FORT LAUDERDALE, Fla. -
"Credit Unions have an opportunity in MBLs," said Doug Lacy-Roberts, financial examiner supervisor for the Division of Credit Unions, State of Washington. "It is important we perform commercial lending well."
Credit unions' MBL totals have grown during the past few years, Lacy-Roberts says. "These are the trends we are seeing," Lacy-Roberts said, explaining that total dollar amount of credit union MBLs grew from $13.35 billion from Dec. 31, 2004 to $23.30 billion by March 31, 2007.
Lacy-Roberts shared this at a discussion he led about "Member Business Lending: Strategic and Regulatory Concerns" as part of the NASCUS 2007 State System Summit.
Lacy-Roberts said that credit unions must be careful, however.
"Banks and Congress will scrutinize our efforts," he said. "The DCU approach is 'MBL programs must be as safe and sound as a bank of similar size and complexity.' Size matters."
The best way to achieve success is to realize that experience is critical, Lacy-Roberts noted.
"It is difficult to bring in that expertise," he said. "But experience really is critical. How do you know what you don't know?"
Strategic plans are also essential, he said. "Policy limits on loan types are important," he said. "Credit unions should stick to them." There also needs to be "a healthy dynamic tension between the marketing people and the underwriting people," Lacy-Roberts said.
When examining a commercial lending program, Lacy-Roberts said it's important to use a "top-down approach."
"Take a look at the overall program," he said. "Then it's a lot easier to go in and take a look at the individual loan. Spreadsheets are a good tool."
Again, Lacy-Roberts stressed that "experience is the most important factor." This includes underwriting experience, experiencing setting up an MBL program and experience in managing an MBL program, he says.
It's also important for the credit union to be a cash-flow commercial lender, instead of an asset-based lender, or even worse, he says-a relationship-based lender, Lacy-Roberts said, in addition to getting a cross section of loans.
"You also don't want to just be choosing commercial loans out of thin air," he advised. "You really want to get an idea of what is going onside that credit union."
