Buying or Selling: A Record Year for Business Loan Participations

At year-end, 1,029 credit unions reported loan participation activity with over 7.4 billion in participations outstanding.

 
 

The recent surge in member business lending has led to greater activity in the participation markets. A peek at the top 20 credit unions in business loan participations sold and bought since June 2004 revealed enormous growth rates of 185 percent and 120 percent, respectively.

Leading the charge in the sales was Evangelical Christian Credit Union in Brea, CA, with $640 million in assets. The credit union generated 38.3 percent of the $1.1 billion business loan participation sellers market. (See chart below for the leaders in business loans and participations sold.)

On the purchasing side, Patelco Credit Union in San Francisco, CA, with $3.5 billion in assets and Texans Credit Union in Richardson, TX, with $1.3 billion in assets collectively garnered 19.5 percent of the $1.6 billion buyers market at year-end. (See chart below for the top buyers in the business loan participation market.)

The recent growth in participation loans can be largely be attributed to awareness. As credit unions seek new opportunities, member business lending has provided an avenue of growth. For credit unions that have business lending, loan participations allow diversification of the loan portfolio while increasing the return on earning assets.

US Federal Credit Union in Burnsville, Minnesota with assets of $573 million, was active in buying and selling loan participations.

“Since 2002, we have grown our business lending portfolio from $2.5 million to over $57 million, today,” said Greg Kaiser, director of business lending, “We’ve used the participation market to help grow our portfolio as well as helping to manage it. This year we sold a block of business loans to keep us from exceeding our cap set by NCUA plus from an ALM perspective, the sale helped us manage our risk.”

The Leaders in Business Loans and Participations Sold
YTD - December 31, 2004
Rank
State
Name of
Credit Union
Business Loans & Participations Sold
YTD $ - 12/31/04
$ in millions
Business Loans & Participations Sold
YTD $ - 6/30/04
$ in millions
Member Business
Loans Granted
YTD $ 12/31/04
$ in millions
Total Loan Growth
Assets
$ in millions
1 CA Evangelical Christian 436.7 251.1 798.3 23.6%
640.3
2 CA Telesis Community 167.9 31.1 120.7 31.2%
481.2
3 NY Progressive 81.0 0.0 232.4 5.8%
279.7
4 TX Texans 64.8 0.0 243.2 14.2%
1,340.1
5 NC Coastal 61.9 0.0 37.8 18.6%
1,484.3
6 NY Central 25.3 7.2 34.1 33.8%
74.9
7 WI Pioneer 24.5 11.0 12.5 31.1%
248.9
8 WI Fox Communities 24.4 14.7 17.4 35.1%
467.8
9 MN US 19.4 0.0 40.6 18.7%
573.5
10 CA North Island 18.0 4.4 15.5 8.7%
1,462.2
11 NJ Paragon 17.4 9.1 42.1 4.3%
393.5
12 UT Mountain America 15.9 10.1 104.1 9.7%
1,426.7
13 CA America's Christian 14.3 4.7 54.4 15.4%
168.5
14 WA Harborstone 14.2 0.0 110.2 8.8%
582.5
15 CA University & State Employees 11.6 0.0 0.0 6.7%
719.9
   
All Credit Unions
1,140
417
8,523
10.4%
661,827.2

 

The Top Buyers in the Business Loan Participation Market
YTD - December 31, 2004
Rank
State
Name of
Credit Union
Purchased Business
Loan Participations
YTD $ - 12/31/04
$ in millions
Purchased Business Loan Participations
YTD $ - 6/30/04
$ in millions
Assets
$ in millions
Total Loan Growth
1 CA Patelco 161.3 88.9 3,506.1 19.9%
2 TX Texans 151.1 23.1 1,340.1 14.2%
3 CA Orange County Teachers 73.1 44.9 5,197.1 30.9%
4 CA Premier America 57.8 42.6 1,017.0 24.3%
5 CA SAFE 49.0 0.0 1,203.2 6.3%
6 VA Langley 48.3 24.5 1,086.5 16.5%
7 CA Farmers Insurance Group 38.8 32.8 509.6 16.4%
8 CA Travis 36.9 22.1 1,422.7 9.2%
9 NC Allegacy Federal 36.6 25.0 1,037.6 26.6%
10 TX Credit Union of Texas 33.4 0.0 1,491.2 10.6%
11 MN US 32.8 5.6 573.5 18.7%
12 CA USA 31.8 22.3 646.3 9.7%
13 CA Lockheed 30.3 28.7 2,019.8 25.1%
14 WI CitizensFirst 29.9 11.0 252.0 14.4%
15 CA Caltech Employees 26.0 9.5 724.1 18.0%
    All Credit Unions 1,602.4 760.2 661,827.2 10.4%
 

 

 

April 25, 2005


Comments

 
 
 
  • Using the figures above as representing the total amount of sales/purchases of loan participation product by CU's, on a gross percentage basis, what percentage does this represent of ALL total participation transactions in comparison specifically to banks (community, farm, small independent banks, funding and/or capital companies)? Or another way of asking: of all LP's bought and sold nation-wide, what percentage do the above figures represent in comparing CU's to farm/community/smaller lending institutions outside of CU's? (banks % versus CU's %). Linda
    Anonymous
     
     
     
  • Using the figures above as representing the total amount of sales/purchases of loan participation product by CU's, on a gross percentage basis, what percentage does this represent of ALL total participation transactions in comparison specifically to banks (community, farm, small independent banks, funding and/or capital companies)? Or another way of asking: of all LP's bought and sold nation-wide, what percentage do the above figures represent in comparing CU's to farm/community/smaller lending institutions outside of CU's? (banks % versus CU's %). Linda
    Anonymous