The pandemic also alteredplans at BECU. The credit unionwas preparing to dip into construction and developmentlending. And it was planning toleverage its experience in multi-family lending to deepen its commitment to help the communitybuild more affordable housing, acritical need in the Seattle area.
At both credit unions, loan production was heavy in January andFebruary, but came to a near haltafter the World Health Organization declared COVID- 19 a pandemic on March 11, 2020.
Personnel were shifted to processing existing loans and handling an influx of applicationsfor Paycheck Protection Program(PPP) loans to the U. S. Small Business Administration.
They also began carefullystudying their existing loans, notsure where dangers might lie in apandemic.
Some borrowers have facedsevere financial stress – typicallyhotels, restaurants and some retailers. But overall, the businesseshave been surprisingly resilient,and the largest credit union lenders for commercial real estatehave shown few delinquencies orcharge-offs.
In part, that’s an artifact ofaccommodations. Griffiths atMountain America said he expects delinquencies will rise modestly this year.
Perhaps the most surprising
trend to emerge from the fourth-
quarter 2020 data released by
the NCUA on March 4 was that
originations of real estate-backed
commercial loans continued to
accelerate last year. After growing
just 4% in 2018 and 13% in 2019,
they grew 24% to $25.8 billion in
At Mountain America, production was $327.7 million. And despite shutting down underwritingfor new loans in April and May, itrose 1.2% from a year earlier. “Westill had one of the largest years inproduction to date,” Griffiths said.
Among the 5,244 credit unionsin the NCUA’s December data, thegrowth rate of commercial loanslast year was on par with totalloan originations, which grew 25%to $677.9 billion on the strength ofresidential first mortgages.
But the trend has included widevariations among the 1,051 creditunions that originated commercial loans last year.
Among credit unions, the largest producer of commercial realestate loans last year was GreenState Credit Union of North Liberty, Iowa ($7.1 billion in assets,
253,348 members).Last year it originated $587 million, up 56.2% from
EVP of commer-
cial services for
the credit union
benefited as buyers in the second-
ary market added requirements
that would have been costly to
“We received an influx of quality commercial real estate requestsdue to this and we could competewith similar rates and terms,” Wilson said.
At BECU, the second-largest,
commercial loan production last
year fell 22.3% to
Dana Gray, BE-
CU’s SVP of com-
mercial and busi-
ness services, said
were bustling in
early 2020, but
after COVID- 19
was declared a pandemic March
11, the credit union pressed the
It concentrated on gettingloans in the pipeline funded, andturned its staff to reviewing eachof its more than 600 existing commercial real estate loans. It developed an extensive questionnairefor staff to use as it contactedborrowers, and followed up asnecessary.
“It did have an impact on production,” she said.
About two-thirds of BECU’scommercial portfolio is formulti-family housing. Therewas some weakness in Seattle,where landlords started offeringrent concessions in the springand summer in areas that aregenerally pricey for apartments.But the impact on loans wasminimal.
“Multi-family held up muchbetter than we had expected,”Gray said.
In retail, BECU found unex-
pected challenges. Long before
the pandemic, BECU had devel-
oped a strategy of concentrating
on loans in strip shopping cen-
ters anchored by grocery or drug
stores. The idea was to lessen
exposure to retailers that might
be hurt from competition from
Amazon or other online outlets.
In that context, nail salons, barber shops and karate studios weresafe bets. But in the pandemic,those personal services had toshut down or severely curtailoperations.
BECU responded by developingplans to enable payment deferralsof up to 90 days.
“We really did not have a member need or request a payment deferral at all,” Gray said.
By the fourth quarter, BECUfelt comfortable enough to rampup production. ”We’re very optimistic where we’re headed,” Graysaid.
Loan quality seems to have heldup well last year. Among the top10 commercial real estate lenders, BECU and six others had nocharge-offs. And the 60-day-plusdelinquency rate among the Top10 credit unions was 0.05% as ofDec. 31, down from 0.16% a yearearlier.
Among all lenders, the 60-daydelinquency rate was 3.8% in February, down from 3.9% in January.Among delinquencies of any duration, the February rate was thelowest since April 2020, accordingto the Mortgage Bankers Association of Washington, D.C.
The MBA data showed the highest 60-day delinquency rates inFebruary were 20.6% for lodgingand 10.8% for retail. Rates were2.7% for industrial, 2.4% for officeand 1.7% for multi-family loans.
BECU and GreenState had nodelinquencies either year, whilethe rate at Mountain America was0.03%, down from 0.34% a yearearlier.
GreenState’s net charge-offslast year were $25,695, comparedwith none in 2019. MountainAmerica had net charge-offs of$117,270 for 2020, comparedwith a net recovery of $170,828 in2019.
“Our delinquencies are at his-
toric lows, the lowest they’ve ever
been,” Griffiths said. “It won’t be
that way by mid-2021, or maybe
the end of 2021. I still think we’re
in good shape. It won’t be crazy
higher delinquencies, but it will
be higher than it is now.”
As of early March, GreenState
was continuing to maintain a
close eye on retail real estate and
hotel portfolios, monitoring their
“What happens after the stimulus packages and governmentassistance stops? We need to bein communication with our borrowers now more than ever, andwe are,” he said. “So far, our loanquality remains strong and we’vebeen able to weather the storm.”The NCUA has required PPPloans to be recorded under thecategory normally used for unsecured personal consumer loans,so they don’t show up in commercial lending categories.
“We started the year very fastin January and February as far asproduction. When we hit March,we definitely tapped on thebrakes, not knowing where thingswere going on the commercialreal estate side as it related to thepandemic,” Griffiths said.
“As we got more familiar withwhat the market looked like in2020, we adjusted our approachas it relates to property types,”lowering its loan-to-value limits inareas impacted by the pandemic,he said.
Mountain America had fewloans to hotels, but halted lendingin that area. “We got very nervouswith retail, and somewhat cautious with office,” he said.
Instead, Mountain Americafocused on lending for industrialwarehouses and multi-familyhousing, and by year’s end theybecame larger parts of its overall$1.1 billion commercial real estateloan portfolio.
Commercial real estate as a percent of total loans was 12.5% asof Dec. 31 at Mountain America,compared with about 9% amongcredit unions that have thoseportfolios. Griffiths said the boardhas placed no cap on its businessportfolio, and that he expects theportfolio to become a larger partof the credit union.
“This is one thing I absolutelylove about Mountain America,”he said. “We are not looking at apercentage; we will go where theneed is, and we feel there is a largeneed on the small business sideto help our members with theirsmall business loans.” n
LoansCONT. FROM PAGE 1
Y Despite a pause early in the pandemic,commercial lending began accelerating inlate 2020.
Y The 60-day-plus delinquency rate among thelargest CUs was 0.05% as of Dec. 31, downfrom 0.16%.
Y Lenders are optimistic, but cautious about thelending quality through the rest of 2021.
$0 2017 2018 2019 2020Commercial Real Estate Lending AcceleratesEven with many lenders pausing in the early monthsof the pandemic, loan volume rose 23% to $25.8 billionin 2020, following a 13% gain in 2019.
Commercial real estate loan production in the 12 monthsending Dec. 31 in billions of dollars
Construction and DevelopmentFarmMulti-FamilyOwner-Occuppied OtherNon-Owner-Occuppied Other
SOURCE: The NCUA with data analysis by Jim DuPlessis, correspondent-at-large, CU Times
‘So far, our loan qualityremains strong andwe’ve been able toweather the storm.’‘We’re very optimisticwhere we’re headed.’