Building Volume in a Downturn – Credit Unions Grow Their Business Loan Portfolio

Although banks did ease lending standards from the third quarter, fourth quarter results show credit unions growing their loans to businesses by 18.3%.


According to the most recent Federal Reserve Senior Loan Officer Opinion Survey, as of January 2009, 69% of institutions surveyed have tightened their lending standards to small businesses. This is a slight reduction from the previous quarter, where 74% of institutions had tightened standards. While the percentage of institutions reporting tighter standards dropped, banks have maintained consistently tight standards from the previous quarter.

On December 31, 2008, credit unions posted $26.5B in outstanding member business loans, up 18.3% from the previous year. Commercial real estate remains the largest portion of the credit union business lending portfolio, standing at 93.7% at year end.  Currently, 25.8% of credit unions offer member business loans, up significantly from 16.8% at year-end 2003. While more credit unions have entered this lending sector, not all have had record growth or volume. Only 13.1% of credit unions posted more than one million in outstanding member business loans at year-end.

Member Business Lending Graph

Callahan's First Look program indicates steady lending continued through the first quarter. With 28% of the industry's assets, the First Look credit unions' member business loan portfolio grew 21.6% over March 2008.

Wayne Matusmura manages the business lending department at Unitus Community Credit Union ($734M in Portland, OR).  At year-end 2008, Unitus Community had just over $5.5M outstanding in their business loan portfolio almost tripling their balances after starting the program in 2007. While they did grow significantly from 2007 to 2008, Matusmura says, "Oregon has the second highest unemployment rate in the nation right now. It is a challenge to find growing businesses in this local market. But there are plenty of small businesses that need credit and aren’t being served by the banks. Like most credit unions, that’s our niche – small businesses that are too small for the banks and want the personal service we provide."

With a solid first quarter behind them, Matsumura notes, "For 2009, we're going slow and steady. We're trying to maintain our course by building volume. We're focused on the areas that we're comfortable and familiar with, which is commercial real estate loans, vehicle lending and small lines of credit."   By wisely positioning themselves within their local marketplace and preparing new products and services that appeal to the local business community, Unitus Community will be set for further success in the future.