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• DEPOSITS
• MEMBERS
• MORTGAGES
• CREDIT CARDS
• LENDING
• BUSINESS LENDING
• AUTO LENDING
• EARNINGS

In the third quarter of 2017, the NCUA revised Section 4 of the 5300 Call Report and now requires credit unions to segment member business lending and commercial lending into separate buckets. Prior to the third quarter, the entire business loan schedule for credit unions fell under MBL codes. Now, MBL accounts for only two account codes and the remainder of the business loan schedule falls under commercial codes.

Consequently, analysis of the commercial portfolio is available only for quarter-over-quarter comparisons rather than year-over-year. The fact the NCUA slightly altered the definition of member business lending does not affect the ability to conduct year-over-year analysis for these loans.

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Commercial Loans

Member commercial balances in the commercial portfolio increased 1.8% quarter-over-quarter, or $967.1 million, to reach $55.5 billion at year-end 2017. The fastest growth in commercial loans came from construction and development loans, which expanded 4.0% quarter-over-quarter. As of year-end, this loan type comprised 3.9% of all member commercial loans.

Commercial loans secured by non-owner occupied, non-farm, non-residential property made up the lion’s share, 39.7%, of all member commercial lending. Balances for these loans increased 3.5% quarter-over-quarter. This loan type also exhibited the largest concentration increase quarter-over-quarter, at 66 basis points.

As total auto loans grow in share, new auto loans outpace used auto loans in year-over-year growth.

As of fourth quarter 2017, purchased commercial loans or participation interests to nonmembers made up 14.9%, or $9.7 billion, of total commercial loans. Nonmember commercial balances grew 4.8% quarter-over-quarter as nonmember construction and development loans expanded 19.7%. Like the member commercial portfolio, this loan type makes up only 2.5% of all nonmember commercial loans.

Balances of the largest component of nonmember commercial loans those secured by non-owner occupied, non-farm, non-residential property increased 6.1% quarter-over-quarter and also exhibited the largest concentration increase, at 60 basis points.

Nonmember commercial loans secured by non-owner occupied, non-farm, non-residential property made up 49.9% of the industry’s nonmember commercial loan portfolio as of Dec. 31, 2017.

Construction and development commercial loan production occurred in conjunction with the construction employment sector adding 250,000 jobs annually, according to the Bureau of Labor Statistics. These jobs expanded 3.7% annually, 80 basis points faster than in 2016.

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Member Business Loans

After a volume decrease in the third quarter of 2017, potentially due to reporting changes, member business loans rebounded in the fourth quarter.

Member business loan balances dipped $3.4 billion from June 30, 2017, to Sept. 30, 2017, before growing 9.9% quarter-over-quarter to reach $68.2 billion as of Dec. 31, 2017. Moreover, credit union member business loan balances expanded 13.2% annually.

The concentration of member business loans for credit unions with more than $250 million in assets was higher than the industry average of 7.0% in the fourth quarter.

Member business loans as a percentage of total loans surpassed 7.0% in the fourth quarter, up 21 basis points annually. Comparatively, member commercial loans as a percentage of total loans was 5.7% as of the fourth quarter. Credit unions with assets between $500 million and $1 billion held the highest percentage of member business loans on their books 7.85% at year-end.