Small  Business  Lending  Trends  Q2  2012    

1  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

Foreword  

•  Small  Business  Lending  Trends  is  a  complimentary  version  of  the  SBFE®  Small  Business  Lending  Trends.  

•  Small  Business  Lending  Trends  u?lizes  SBFE  Data™  with  sophis?cated  business  intelligence  and  analysis  from  Equifax,  to  provide  a  holis?c  view  of  the  small  business  market.    

•  Small  Business  Lending  Trends  provides  unparalleled  insights  into  the  overall  health  of  the  small  business  lending  industry  and  highlights  growth  opportuni?es  and  risk  trends.  

•  No  part  or  whole  of  this  report  may  be  reproduced  or  shared  without  the  explicit  permission  of  the  SBFE.  

2  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

Small  Business  Lending  Origina?ons:    units  

3  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  The  number  of  Line  of  Credit  origina?ons  began  dropping  pre-­‐recession  and  con?nued  to  drop  through  June  2009  

•  Line  of  Credit  and  Business  Card  origina?on  remain  below  prerecession  levels  

•  Term  Loan  origina?ons  have  been  increasing  since  first  quarter  2010  and  are  slightly  above  prerecession  levels  –  The  increase  in  Term  Loan  origina?ons  is  par?ally  impacted  by  termed  out  Lines  of  Credit  (i.e.  conversion  from  Lines  of  Credit  to  Term  Loans)  

0

50

100

150

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250

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Mar-08

Jun-0

8

Sep-08

Dec-08

Mar-09

Jun-0

9

Sep-09

Dec-09

Mar-10

Jun-1

0

Sep-10

Dec-10

Mar-11

Jun-1

1

Sep-11

Dec-11

Mar-12

Jun-1

2

Inde

x (J

an 2

007=

100)

Business Card Line Of Credit Term Loan All Products All Products Excluding Card

Origination Units Indexed to January 2007

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  Lending  Origina?ons:    balances  

4  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  Origina?on  Balance  indices  on  new  accounts  are  observed  aVer  the  origina?on  date  to  allow  for  the  natural  lag  in  repor?ng  of  the  data  and  usage  on  revolving  accounts  

•  Origina?on  Balance  levels  contracted  significantly  in  2008  

•  Term  Loans  have  recovered  to  levels  from  five  (5)  years  ago  –  The  increase  in  Term  Loan  origina?ons  is  par?ally  impacted  by  termed  out  Lines  of  Credit  (i.e.  conversion  from  Lines  of  Credit  to  Term  Loans)  

   

0

50

100

150

200

250

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Mar-08

Jun-0

8

Sep-08

Dec-08

Mar-09

Jun-0

9

Sep-09

Dec-09

Mar-10

Jun-1

0

Sep-10

Dec-10

Mar-11

Jun-1

1

Sep-11

Dec-11

Mar-12

Jun-1

2

Inde

x (J

an 2

007=

100)

Business Card Line Of Credit Term Loan All Products All Products Excluding Card

Origination Balance Indexed to January 2007

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  New/Exis?ng  Accounts:    unit  ra?o  

5  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  The  ra?o  of  new  accounts  exis?ng  accounts  indicates  the  rela?ve  size  of  new  ac?vity  entering  exis?ng  por[olios  

•  Business  Card  and  Line  of  Credit  new  to  exis?ng  account  ra?os  are  increasing  slightly,  but  remain  lower  than  prerecession  levels  

•  Term  Loan  new  to  exis?ng  account  ra?o  has  returned  to  prerecession  levels  –  The  increase  in  Term  Loan  origina?ons  is  par?ally  impacted  by  termed  out  Lines  of  Credit  (i.e.  conversion  from  Lines  of  Credit  to  Term  Loans)  

   

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Mar-08

Jun-0

8

Sep-08

Dec-08

Mar-09

Jun-0

9

Sep-09

Dec-09

Mar-10

Jun-1

0

Sep-10

Dec-10

Mar-11

Jun-1

1

Sep-11

Dec-11

Mar-12

Jun-1

2

Business Card Line Of Credit Term Loan All Products All Products Excluding Card

New/Existing Account Unit Ratio

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  New/Exis?ng  Accounts:    balance  ra?o  

6  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  The  ra?o  of  new  accounts  to  exis?ng  account  balances  indicates  the  rela?ve  size  of  the  new  balances  entering  por[olios  

•  Business  Card  balance  ra?os  have  been  moderately  increasing  since  Q2  2010  

•  Term  Loan  and  Line  of  Credit  balance  ra?os  have  been  increasing  for  the  past  two  (2)  years  –  The  increase  in  Term  Loan  origina?ons  is  par?ally  impacted  by  termed  out  Lines  of  Credit  (i.e.  conversion  from  Lines  of  Credit  to  Term  Loans)  

 

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Mar-08

Jun-0

8

Sep-08

Dec-08

Mar-09

Jun-0

9

Sep-09

Dec-09

Mar-10

Jun-1

0

Sep-10

Dec-10

Mar-11

Jun-1

1

Sep-11

Dec-11

Mar-12

Jun-1

2

Business Card Line Of Credit Term Loan All Products All Products Excluding Card

New/Existing Account Balance Ratio

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  Business  Cards:    u?liza?on  

