Business Lending Booms In 2013

The industry's MBL portfolio is growing as more credit unions step into small businesses lending.

 
 

NCUA is set to release quarterly financial information on the entire industry in early March. Until then, Callahan & Associates is collecting information as part of its FirstLook program and to date has 5300 Call Report data on more than 6,540 credit unions representing more than 99% of the industry’s assets. For these FirstLook credit unions, member business lending represents a small but significant segment of the loan portfolio.

Member business loans account for 6.3% of the overall loan portfolio for FirstLook credit unions, but the segment posted strong growth in 2013. MBL originations and outstanding balances increased 13.3% and 11.7%, respectively. These loans are the second-fastest growing segment of the loan portfolio, surpassed only by new auto loans.

2013 is the strongest year for business loan originations on record. FirstLook credit unions lent $16.6 billion to small businesses — surpassing their 2012 $14.6 billion origination record by $2 billion. Outstanding business loan balances hit $40.1 billion, another new high. The business loan portfolio for credit unions in New York increased by the largest dollar amount, up $548 million annually, while the portfolio for credit unions in Delaware posted the fastest growth, up 159.4% to $20 million.

OUTSTANDING BUSINESS LOANS & 12-MONTH GROWTH
Data as of December 31 for FirstLook credit unions
© Callahan & Associates | www.creditunions.com

MBL_Orig___Growth

Source: Callahan & Associates’ Peer-to-Peer Analytics

One reason for the strong business lending growth is the increase in the number of credit unions that are lending to small businesses. Nearly 21% of FirstLook credit unions, or 1,365 institutions, originated a business loan in 2013 versus 19% in 2012 and 17% in 2008. A total of 2,091 FirstLook credit unions had at least one outstanding business loan on their books as of December 31.

Within the MBL portfolio, real estate loans account for 83.5% of all business loans. Commercial and industrial loans comprise 13.2% of the portfolio.

Despite the expanding business loan portfolio, asset quality remains strong. The MBL delinquency rate of 1.32% is 61 basis points lower than this time last year and down significantly from the 4.11% high reported during the height of the recession. Net charge-offs for business loans are also lower. They’re down to 39 basis points as of December 31 versus the 75 basis points FirstLook credit unions reported at the end of 2012.

BUSINESS LOAN ASSET QUALITY
Data as of December 31 for FirstLook credit unions
© Callahan & Associates | www.creditunions.com

MBL_Asset_Quality

Source: Callahan & Associates’ Peer-to-Peer Analytics

As more credit unions venture into the business lending space and the improving economy spurs more lending, look for the business loan portfolio to continue its momentum and hit even more record highs.

 

 

 

Feb. 20, 2014


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