Business Lending Increases In 2Q 2011

Credit unions across the country are using their knowledge of local markets to boost the community's economy.


Member business lending continues to increase in importance to credit union loan portfolios. FirstLook data indicate member business loans outstanding at credit unions increased 3.8% year-over-year to end the second quarter at $31.8 billion. This represents 5.6% of the credit union loan portfolio. Although growth has slowed from recent years, this is an indication of maturing portfolios. As fewer credit unions start new programs, the rapid growth of balances has eased.

MBL Outstanding, 2Q2011

Click on graph to view larger size. |  Source: Callahan & Associates' Peer-to-Peer

At the end of second quarter 2010, 27% of the credit union industry was participating in member business lending. Today, that number has risen to more than 28%. This 28% originated nearly $5.7 billion in member business loans in the first six months of 2011, increasing originations by 12.2% from the same time period in 2010.

High Points For The MBL Portfolio

Commercial real estate remains a strong force in the business loan portfolio, as it comprises 78.8% of all member business loans and purchased business loans. Construction and development loans have declined 10.1% from last year, but still comprise 4.4% of the business loan portfolio. The decline reflects the weak construction demand in most parts of the country. Small Business Administration loans increased 19.7% over the past 12 months. Such activity demonstrates the commitment of small businesses to keeping the nation on a road to economic recovery, and credit unions are providing the necessary funding.

MBL Portfolio, 2Q2011

Click on graph to view larger size. |  Source: Callahan & Associates' Peer-to-Peer

Member business lending can be riskier than other types of lending, and as such delinquency for member business loans is higher than other types of loans. Delinquency at mid-year dropped to 3.46%, which is a 76-basis-point improvement from the same time last year. Net charge-offs decreased 1 basis point over the same time, from 0.82% in 2010 to 0.81% today. And like members, member business loans are not immune to the recession, as credit unions have more than $2.2 billion in modified business loans on their books.

MBL Delq & CO, 2Q2011

 Click on graph to view larger size. |  Source: Callahan & Associates' Peer-to-Peer




Aug. 22, 2011



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