Oregon's Willamette Valley Bank announced it is exiting mortgage lending, pointing to challenges facing small institutions and macroeconomic concerns behind its decision. 

The community bank, based in Salem, Oregon, will formally end residential lending operations on March 31. Along with four full-service branches across the state, Willamette Valley also runs five designated home loan centers located in both Oregon and neighboring Idaho.  

"The residential mortgage industry has undergone significant changes in recent years, including the growth of online and nonbank lenders and a prolonged period of higher interest rates," Willamette Valley Bank President and CEO Ryan Dempster said in a press release.

"These conditions have made it increasingly difficult for community financial institutions to compete sustainably in this segment," Dempster said. 

Between 2015 and 2024, the share of originations by community banks decreased from 21.8% to 12.4%, 

In 2024, Willamette Valley originated $273.6 million worth of residential loans comprising 742 transactions, according to Iemergent's analysis of Home Mortgage Disclosure Act data.  Volumes came in at well under half their levels as recently as two years earlier, when the bank originated $785.7 million in volume for 2,177 units. 

Other retail and commercial banking activities will proceed at the bank, which reported $3.2 million in net income for full year 2025. 

Mortgage trends among banks

Willamette Valley's mortgage exit is the latest by a depository institution in recent months, with other midsized and community banks similarly exiting and citing the challenges of turning profits in home lending in today's economic environment. 

An initial spike in mortgage rates, which more than doubled within months from near-3% levels in early 2022, contributed to decisions of some to leave the segment in the following year. Stubbornly sticky rates in the ensuing years sustained the trend, as both depository institutions and nonbanks struggled to profit, with the 30-year average only falling back below 6% this month for the first time since 2022.  

At the same time, regulatory capital restrictions on depository banks, which some have criticized as onerous, also diminished any appetite to plan for mortgage growth. 

Still, while the industry has seen a number of departures in the past year, not all banks are choosing to pull back from mortgages entirely, taking different approaches, including expansion to keep their brands in the space. 

Here are a few of the recent developments:

• Willamette Valley joins a list of financial institutions that includes Wafd, Popular Bank and Ally Financial to leave residential lending since early 2025.
• Others are turning to nonbanks as outsource mortgage partners in order to continue providing home lending options to banking customers. Both Oceanfirst Bank and Amalgamated Bank signed such cooperation agreements with Embrace Home Loans to direct potential mortgage customers its way.  
• In February, Firstrust Bank announced an operations partnership with direct lender Mortgagecountry. Unlike the Embrace agreements, Firstrust will still continue to originate and close loans under its own name, with the nonbank responsible for all mortgage production, technology services and strategic guidance of the business.
• At the same time, other community financial institutions have found opportunities to grow their lending businesses, with First Federal Bank and the Bank of Glen Burnie both making mortgage acquisitions since summer 2025. 

Recent regulatory developments, if approved, may open a window for increased mortgage lending from banks in the coming months. Federal Reserve Gov. Michelle Bowman recently indicated she wished to see the return of banks into home lending, with a publication of a proposed update to ease capital-risk requirements expected at the end of the current quarter.