Credit unions can diversify their portfolios how they see fit. NCUA doesn’t put big restrictions on CUs for any type of lending unless it’s an over abundance in one field. In which case they would just have you do extra due diligence. As long as the program is ran soundly and delinquency isn’t running wild, they let you do what you need to do without much fuss.

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Posted by Kreg Jennings

Parts Unknown

Member since Aug 2007

3914 posts

Posted on 2/11/23 at 11:49 am to Im4datigers

quote:
I get it but here’s the issue - prior to 10 years ago CU’s weren’t doing business lending or commercial real estate lending. It was all car loans and mortgages. Now you’re seeing CU’s band together doing $10mm plus real estate deals. Most don’t have the expertise to be sniffing these kind of deals as they just don’t have the talent under their roof’s. They try hiring said talent to do this type of stuff but they won’t pay so they can’t attract the right people. Very general statement btw. What I’m interested to see is what happens during a CRE correction. CU’s didn’t start doing CRE deals until after the 08-10 crash so they’ve been riding the tide for all this time now without a correction to expose their weaker underwriting skills. I’ve competed against CU’s on some deals and I just scratch my head wondering who in the hell would ever consider approving the structure they were putting out there. Some of it was just insane.

This.

History will repeat itself. CU’s will take large losses and erode already thin capital. I wouldn’t feel safe with my money there in that scenario.

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Posted by Im4datigers

Northern Virginia

Member since Oct 2003

4649 posts

Posted on 2/11/23 at 4:06 pm to Kreg Jennings

quote:
The NCUA has strict limits on commercial lending for CUs. I believe it’s either 12.5% of total assets or 1.75X networth (CFR, title 12, chapter 7, Sec 730). So their commercial books (C&I, CRE, ADC) are never going to compete with banks.

Sorry, but being in the field I disagree. They compete when they want to with banks and win most of the time due to stupid structures of deals. Nevermind the pricing. They won’t compete with the chases and wells of the world but they’re darn sure competing with community sized banks.

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Posted by schexyoung

Deaf Valley

Member since May 2008

6674 posts

Posted on 2/11/23 at 7:38 pm to Im4datigers

Sorry I’m in the field too. You can pull 5300s and review their commercial loan activity. It’s peanuts relative to banks, even excluding the banks over $1T in assets.

I do agree they have no idea how to handle price or structure. It’s a mess. They don’t have the credit admin expertise.

This post was edited on 2/11/23 at 7:48 pm

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Posted by Im4datigers

Northern Virginia

Member since Oct 2003

4649 posts

Posted on 2/12/23 at 12:51 pm to schexyoung

Shexyoung - might be a market thing too. I’m in northern Virginia/Dc and several are damn active in CRE up here. They do get hot and cold with it though. I can see it being a market by market thing as well.

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