WATFORD CITY, N.D. — Several years into the oil boom in Western North Dakota, two credit unions say that for all the growth they've seen, there's no escaping a very real people problem.
At $264 million Dakota West, explained CEO Denton Zubke, wages for frontline staff start at $16 per hour, but usually average closer to $18. And even with those high wages, frequent turnover is all but inevitable.
"When you hire them at $18-20 an hour and you get two months down the road and they get an offer from somebody else at $22 or $24 per hour, plus maybe they can work from home for a day, you lose them just like that — and that's common," he told CU Journal.
"Many of us have been so desperate for employees that you say 'Well, at least we got two months out of her,'" he added.
On top of that, he said, there are huge issues around housing. Because of high demand, said Zubke, apartments can easily cost $2,500 per month, and those who can't afford apartments are sometimes living in campers or employee housing near the oil rigs. Between all of that and the brutal North Dakota winters, turnover has been high.
In order to alleviate some of the housing issues, Dakota West rents an apartment for one staffer — a good deal at $1,500 per month, said Zubke, because he got it early. The CU has also spent more than $840,000 on three houses for employees. "Without that I wouldn't have had a chief operating officer, a credit manager, an ag lending officer and a compliance officer — and that's all in one office."
At $350 million in assets, Western Cooperative in Williston, CEO Melanie Stillwell said that $15 per hour has been the sweet spot for attracting new employees.
"If you were at $13 or $12, chances are they won't talk to you," she said. But even at $15, finding employees is "still a challenge, because there are so many jobs that if you decide I want more time off and they won't give it to me, maybe I'll go somewhere else.' So we're still challenged on the front line. We have some individuals that left maybe to other managerial levels or levels that aren't at the teller level, [but] they've found it's not quite what they thought it would be — a lot more hours and weekends."
While there are still plenty of jobs available — the unemployment rate in Williston is just 0.9% — there is talk of a slowdown in the oil fields after oil prices dropped in recent months. According to Stillwell, some workers are being laid off, overtime is being slashed and housing subsidies are being cut.
"There are some stirrings going on, but I talk to some of our VPs, and most of them said we still haven't really seen a slowdown — but we're hearing it."
Loan-A-Palooza
Up until now, however, business has been booming, and Stillwell said her CU finished 2014 with about 8% growth, and the CU could have done more if it hadn't had to control for share growth. Recent years have ranged between 5% and 10%, "and that's not counting the loans that we do and sell to the secondary market," said Stillwell. "On the real estate side, if we threw them in there we'd have a lot higher growth, but we don't hold them."
Loan requests have also gone up at Dakota West, which has, in turn, translated into an increase in loan denials.
"The first wave of people that came here was not very credit reliable, for lack of a better word, but it has gotten better," said Zubke. Many of those loan denials were part of a surge in commercial lending interest in the region as apartments, motels and other businesses were erected as quickly as possible to meet the demand.
As far as more traditional credit union lending products, many members are skipping the $25,000 used truck and buying the $50,000 new pickup, said Stillwell. Or instead of purchasing starter homes they're buying nicer homes in the $400,000 range.
"The dealerships here, they can sell a new vehicle off the lot in minutes," said Stillwell.
Both credit unions have tried to stay somewhat conservative with their lending. For Western Cooperative, that has meant not jumping into commercial lending. For Dakota West, that meant becoming stricter with underwriting guidelines.
"You've seen what's happened with the price of oil," said Zubke. "All of a sudden, any of those loans that you may have written during that period subsequently become watch loans or even collection problems. Because of those tighter credit standards, we haven't been impacted a great deal yet. But we are definitely monitoring that loan portfolio more than we used to."
Turning Away Deposits
One other area both CUs have had to watch carefully is deposits. Not only are employees making big money, but residents in the region are seeing sizable checks for selling drilling rights to their property or selling businesses.
While there are fewer large checks coming in than there used to be, it's still common, said Stillwell, noting that Western Cooperative still occasionally has to turn away large deposits from non-members or new members with little to no relationship with the CU. Even for longtime members, "once they start going over the insured limits of $250,000, we start looking at those people's accounts and what kind of business they do with us."
The credit union has also dropped rates on all of its savings products to the point where 0.05% interest was about the best that was available, "just to try to discourage that money from coming in," said Stillwell. "It didn't have much of an impact at all. People just wanted a place to put their money."
At Dakota West, said Zubke, commercial deposit accounts are now only available to businesses with loans at the credit union, and high-deposit savings accounts are no longer available at all.
"If my capital-to-asset ratio is constantly deemed diluted and I'm going from 9.5 to 9 to 8.5, what do you think the regulators do?" said Zubke. "Do they make an exception because you're in an oil-development area and the deposits are running n that fast? No. they see your capital-to-asset ratio declining and they say either you get this under control or you've got some serious problems."
Statewide Impacts
Despite the oil boom's epicenter being in the western region of North Dakota, the entire Roughrider State has felt the benefits of the last several years. NCUA's Q4 data showed the state with the lowest delinquency rate in the nation (just 0.3%), fueled in large part by its low unemployment rate (2.8%). The state was also a top 10 finisher for asset growth, member growth and deposit growth, and had the 11th-best loan growth of all states, at 6.3%. At 109 basis points, it also had the second-highest aggregate return on average assets.
Jeff Olson, EVP of government affairs at the Credit Union Association of the Dakotas, said that one of the biggest benefits of the boom is what it has meant for jobs throughout the state.
"People are taking jobs in the oil fields and commuting," he said. "We're four hours from the oil fields here in Bismarck; Fargo is probably eight hours away. So you go up there and work a shift and live in a man camp [clusters of trailers and other temporary housing for oil workers] and stay there for ten or 12 days, and then you come home for a week or two and go back. And there are people who move to those communities because the housing is more available and more affordable, and they move their families there and then commute to the oil fields."
Olson added that banks and credit unions have even partnered to keep up with infrastructure needs related to the oil boom, such as housing and hotel construction. And while the number of rigs operating in the state has fallen from a peak of 208 in 2011 to just 93 today, he said that's probably a positive for most CUs.
"That's more of an impact for those oil-impacted areas and their credit unions," he said. "If they lose workers and people pulling deposits out, that's a good thing."
For the Long Haul
Even with the slowdown, Western Cooperative and Dakota West are plenty busy.
"It seems odd to hear that the oil prices have been cut in half and we're still crazy here," said Western Cooperative's Stillwell.
With things slowed down a bit, she said, the credit union finally has an opportunity to do some intensive training and cross-train employees — things it hasn't always had time for in recent years.
Violent crime is also up significantly, said Zubke, and Dakota West has made sure to reinforce security training for employees amid the slight slowdown.
Neither Stillwell nor Zubke believe that the slowdown will last terribly long.
"This isn't my first oil rodeo, so I knew some of the things that were going to happen," he said. "Being a lifelong resident here, I was very cautious going into this, and I think that has helped us today. In the last couple of months we've had a little bit of a slowdown in deposits but we still have a lot of rigs drilling, and it sounds like they'll continue to drill."
Zubke said he believes that, short of turmoil in the Middle East or Africa, a slowdown won't last any longer than 18-24 months.
"As long as that price stays around $50 a barrel or higher, we're going to see continued development," he said. "The pace may change depending on what the price is, but as long as it stays around $50 [or better]... I think that development will extend as long as 2035."
