United Community Banks in Blairsville, Ga., is already singing the praises of a business unit it began to aggressively ramp up less than a year ago.
The $7.6 billion-asset company jumped into Small Business Administration lending in April, after it lured Richard Bradshaw from TD Bank, persuading him to leave a much larger institution where he had led SBA programs since 2011. Bradshaw, who became United Community's president of specialized lending, was tasked with building the company's SBA business virtually from scratch.
Bradshaw, an Air Force Academy graduate who has been involved in SBA lending since 1995, didn't let any grass grow under his feet. United Community agreed last May to buy Business Carolina, an SBA lender in Columbia, S.C., along with a nearly $25 million tranche of loans. Bradshaw has continued to add to that base in the last year, hiring more than 20 veteran SBA lenders.
"We jumped out of the gate and haven't stopped," Bradshaw said in a recent interview.
Building a lending intensive business isn't cheap. The company reported a $4.7 million increase in salaries and benefits last year compared with 2013, primarily as a result of investments in Bradshaw's specialized lending bailiwick.
The business, however, seems to be slowly starting to pay off. Fee income attributable to gains on sale of SBA loans totaled $2.6 million last year after being nonexistent in 2013. Management expects such income to top $7 million this year.
United Community "feels very good about where we are with SBA," Jimmy Tallent, the company's chairman and chief executive, said during a conference call earlier this year to discuss 2014 earnings. "The addition of key leaders and talent in this area is showing strong results."
The SBA push coincides with a significant bump in the popularity of the agency's flagship 7(a) loan-guarantee program. Through March 21, the SBA said it had guaranteed $9.4 billion of 7(a) loans during its current fiscal year, a 26% increase from a year earlier. (The agency's fiscal year starts on Oct. 1.)
United Community built its SBA lending division around a "vertical" strategy, where teams of underwriters and lenders focus exclusively on one specific industry, Bradshaw said. The company has created verticals in areas such as veterinary medicine, dentistry, franchises, owner-occupied commercial real estate and manufacturing. Specialization produces increased expertise that lets teams provide a higher level of customer service and make better underwriting decisions.
"The SBA unit does business throughout the country," Bradshaw said, noting that technology has helped United Community construct a nationwide platform. Bradshaw said he is considering incorporating credit scoring into the business model, particularly on smaller credits.
Creating a fully automated process is not part of his plan. "Our lenders meet and see every business before we give a client money," he said.
Industry observers have taken notice of the company's progress, Matt Olney, an analyst at Stephens Inc. in Little Rock, Ark., said in an interview Thursday.
"It's been an important initiative over the past few quarters," Olney said. "It's very early in the process, but so far, so good. "
United Community's bank unit, United Community Bank, has more than 100 branches in Georgia, South Carolina and the western halves of Tennessee and North Carolina. Historically the company has focused on real estate lending, but "it got overly concentrated" during the last credit cycle, Olney said.
When the financial crisis spawned a real estate bust in United Community's main markets of suburban Atlanta and north and coastal Georgia, the company was stung with hundreds of millions of dollars in loan losses.
With that history in mind, United Community's investment in SBA and other specialized lending businesses is money well spent, Olney said, representing "good diversification" to revenue and the company's loan mix.
"The lesson is to look for diversification," Olney said.
Bradshaw's move from a high perch at the $230 billion-asset TD Bank to a comparable slot at the considerably smaller United Community might seem unusual at first glance. After 20 years as an SBA lender, Bradshaw said he was looking to take on more executive duties.
United Community's job, offering a chance to supervise health care, asset-backed and corporate lending, in addition to SBA programs, was too tempting for Bradshaw to resist.
The hire proved to be a strategic home run for United Community; now Bradshaw is seeking to hit one of his own. With a solid SBA foundation in place, Bradshaw said he plans to hire a deputy to handle daily SBA-lending responsibilities, freeing him to devote more time to his other business lines.