Pawtucket Credit Union has been around since 1928 and has grown into the largest credit union in Rhode Island. But it’s new to business lending.
David Coderre was hired at Pawtucket Credit Union last year to oversee its new commercial lending division, and he answered five questions about this new area for PCU.
PBN: Why did the credit union decide to open a commercial/business lending division? With all the talk in the business community about big banks curtailing lending, did PCU see an opportunity?
CODERRE: As we’ve grown, so have the needs of our members. PCU has had business deposit products for several years and recognized the demand for business loans, but didn’t have the expertise in-house to offer a comprehensive program. In early 2008, management committed to creating a commercial lending department and set the wheels in motion to hire experienced staff.
The credit union’s launch into commercial lending was planned prior to the economic meltdown and, although there’s been much media coverage about big banks curtailing lending, recent circumstances did not affect PCU’s decision to enter the business lending marketplace.
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PBN: What are the products and services that will be offered, and how will they differ from what a business owner might see at a bank, or even another credit union?
CODERRE: In addition to our deposit products, we now offer a wide range of business loans ranging from real estate and equipment loans to lines of credit. Real estate loans include office and industrial properties, apartment and multi-family buildings, mixed use (business/residential) properties and retail centers. Business online banking and lock box services will also be introduced later this year.
While the products offered by PCU are similar to those offered by banks and some of the larger credit unions, PCU is different because it’s large enough to have the resources to meet most borrowers’ needs, but small enough to get things done without lots of committee decisions and delays.
PBN: Which segments of the commercial market have taken advantage of PCU’s services the most and why?
CODERRE: To date, many of the inquiries we’ve had are for investment and mixed-use properties. This makes sense since it’s closely related to the regular retail mortgage lending we’re known for. As we become more well-known in the business community, I expect we’ll develop a diverse portfolio of commercial business.
PBN: How big a part of PCU’s business will commercial lending become in the coming years?
CODERRE: We expect our commercial portfolio to grow substantially over the next few years as the marketplace becomes more aware of our products and services. Ultimately, the National Credit Union Administration limits credit unions’ commercial loan portfolios to roughly 12 percent of total assets. As the new kid on the block in commercial services, and the largest credit union in Rhode Island, we have quite a ways to go before we have to worry about this constraint.
PBN: How do respond to the complaints of many bank executives that, by moving into business lending, credit unions are overstepping their bounds as nonprofit institutions?
CODERRE: Commercial banks typically offer a broader array of specialized business products than credit unions. At the same time, they may not be positioned well to meet the needs of all potential customers due to their organizational structure or business guidelines. That’s where credit unions come in – we have the flexibility to consider the needs that big banks can’t or won’t.
Credit unions were formed to service the needs of the community as a whole. As communities change so do their needs. Offering commercial services is just one way we’re continuing to meet those needs. Business lending by credit unions will have little impact on banks, but a significant impact on local businesses and the communities they serve.
