff moved to different areas,” Walker said. “We are growing members and assets. Our challenge is to grow loans.”

It's quite a challenge. As of Dec. 31, the credit union's 12-month loan growth had shrunk by 21.69%.

“We have a significant MBL portfolio and we ride the ups and downs of commercial lending to some degree,” Walker said. “We have lost at least one large commercial loan because of regulatory restrictions on MBL loan to value. Our member wanted to expand his business but we weren't able to take on the additional loan and we had to watch that $7 million walk across the street to a bank that could do the whole deal for the member.”

Walker said that despite high delinquency numbers, the credit union charged off the known major losses in their commercial loan portfolio and has seen consumer delinquencies stabilize.

“We are nowhere near the record low delinquencies of the good ol' days,” she said. “Our September delinquent loans to assets was actually 10.18% and our net charge-offs to average loans was .59%, both higher than we would prefer, but the trend is slightly positive.”

The credit union improved on its delinquency numbers, reducing the number to 5.46% as of year-end, according to its financial performance report posted on the NCUA's website.

In recent years, Missoula has seen several larger businesses leave the area, taking jobs with them, which has resulted in some lean times — particularly as the logging industry has also slowed. However, this college town is starting to see some jobs come back in the manufacturing sector. Construction is slowly coming back, but not nearly as quickly as it dried up.

“We are optimistic about the coming year, having forecast some growth in auto lending,” Walker said. “We believe there is some pent-up demand in our market and we intend to realize that growth. Few people in our FOM rely on public transportation as their main mode of transport. Because of this, most people must have a reliable vehicle and many have waited to purchase new vehicles longer than usual.”

Missoula FCU has also jumped back on the mortgage bandwagon. Mortgages (both refis and purchases) are a big target area for the credit union in the coming year.

“We just introduced a new 10-year, no-fee mortgage that we believe will fill a need in our market for those who have avoided refinancing to lower rates because of fees,” Walker said. “Home sales are starting to move again, as more first-time homebuyers take advantage of low rates.”