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Friday, 23 March 2012 10:43

Credit unions continue growth in biz lending

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WEST MICHIGAN — What started as a niche opportunity when credit tightened during the tough economy has become a target of greater focus for United Federal Credit Union.

After growing commercial lending 35 percent during 2011 as it ramped up commercial lending, the St. Joseph-based United Federal is putting more emphasis in 2012 on making loans to members who own a small business.

Gary Easterling“We’re really starting to see it come to fruition,” CEO Gary Easterling said. “We were able to acquire some talented people who know how to do this. We’re really starting to develop some proficiency here.”

United Federal had $73.4 million in business loans to members at the end of 2011, compared to $54.3 million in December 2010, according to an annual financial report filed with the National Credit Union Administration.

Easterling is unsure whether the credit union can post the same growth rate in 2012 for member business loans. An improved economy has led more banks that previously tightened commercial lending to begin extending more credit, generating increased competition at a time when demand has yet to return to pre-recession levels.

“The rest of the banking system has gotten better, so there’s a lot more people competing for a piece of a pie that hasn’t gotten larger,” Easterling said.

In 2011, he said, “We were still reaping some of the rewards of being an active lender when some of the other players had walked away from it.”

Credit unions over the years have moved further into the commercial lending arena. Though commercial volumes are a fraction of what banks do, and federal law limits their business loans to 12.25 percent of assets, credit unions do pose increased competition for banks that target small businesses for loans.

MBLWest Michigan’s largest credit union, Grand Rapids-based Lake Michigan Credit Union, grew business loans to members by nearly 80 percent in 2011, to $80.8 million from $44.9 million. Lake Michigan Credit Union, with assets of $2.42 billion, has 32 offices across a market that stretches from Grand Rapids to the lakeshore and into Kalamazoo.

One of the region’s other top credit unions, Kalamazoo-based First Community Credit Union, grew business loans to members by 21 percent in 2011 to $50.8 million. The credit union, with $661.5 million in assets, has 11 offices in southwest Michigan, plus two south of Detroit, three in Wisconsin and one in Illinois.

Since 2007, credit union business loans to members have more than doubled across Michigan and increased in 2011 at a double-digit rate, although growth for the year was the lowest rate in the last five years. Total business loans to members across the state topped $1.15 billion, up from $1.01 billion in 2010, according to data from the NCUA.

United Federal Credit Union began putting more emphasis on business loans when it was able to hire commercial lenders in 2010 that had previously worked at banks and left during the recession.

The business gained during 2011 is now beginning to build as small business owners who accessed credit through the credit union for the first time are now coming back for loans to refinanced debt, a new loan to finance expansion or an operating line of credit, Easterling said. He estimates that the business loans are split evenly between existing depositors and new members to the credit union.

“Once you get that relationship, then you get follow-up business with these businesses,” he said. “The business just kind of builds on itself and that’s what we’re seeing, so we’re aggressively going after it.”

A recent major upgrade in the credit union’s information technology system has enabled United Federal to begin developing additional products for small business, such as payroll management, that it hopes to rollout in 2012, Easterling said.

Read 1876 times Last modified on Sunday, 12 August 2012 10:27

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