A big year for credit union commercial lending
Lake Michigan may be up 40 percent and a small Kalamazoo CU is ramping up.
Commercial lending is taking off in a big way at credit unions in West Michigan, with one of the biggest groups in the state predicting its commercial loan volume will increase by as much as 40 percent this year.
Meanwhile, Educational Community Credit Union in Kalamazoo is building a commercial loan staff and just hired its first commercial loan officer.
At Lake Michigan Credit Union, Mark Hoffhines, senior vice-president of commercial lending, predicted LMCU’s total volume of commercial loans will probably end the year at 40 percent above its total last year.
LMCU maintains two commercial loan portfolios. One is for members’ businesses and totals about $100 million. The other is loans for investment property, particularly multi-family residential, which is at about $50 million.
LMCU, based in Grand Rapids, is the second largest credit union in Michigan, after DFCU Financial, based in southeast Michigan. Its assets total $3.4 billion, with loans of $2.2 billion, savings of $2.6 billion and more than 291,000 members. LMCU is the West Michigan region’s largest home mortgage originator.
Commercial lending is a big part of LMCU’s business, said Hoffhines. “Most of what we do is small to medium-size businesses.”
That includes some companies, mainly manufacturers, with 200 to 300 employees and $50 million to $60 million in sales each year, according to Hoffhines.
His organization has talent, products and capabilities “to service a pretty broad spectrum of the companies out there.”
According to Hoffhines, many LMCU commercial loan officers have more than 20 years of experience, and there is a “fit between the senior lender and small business,” which he says has contributed to the growth in business loan portfolios.
“It’s really the advisory side; they’re looking for somebody that can work with them, somebody who really will know the business,” he said.
Then there’s the economy today, which is definitely growing.
“Certain sectors, especially housing,” Hoffhines said, are very active, and there are “a lot of people back in business in that area.”
Manufacturing is not quite as spectacular, but it has been recovering from the recession, showing consistency over the last two years with some upticks.
But residential construction “came out of nowhere” lately, he said, although he added it has “a long way to come back to,” compared to its level of activity before the onset of the Great Recession.
Trucking, automotive, office furniture — all are examples of West Michigan business that appear to be going up, said Hoffhines.
The newest addition to the growing commercial department at Educational Community Credit Union made some of the same points in talking with the Business Journal. Ryan Reffitt said residential development has made quite a comeback in the last few years, and commercial development is stirring, too.
“We do see many more cranes in the area for commercial construction,” said Reffitt. “In Kalamazoo, the medical school is going in downtown. That will produce an economic boost in ancillary businesses in the vicinity.”
The Western Michigan University Homer Stryker M.D. School of Medicine — the nation’s newest medical school — is a $68 million construction project that was completed in June. The inaugural class of 54 students has started and a formal grand opening is scheduled for Sept. 18.
Reffitt just joined the staff of ECCU as its first commercial loan officer. In April, Charles Cornelius, president and CEO of ECCU, announced the hiring of Kenneth Leonard as vice president of Commercial Loan Services. Leonard has 10 years of experience in the financial industry and his previous positions included vice president of business development at Celtic Bank and vice president and market manager at United Bank and Trust in Ann Arbor.
“We are committed to providing an extraordinary experience to our members, and this will remain the case as we develop and grow our commercial loan services,” said Cornelius, noting ECCU will provide “a member-focused alternative to the businesses we serve.”
Reffitt will work with area businesses in real estate loans, credit lines, equipment loans and SBA-backed loans. He will also be responsible for developing new and existing business relationships.
A lifelong resident of West Michigan, Reffitt had nine years of commercial lending experience at Chemical Bank in southwest Michigan.
Commercial lending “is a good opportunity for the credit union to get larger,” said Reffitt. The market is significantly different from what it was five or six years ago as the recession was setting in, he noted, but now they are seeing expansions in different industries that are “beginning to get their foothold again.”
ECCU’s activity is concentrated in southwest Michigan, particularly in Kalamazoo, Van Buren, St. Joseph and Allegan counties. However, it is chartered to work in 21 counties, as far north as Muskegon and Gratiot counties and east to Hillsdale County.
Established in 1935, ECCU began by serving Kalamazoo school employees but now provides financial products and services to anyone who lives, works, or attends school in any of its 21 southwest Michigan counties. It has more than $414 million in assets and more than 36,000 members.