Through June 28, 2019, SBA 504 loan originations are up 5.4% compared to the same period in the prior year, reaching $3.59 billion year-to-date in 2019 versus $3.40 billion during the same period in 2018.
Despite this growth, the unpaid principal balance of outstanding 504 loans stood at $25.53 billion as of March 31, 2019, down 1.2% compared to the $25.83 billion figure at year-end 2018. In contrast, SBA 7(a) loan originations are down 8.5% year-to-date to $17.05 billion and the unpaid principal balance of 7(a) loans is $93.82 billion at March 31, 2019, up 1.5% compared to year-end 2018.
While 7(a) loans continue to grow at solid pace (7.2% in 2018), 504 loans have remained in a fairly tight range between $25 billion and $27 billion over the last nine years. Of course, the chart below includes only the CDC/SBA second lien portion of a 504 loan package, which typically amounts to roughly 40% of the financing. The first lien loan, usually supplied by a bank or other private sector lender, typically provides another 50% of the project funding.
Charge-off rates for the major SBA loan programs remain very low. The chart below shows charge-off rates for the CDC/SBA held second lien position, as well as chargeoff rates for the short-lived FMLP program, authorized in 2009 and ending in 2012. This program held pools of 504 first liens. While accurate data on the privately-held 504 first lien loans is not available, the fact that these loans are in a last loss position after the second lien loans leads to a presumption that charge-off rates would be considerably lower than for the second lien loans.
News Blurb of the Week – OCC Official: Expect CRA Reform Proposal by End of Summer, Compliance Newsbytes
June 12, 2019 – The federal banking agencies expect to issue a notice of proposed rulemaking to revise their Community Reinvestment Act regulations by the end of summer, Senior Deputy Comptroller of the Currency for Bank Supervision Policy Grovetta Gardineer said today at the American Bankers Association’s Regulatory Compliance Conference.