Through August 9, 2019, SBA 504 loan originations are up 7.2% compared to the same period in the prior year, reaching $4.26 billion year-to-date in 2019 versus $3.98 billion during the same period in 2018.
This reflects a substantial acceleration in originations over the past month, as originations were up just 5.4% year-to-date a month ago. Despite this growth, the unpaid principal balance of outstanding 504 loans stood at $25.68 billion as of June 30, 2019, down 0.6% 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 $19.51 billion and the unpaid principal balance of 7(a) loans is $94.60 billion at June 30, 2019, up 2.4% 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 above 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 to the left shows charge-off rates for the CDC/SBA-held second lien position, as well as charge-off 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 privatelyheld 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 – Reconceiving the Community Reinvestment Act, Karen Jacobs, Economy Matters, Federal Reserve Bank of Atlanta
August 1, 2019 – An unfavorable Community Reinvestment Act (CRA) rating from the Federal Reserve Bank of Atlanta led to improved operations at BBVA (formerly BBVA Compass Bank).