SAN BERNARDINO, Calif.-The head of a business services CUSO here is forecasting some opportunities in the year ahead.
Scott Burger, president and CEO of Members Business Services, which serves 20 credit union clients in California, Nevada and New Mexico, said the decline in lending by banks in those markets can be seen in the increase in the CUSO's portfolio to $264 million through November, up from $214 million in December 2008, a growth rate of 25.3%.
"(Credit unions) don't buy into large participations, so this is organic growth," he said. "Some of the good loans the banks are unable to make, credit unions are able to make. These loans are local to the credit unions' immediate markets. Banks are not lending to small businesses in these markets, so credit unions are able to cherry-pick good loans. These credit unions are adding to their portfolios while keeping delinquencies low."
The delinquency ratio for clients of Members Business Services is just 1.04%, which Burger noted compares quite favorably to the national bank delinquency rate on commercial loans, which is 4.9% according to the FDIC.
"What is interesting is the commercial credit market reportedly is deteriorating," he said. "But projects that are well underwritten and have good cash flows are holding up. What is really hurting are small shops that were related to construction in any way. The common thread for our CUSO is looking at loan-to-value and requiring equity. We try to give the right recommendations to our credit unions so they can pick the best ones. Lending is a risk business anyway, but this market is really tough."
Members Business Services offers underwriting and business depository services to its clients. CUs take loan applications/documentation. and MBS performs due-diligence.
