Before David A. Kwant joined Mountain America Credit Union nearly 25 years ago, he wasUtah's supervisor of credit unions. So how does that experiencehelp him as chief financial officer at the $3 billion West Jordan,Utah-based credit union?

“It helps me get into trouble,” he said with a chuckle. “I arguetoo much with them.” But he admitted that it is helpful to knowwhat examiners are looking for on the financial side and makingsure that the appropriate records and documentation isavailable.

And does his experience as a regulator give him an insight intoan examiner's way of thinking?

“Well, it used to. But today, I don't know what they're thinkinganymore,” he said, noting a change in the way they now approachexams.

“They come out with a letter that says best practice says youhave to do this. So they are expecting you to do that. And if youdon't they escalate it on their comments the next time they comearound,” Kwant said. He added that this cookie-cutter approach maybe dangerous and likens it to farming.

“If everyone is growing the same crop of corn, everyone is goingto get the same disease. If everyone is using the same bestpractice, which may have a vulnerability that no one has reallyseen,  everyone could have the same problem becauseeveryone was forced to do something the same way.”

Utah didn't get hit as hard as other sand states by the GreatRecession. “Our unemployment rate has always been anywhere from 75to 100 basis points below the  national unemploymentrate,” he said. “We did take a hit on real estate values, so wetook our lumps there.” And “the income- generation side of theequation didn't miss a beat. Profits were down because loan losseswere up, not because income was down.”

Among large Utah-based credit unions, the 354,000-memberMountain America beat its peers last year in efficiency, loans toshares ratio, and return on assets, according to data from Callahan& Associates.

“Efficiency ratio is one to keep your eye on,” said Kwant. “It'snot the only one to watch, but it is a measure of what it's costingyou to earn a dollar. The return on assets is one of those ratiosthat you look at. It reflects how loaned out you are, and I thinkthat has been one of the successes of Mountain America.”

“We've always had minimum investments and maximum loans. And asa result that income side didn't really dip much during therecession,” he added.

Mountain America's net income rose consistently in 2011. And atyear end it posted an 82% gain in net income over the previousyear, from $16.3 million in 2010 to $29.6 million in2011.  Kwant attributed that mostly to a decline in thecredit union's  loan-loss provision. The provisiondeclined to $39.3 million at year-end 2011 from $56.5 million atyear-end 2010. That was possible by facing reality on bad mortgageloans, said Kwant. Reality and some creative thinking.

“We have a very good collections department, and they collectedwhat they could. And we had  the intellectual honestyamong senior management that we needed to write this stuff off.There is no need thinking we are going to get something when weknow we are not going to get it. We aggressively charged off thosethings we deemed uncollectible, and we salvaged what we could wherethere was something to salvage,” he said.

Marshall Paepke, Mountain America's executive vice president andchief administration officer, said Kwant showed great leadership inguiding the credit union in its approach to the disposition ofREOs.  

“In mid to late 2008, after a merger, we began to see anincrease in our REO portfolio.  At the time, many expertswere predicting a quick turnaround and recovery of theeconomy.  Dave's philosophy was the credit union's firstloss was the least amount of loss.  In other words, don'thold on to REO properties thinking the market is going to returnbefore you begin to market them for sale,” Paepke said.

Kwant's reasoning was that if the credit union is alreadytaking  a loss through the write-down process, don't risktaking another loss by waiting for the market to recover beforeselling the REOs, added Paepke.  “Mountain America'sstrategy was that the first loss was the least amount of loss, andwe were able to sell most of our properties within an acceptabletime frame,” he said.

A year after Mountain America sold the majority of the REOproperties, it looked back, and an analysis showed that it saved atleast 10% by working this strategy.

“If we would have held the properties and waited for the marketto return before aggressively selling the properties, we would havetaken additional write-downs of 10% or more of the REO portfoliovalue,” said Paepke.

Another reason for success at Mountain America, according toKwant, is loan portfolio diversification. “It's likediversification in a stock portfolio. When one stock is up, anotherone is down, but you're maintaining a constant return.” In additionto mortgage and auto lending and  credit cards, memberbusiness loans backed by the Small Business Administration and lifestyle lending are all part of Kwant's recipe for portfoliodiversification.

Mountain American has been making SBA loans for about fiveyears, and Kwant calls it a developing business. “But the key isthe government guarantee, so we are loaning to people with a littlebit higher risk than you'd normally loan to. Some makeit,  some don't.”

The credit union earlier this year won two awards from the SBA'sUtah District by being named 2011 Lender of the Year and receivingthe 2011 Blaine Andrus Memorial Award. The latter, which is namedfor a leader in the Utah SBA office, recognized the credit union'scommunity efforts and the diversity of its small business lendingprograms. 

“As CFO you have to look at the financial side of things, butthe financial side is just one ingredient in decision making.”Kwant is proud that some decisions were tempered by his input.“When we first started to do indirect lending, I tried to remindthem that if we overpaid the broker, it just hit too much of ourreturn, and the synergies wouldn't pay off.  So they builtin some penalties if [the loan was] paid off too quickly.”

According to Paepke, during the recession many CFOs werefocusing on cutting costs. “Although we were looking at ways to bemore efficient, one of the reasons for our success in 2010, 2011and so far this year is the encouragement from Dave to keep thecourse of investing in employees, investing in member service andinvesting in the communities we serve,” he said. “CFO's to a largedegree control the purse strings of the credit union. Dave hasnever tried to close the purse at the expense of investment andgrowth.”

Sterling Nielsen, president/CEO at Mountain America, added,“More than having an amazing knowledge base, Dave has wisdom—thatspecial ability to skillfully apply his knowledge to financialissues and opportunities.”

Kwant, 65, has a bachelor's degree in accounting from theUniversity of Utah and is a certified public accountant. He and hiswife, Carol, will celebrate their 41st anniversary this June. Theyhave four children and three grandchildren. “And two more on theway,” added Kwant.