Monday, January 12, 2015

Rapid Growth in New Mexico Educators' Business Loans

New Mexico Educators Federal Credit Union (Albuquerque, NM) has rapidly grown its business loan portfolio after receiving a low-income designation on September 17, 2012.

A credit union that receives a low-income designation is not subject to the member business loan cap of 12.25 percent of assets.

Between September 2012 and September 2014, outstanding business loans (including unused commitments) almost doubled at New Mexico Educators Federal Credit Union from $125.2 million to almost $241.6 million. This represents a compound annualized growth rate of almost 39 percent.

Business loans and commitments as a percent of assets rose from 10 percent to 16 percent over the same two-year interval.

While New Mexico Educators Federal Credit Union is currently reporting a very low delinquency rate on its business loan portfolio, any credit union reporting such a rapid loan growth should draw additional scrutiny from the National Credit Union Administration to ensure that this growth is done in a safe and sound manner.

As Warren Buffett stated, "[o]nly when the tide goes out do you discover who's been swimming naked."

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