7  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  Business  Card  limits  peaked  in  August  2008  then  experienced  a  subsequent  decline,  although  there  has  been  rela?ve  stabiliz?on  over  the  last  two  (2)  years  

•  Business  Card  balances  con?nue  to  decrease  resul?ng  in  declining  u?liza?on  levels    

•  The  decreased  balances  and  declining  u?liza?on  indicates  that  small  businesses  remain  conserva?ve  in  their  use  of  credit  

 

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Jan-

07

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-07

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ay-0

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ay-1

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Uti

lizat

ion

Balance Limit Utilization (RHS)

Business Card Utilization

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  Lines  of  Credit:    u?liza?on  

8  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  Line  of  Credit  limits  have  grown  over  the  past  twelve  (12)  months  

•  Line  of  Credit  balances  dropped  driving  u?liza?on  to  its  lowest  point  since  July  2008  

•  Declining  Line  of  Credit  u?liza?on  indicates  that  small  businesses  remain  conserva?ve  in  their  use  of  credit  

   

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Jan-

07

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-07

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-07

Jul-0

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7 Ja

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ar-0

8 M

ay-0

8 Ju

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May

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ep-0

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ay-1

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Sep

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-10

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Mar

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Jul-1

1 S

ep-1

1 N

ov-1

1 Ja

n-12

M

ar-1

2 M

ay-1

2

Uti

lizat

ion

Balance Limit Utilization (RHS)

Line of Credit Utilization

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  Lending  Annualized    Charge  Offs:  units  

9  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  Business  Card  unit  charge  off  rates  peaked  in  2009  and  have  been  steadily  declining  since  

•  Peaks  in  Business  Card  and  Line  of  Credit  unit  charge  off  rates  coincides  with  similar  peaks  in  unit  delinquency  rates  for  those  loan  types  

•  All  charge  off  unit  rates  are  well  below  recession  levels  indica?ng  con?nued  stabiliza?on  of  the  por[olios  

   

0%

1%

2%

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4%

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6%

7%

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Mar-08

Jun-0

8

Sep-08

Dec-08

Mar-09

Jun-0

9

Sep-09

Dec-09

Mar-10

Jun-1

0

Sep-10

Dec-10

Mar-11

Jun-1

1

Sep-11

Dec-11

Mar-12

Jun-1

2

Business Card Line Of Credit Term Loan All Products All Products Excluding Card

Annualized Unit Charge Off Rate

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

Small  Business  Lending  Annualized    Charge  Offs:  dollars  

10  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

•  Business  Card  dollar  charge  off  rates  experienced  a  steeper  increase  than  Business  Card  unit  charge  off  rates  indica?ng  the  severity  of  the  impact  to  these  por[olios  

•  Line  of  Credit  Dollar  charge  off  rates  have  declined  steadily  except  for  an  increase  in  Q4  2011  

•  Term  Loan  dollar  charge  off  rates  have  remained  rela?vely  steady  for  the  last  twelve  (12)  months  

   

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6%

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14%

16%

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Mar-08

Jun-0

8

Sep-08

Dec-08

Mar-09

Jun-0

9

Sep-09

Dec-09

Mar-10

Jun-1

0

Sep-10

Dec-10

Mar-11

Jun-1

1

Sep-11

Dec-11

Mar-12

Jun-1

2

Commercial Card Line Of Credit Term Loan All Products All Products Excluding Card

Annualized Dollar Charge Off Rate

Source: Small Business Financial Exchange, Inc. and its SBFE© Database with analytics provided by Equifax

©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved  

11  

About  the    Small  Business  Financial  Exchange,  Inc.  

The  SBFE  seeks  to  be  the  leading    advocate  for  the  exchange  of  business    financial  informa?on  used  for  risk    management  ac?vi?es  of  small  business    lenders  and  financial  en??es.      SBFE  has  four  primary  objec?ves:  •  Promote  the  growth,  health  and  success  of  the  small  business  community  that  includes  our  

members  and  the  small  businesses  they  serve.  

•  Establish  opera?ng  rules  and  standards  that  focus  on  protec?on  of  sensi?ve  small  business  data,  control  of  its  use  by  lenders,  and  maintaining  its  value.  

•  Establish  repor?ng  standards  and  opera?ng  prac?ces  that  insure  the  highest  data  quality,  data  integrity,  and  data  security.  

•  Provide  effec?ve  self-­‐governance  as  an  independent  organiza?on  that  is  a  trusted  advocate  and  guardian  on  behalf  of  all  par?es.  

   

For  more  informaBon  about  the    Small  Business  Financial  Exchange,  Inc.  

Carolyn  Hardin-­‐Levine  Chief  ExecuBve  Officer  Small  Business  Financial  Exchange,  Inc  

24100  Chargin  Blvd,  Suite  125  Cleveland,  Oh    44122  Office:  216-­‐245-­‐4242  Cell:  216-­‐337-­‐2599    Email:  Chardin@sbfe.org    

   

12  ©  2012  Small  Business  Financial  Exchange,  Inc.  Confiden=al  and  proprietary.    All  rights  reserved