Credit Union Business Lending Trends: Back to Normal?
Making loans is easy. Managing a commercial loan portfolio is infinitely harder and more complex. This truism is the perfect starting point for a review of the credit union commercial lending market. Many of us have lived through both rock bottom interest rates and rapidly expanding portfolios, with loan delinquency rates near zero and minimal loan portfolio management being required. But things have changed, in 2025, credit unions are seeing loan volumes rebound and delinquency rates rise. Using NCUA 2025 data, we can analyze credit union commercial lending performance compared to previous years and help to predict future trends.
Volumes Are Back But Let’s Remember
2025 has seen a rebound in commercial loan business after a rocky couple of years. The first quarter saw $9.76 billion in commercial loan volume, significantly higher than $6.77 billion in 2024. The largest originators increased their production by nearly $800 million, focusing on larger commercial real estate transactions. While loan dollar volume increased 44%, the number of business loans funded increased only 9%, resulting in an average loan size increase from $356,000 to over $470,000. Additionally, a total of forty-seven more credit unions funded at least one commercial loan per month compared to 2024. With liquidity concerns easing across the board, we are seeing a widespread return of credit unions to fund at volumes equivalent to their historical norms.
If the current lending pace continues, we will see solid and consistent growth, with an 11% year-over-year portfolio growth. The industry as a whole is nearly 20% higher than pre-pandemic levels. Unlike the residential mortgage market, commercial lending has a natural refinance market built into the business. Most commercial loans are fixed for five years, creating new loan origination opportunities in 2025 and 2026 as Covid-era loan refinances come due.
Loan Selling & Buying Is Back
Credit unions are rebounding from a historically brutal loan participation marketplace during the liquidity crunch. The amount of commercial loans bought and sold has more than doubled since this period, reaching $1.07 billion in early 2024. If the 2025 pace continues, there will be a 31% increase in loan participations compared to 2024. Twenty-eight credit unions purchased at least $10 million in loans so far in 2025, compared to only eight in 2024. When you look closely at those credit unions purchasing participations, the list consists primarily of credit unions that have historically engaged in loan purchases since they do not have adequate internal staff to originate these volumes, or they are aligned with an established CUSO. Time and again we hear from credit unions that are now looking to purchase loans, after the loan dollars they allocated to internal loan production have not panned out, that they now need to work with other credit unions or CUSOs to meet their production goals.
Cooperating among cooperatives is key for credit unions. As liquidity markets stabilize, placing a portion of loan production as loan participations makes sense both for the individual credit union as well as for the industry. Credit unions should utilize a loan participation model to maximize internal and regulatory limits, along with establishing and balancing overall credit risk. Be certain to understand liquidity positions within the credit union before attempting to identify participation partners. The credit union may also want to consider working with a CUSO or marketplace with a roster of buyers and sellers to enhance the ability to meet production goals while also maintaining loan risk.
Credit Quality Has Stress So Act Now
Over the past five years I have been reminding everyone that will listen that commercial loan delinquencies will rise and eventually loan charge-offs will occur. That message needed to be communicated to C-suite executives and Boards of Directors so that everyone could prepare financially and mentally for this eventuality. That time is here. Commercial loan delinquency is rising, with a 23% increase in 2025. The percentage of delinquent loans has crossed the 1% mark, reaching 1.04%. Unlike previous surges, this year’s delinquency rise is spread across many credit unions.
To prepare for business loan delinquency or charge-offs, proactive management is key. Monitor NSF checks, property tax delinquencies, and remember there is no replacement for having old-fashioned conversations with members. A lot of information can be obtained about a property and its borrower by conducting on-site visits. Finally, managing business loan workouts and collections is typically a difficult task for the same people who originally made these loans. Consider bringing in third-party expertise to assist with the process when appropriate.
Focus On The Future
Credit unions have shined the brightest during difficult times with small businesses. We are entering an era where portfolio management should have the same or greater resources as the origination function. This may involve additional hires, shifting responsibilities, or bringing in CUSOs or consultants. Focus on this year’s success and the impact on local communities, not comparing performance or production to the times of lowest interest rates. Record numbers of small businesses were formed during the pandemic era and man of these businesses will be maturing and need credit union services such as SBA loans, working capital lines of credit, and depository assistance. This will be a shift from the real estate heavy portfolios funded over the past three years. The current environment is a great time to reset your program for future success.
Mark Ritter
CEO
Mark Ritter is the CEO of Member Business Financial Services (“MBFS”). MBFS is owned by fourteen credit unions and is focused on helping credit unions assist business owners and real estate investors in their communities. In 2002, Mark started Members 1st FCU’s business lending program as “one person and a desk” with no policies, products, staff, systems, or business members. That program grew to be one of the ten largest for federal credit unions with outstanding whole and participation commercial loans. In 2012, Mark took on the challenge of the CEO role for MBFS as the fifth CEO for the organization in five years. Since Mark joined MBFS, the company has grown exponentially and now works with over one hundred credit unions nationwide. Today, MBFS has a full line of services to assist businesses, including a $2.9 billion loan servicing portfolio. Mark has helped countless credit unions’ business lending programs grow and prosper through all types of economic cycles.