Member business lending reached record levels and helped drive credit unions’ strong loan growth in 2011 as MBL originations increased 10.5% year-over-year to $11.9 billion, according to financial reports from 7,091 First Look credit unions.
This was the strongest year for business loan originations at credit unions, with the previous high being $11.3 billion in 2008. In a typical seasonal trend, and perhaps evidence of a recovering economy, originations accelerated through the second half of 2011. In total loan originations last year, credit unions reported a 5.2% increase from 2010 to $259.4 billion.
Related to increasing originations, these First Look credit unions posted strong growth in member business loans outstanding from 2010. MBL loans on credit union balance sheets grew 7.9% last year from 2010, $2.5 billion increase. Over three-fourths of these outstanding business loans were non-farm real estate backed, while 13.5% were commercial and industrial loans. The current business loan portfolio is concentrated in real estate secured loans, while 13.5% were commercial and industrial loans.
With the economy showing some signs of improvement, asset quality has also improved. Member business loan delinquency (excluding agricultural loans) improved 27 basis points in 2011 to reach 3.54% at year-end. However, net charge-offs for business loans (also excluding agricultural loans) were up slightly, increasing 15 basis points to 0.93%.
The improving economy and strong demand at credit unions points to another strong year for business lending in 2012. Coupled with declining delinquency and a surge in business loan originations toward the end of 2011, credit unions have strong momentum going into 2012 and which could help this year’s business loan originations surpass 2011’s record.