Chicago's biggest credit union is growing commercial loans by leaps and bounds, but that may be due more to it taking credits from other borrowers and strong lending in other regions rather than market growth in the Windy City.
Alliant CU, the nation's eighth-largest credit union by assets, had $501.5 million in business loans at the end of 2017. The Chicago-based credit union grew its commercial book by 41.1% on a year-over-year basis.
Charles Krawitz, vice president of commercial lending for Alliant, said in an interview that the credit union originated about $250 million in commercial loans in 2017, and will likely do more than $300 million in 2018.
Alliant is primarily a commercial real estate lender and differs from most credit unions in that commercial lending is a very targeted line. It also makes those loans on a national basis. "There is no credit union that compares to us in this regard," Krawitz said. Alliant is targeting transactions in the range of $6 million to $35 million, which he said is "relatively unheard of" among credit unions.
Chicago makes up about 25% of Alliant's commercial book, but Krawitz called the market a big piece of the company's puzzle. Chicago is benefiting from being a transportation and distribution hub, Krawitz said, and Alliant has been increasingly lending in that space while exploring more "industrial" opportunities. He mentioned First Midwest Bancorp Inc., Wintrust Financial Corp. and MB Financial Inc. as Chicago competitors.
But FIG Partners analyst Brian Martin called Alliant "kind of a non-event" in terms of commercial lending. His Chicago coverage includes Old Second Bancorp Inc., MB Financial, Byline Bancorp Inc. and BankFinancial Corp. He said those banks often talk about other large, regional banks in terms of commercial competition and have not mentioned Alliant to him. "I haven't heard anything on the credit union," he said. "I don't think it's much of a factor at all."
Martin said the Chicago commercial market is hypercompetitive, and the growth any one institution is seeing is likely by taking share from others in the market. He said Alliant may be taking credits that have come up for renewal and that banks simply don't want anymore.
The Chicago commercial market is stagnant, according to Martin, but he added that the recent tax cut could help. "But I definitely don't feel like it's growing," he said. Martin pointed to Old Second, one of the smallest publicly traded commercial players in Chicago, and said the company is projecting about 8% growth.
Aside from the Chicago area, Alliant goes where there are opportunities. It sources transactions through commercial mortgage brokers around the country and employs a commercial lending team with years of experience that Krawitz said rivals almost any credit union. Alliant attracts those lenders because it allows them to go after larger and more sophisticated credits with flexibility in how they price and structure transactions.
Member business lending for many smaller credit unions consist of relatively small loans with small businesses. Krawitz said he sees such transactions all the time in which Alliant could participate, but often the yields for those loans are unappealing. "Most credit unions do commercial real estate loans not on a very well thought-out basis and they don't do it consistently," he said.
Alliant also is able to structure step-down prepayments that most of the large banks it competes against are hesitant to offer. If they do, they charge an extreme premium for it, Krawitz said. Additionally, Alliant does not require its commercial clients to have depository relationships with the credit union. Some small banks may offer aggressive loan terms but they also want to have $5 million in deposits, Krawitz said.
Krawitz also said Alliant does well competing with Fannie Mae and Freddie Mac. The credit union is able to get into some opportunities earlier in the process than the agencies are comfortable with, and so a $35 million multi-family deal that might seem destined for Fannie or Freddie ends up with Alliant.
He added that there is a lot of volatility in the commercial lending market, and Alliant is not under the gun to take on suspect loans.
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