WASHINGTON-There was widespread support among attendees at CUNA's Governmental Affairs Conference last week for passage of the latest Member Business Lending legislation, even as many of those same CU leaders said the cap on MBLs is not an issue for their own credit unions.
Evan Clark acknowledged that MBL reform is not a priority at the $300-million Department of Commerce FCU here. "For my credit union it's just not that important," said the CEO. "We are a mortgage maker and consumer loan maker and demand now is very strong for both products. I know many credit unions are doing really great things in their communities with MBL, and for them it's a bigger priority-and because of that I am certainly for raising the MBL cap."
While MBL reform has been a priority for the credit union trade associations for more than a decade, it is estimated that 70% of credit unions don't make business loans. And the recent expansion of Low-Income CU status to several thousand more CUs by NCUA has also made the cap a moot point for those CUs.
Bill Vogeney said that Ent FCU in Colorado Springs, Colo., may never face the issue of bumping up against a 12.5%-of-assets MBL cap. "We do very little member business lending. We are a $3.7-billion credit union with $2 billion in loans and about $75 million in MBL."
Vogeny, who is EVP/CLO, said Ent is very selective when making a member business loan, looking primarily to build a total relationship with the small business.
"A lot of credit unions in the MBL market are just doing a transaction-making a loan," offered Vogeny, who chairs the CUNA Lending Council. "We want the deposits, the checking transactions, all the products. To get to our cap we'd have to get to $400 million in MBL loans. There aren't $400 million in good MBL loans in our markets, not for what we want to do. But if we can get the bill passed for the credit union industry, I think it's good. But MBL legislation is a non-event for us."
Don't Have The Expertise
Bill Wehr, CEO at R-S Bellco FCU in New Brighton, Penn., and an advocate for the MBL bill, explained his $22-million credit union does not do business lending. "There is a rigor associated with that offering that requires a level of expertise that generally does not exist within a smaller credit union. That does not mean there isn't need out there to have the cap raised, especially at larger credit unions."
The $345-million Westby Coop CU in Westby, Wis., does not need the MBL cap raised because the credit union does not have a business lending cap.
"We have an exemption from the cap for original purpose," said CEO Kevin Hauser. "We were formed in 1939 and serve primarily rural folks, making a lot of loans to farmers. They have needed us a lot over the years with banks often unwilling to make the smaller business loans. Our MBL portfolio is at 28% of assets, and we support the MBL bill because we know the value the product brings to so many people's lives. We see it every day."
Several other credit unions said the MBL cap isn't a problem for them-yet. The $1.5-billion Genisys CU in Auburn Hills, Mich., for instance, is about half way to its MBL cap.
"MBL is definitely a growing area in our credit union and we will be at our limit before long," said Lon Bone, VP of PR and community involvement. "So we are doing what we can to see that the cap is lifted before we have to say no to any small business. This is something that's very important to Genisys and we see this as a major growth area for us in the future."
Still 3-4 Years Away
In Pocatello, Idaho, CEO Kent Oram said it will take three to four years before the $1.3-billion Idaho Central will bump up against the ceiling. "We are a relatively new MBL lender and we have, conservatively, 12,000 to 13,000 small business owners in our membership. We'd love to be able to help all of them."
The $38-million Post Office CU in Madison, Wis., won't enter the MBL market unless the cap is raised. "At the present 12.5%-of-asset limit we would only be able to put on about $4.75 million in business loans," explained CEO Kevin Yaeger, adding that would not be enough to justify gaining the expertise, hiring staff, and managing this area adequately. "We'd have to put on a little over $10 million in business loans and there is demand in our market for us to do that. We need this legislation passed."
Robbie Thompson, president of the CU Association of the Dakotas, Bismark, N.D., agreed that the current MBL cap prevents many smaller CUs from taking on member business lending. "Many don't even consider it because they know they will make a capital investment and then may get to the cap pretty quickly. The cap needs to be raised and we are working hard to get it raised."
At least one person noted that expanded business lending isn't just something that credit unions need, as the picture is bigger.
"And Americans as well," said Scott Wilson, CEO of the $460-million SeaComm FCU, Massena, N.Y. "As we all know, aside from helping credit unions we're putting more people to work. So while SeaComm is not near our cap now, our credit union is right behind this legislation."