Spokane Teachers Credit Union is restructuring its lending departments, in part to pursue what it sees as an underserved market in the commercial sector and also to prepare for an anticipated shift in residential lending demand.

The big Liberty Lake-based credit union is splitting off into a separate division its commercial and industrial lending operations that don't involve real estate. The move, says STCU Vice President of Lending Scott Adkins, is aimed at helping the credit union grow those operations.

"We have between 3,000 and 4,000 (members) that have small businesses," Adkins says. "Within our own membership, the opportunities are huge."

On the residential side, Adkins says, STCU expects refinancing demand to wane and for new mortgage activity to pick up.

"We recognize that rates will eventually go up, and we want to have a strong position as that shift in the market occurs," he says.

The changes are being implemented as STCU rebounds from a down year in lending activity. Through the first six months of 2012, the nonprofit reported 41 commercial loans with a total value of $14 million, up from 25 loans worth $11 million in the year-earlier period. If STCU continues that pace, it will have its highest full-year commercial loan volume since 2008, when it had $32 million in such loans.

In residential lending, STCU has approved 594 loans with a total volume of $84 million through the first six months of this year, including both new mortgages and refinances. That volume is double that generated during the same period last year, when the credit union approved 308 mortgage loans worth $42 million. At the current pace, STCU's mortgage lending activity for all of 2012 would outpace slightly the 2010 clip, when it handled $165 million in mortgage loans. Still, it would fall well short of 2009's $259 million in mortgage loan activity.

On the commercial side, Adkins says, the C&I operations will be known as the small business division. The credit union's separate commercial lending division will handle all of the commercial real estate-related activity, he says.

In all, Adkins says, the commercial lending operations have 12 employees, and he expects that to increase to 17 people in the next 12 months.

STCU already has hired a couple of new directors from outside the organization and has moved some of its longtime managers into new leadership positions as part of the realignment, Adkins says.

Greg Swanson and Jeff Verble have been hired to work, respectively, as director of commercial lending and commercial lending manager. Swanson has more than 30 years of banking experience, serving most recently as a vice president at Sterling Bank. Verble started working in the banking industry 29 years ago and also has worked as a contractor at times in his career.

Heading up the new small business division is Terri Mills, a five-year employee of the credit union who has 25 years of experience at financial institutions and worked most recently as STCU's business services manager.

Adkins says the credit union entered the C&I market two years ago, and since then, it has built that book of business up to between $5 million and $7 million.

He adds, "Once we launch this initiative, we will quickly add to those numbers."

Adkins concedes that competition among lenders for C&I business has stiffened in recent years, especially with the softening of the commercial real estate market. He says, however, that businesses with large credit needs are attracting most of the attention, and STCU plans primarily to pursue businesses that need less than $250,000 in credit.

"The competition for those clients is not as stiff," he says.

Mortgage lending

In the residential lending department, Adkins says about four-fifths of its loans during the past three years have been refinancings. Looking ahead, he says, the credit union would like to balance its residential lending activity so that about half is new mortgages.

To strengthen its position, the credit union has moved real estate loan officer Jessie Chastain into the newly created position of home loan relationship officer. In that role, Adkins says, Chastain will work to build relationships with Realtors and home builders in an effort to "strengthen our brand."

Also, Adkins says, STCU is finalizing the process to be able to offer Federal Housing Administration and Veterans Affairs home loans. He says it expects to begin offering such loans within 60 days.

At the same time, the credit union is marketing new options for conventional home loan financing. For example, STCU has what it calls a 20/10 mortgage that it's promoting, which is a fixed-rate loan with 10 years of payments on a 20-year term, with the balance due in 10 years. Adkins says that product has proven to be popular with home owners and buyers who have some equity and want to pay off their home quicker than they would with a conventional 30-year mortgage.

Adkins says STCU had made more than $55 million worth of 20/10 loans in the past 18 months.

STCU's consumer lending operations are separate from its commercial and mortgage divisions, but Adkins says the credit union has made staffing changes in that area as well. It has promoted Patrick Garrity to a new position, called director of lending strategy. Garrity, who has been with STCU for 19 years and in the lending industry for 30 years, served previously as its director of consumer lending. David Flood, a 12-year employee of the credit union, has taken over that position.

In consumer lending, Adkins says the credit union is providing automotive loans at a number of new-car dealerships in the Inland Northwest, including those operated by Dave Smith Motors, Appleway Automotive Group, Larry H. Miller Corp., and Wendle Motors Inc.

The credit union, he says, is making similar arrangements with some home-improvement supply retailers to provide home-improvement loans.

STCU was founded in 1934 and has more than $1.6 billion in total assets. It has a total of nearly 500 employees and 15 branches in Eastern Washington and North Idaho, with a 16th branch currently under construction.