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Community Banking: 5 Opportunistic States for SBA Lending in 2019

According to the ICBA, community banks represent roughly 99% of all banks in the United States and make nearly 60% of all small-business loans across the country.  By lending locally, these institutions drive economic growth within our communities and are an integral part of our nation’s financial system.  While the SBA’s flagship 7(a) program fell just short of its sixth consecutive year of overall dollar volume growth in FY2018 (0.3% decrease year-over-year), several states continue to grow rapidly and present the greatest competitive advantage for local community banks domiciled in or near those states to enter the SBA market and drive volume in 2019.

There are nearly 1,000 FDIC insured institutions headquartered across the five states highlighted in this article that did not authorize a single SBA 7(a) loan during FY2018, yet more and more small-businesses in their communities are utilizing the program each year.  Our team considered the following metrics to identify the top five opportunistic states where the local SBA competition is low AND the demand for SBA loans is increasing, in comparison to the rest of the nation:

  • Least Competitive (X-Axis): The percentage of FDIC insured institutions (as of September 30, 2018) that did not participate in the SBA 7(a) and USDA Loan Program during FY2018 (LA: 85.6%; IL: 83.2%; SC: 82.7%; TX: 75.9%; FL: 74.6%; Entire Country: 72.0%).
  • Fastest Growing (Y-Axis): The percent change in SBA 7(a) and USDA loan dollar volume growth using combined data ranging from FY2015-2016 to FY2017-2018 (LA: 30.7%; SC: 27.6%; IL: 12.3%; FL: 11.0%; TX: 10.9%; Entire Country: 6.6%).


The below sections will briefly discuss additional key takeaways surrounding the local SBA competition and recent growth for each state:

1. Louisiana

No other state in the contiguous United States grew SBA dollar volume year-over-year at a faster rate than Louisiana in FY2018.  Volume increased by nearly 80%, reaching $314 million, up from $175 million in FY2017.  The next fastest growing state grew by 34% during this same period.

 2. South Carolina

In FY2018, lenders headquartered in South Carolina authorized less than 7% of the total SBA 7(a) loan dollar volume used to fund small-businesses in the state.  This percentage ranked as the lowest for any state in the country in FY2018, as the majority of states typically see anywhere from 25-50% of in-state dollar volume authorized by in-state lenders in a given year.

3. Illinois

With 440 banks headquartered in the state, Illinois ranks as the state with the second highest number of FDIC insured institutions in the country, only behind Texas (444).  Of the 74 banks that were active participants in the program in FY2018, roughly half authorized less than three SBA loans, leaving plenty of room for in-state lenders to grab hold of the increasing market share.

4. Texas

The Lone Star State has grown overall SBA volume by nearly $500 million since FY2015, hitting $2.7 billion for the year in FY2018.  No other state in the country has a higher delta during this four-year span.  With six different SBA district offices throughout the state, there are more than enough resources for local lenders to bolster even more SBA participation in 2019.

5. Florida

Slow and steady growth was key to helping Florida make the list in 2019.  Dating back to FY2013, the year-over-year dollar volume growth rate has exceeded at least 3% each year through FY2018.  Furthermore, local lenders should see an opportunity to compete more effectively in FY2019, as the number of FDIC insured SBA lenders headquartered in the state dropped from 46 in FY2017 to 30 in FY2018.

While the SBA 7(a) Loan Program can be a great option for lenders looking to increase liquidity, generate additional fee income or diversify portfolio risk, the local landscape must first be considered, keeping competition and overall growth at top-of-mind.  Contact Windsor Advantage at (312) 724- 6425 to setup an initial consultation to learn more about your institution’s local SBA market and be on the lookout for a more in-depth analysis on the states we feel are the most opportunistic in our upcoming whitepaper.

Data Sources: SBA 7(a) & 504 Loan Data Reports; FDIC State Profiles; ICBA Community Banking

About Windsor Advantage, LLC

Windsor Advantage is a Lender Service Provider that provides banks and credit unions with a comprehensive outsourced SBA 7(a) and USDA lending platform.

Since 2010, Windsor has processed more than $2.2 billion in government guaranteed loans and currently services a portfolio in excess of $1.3 billion (as of December 31, 2018) for over 85 lenders nationwide.  With over 150 years of collective SBA experience, cutting-edge technology, rigid controls and consistent processes, Windsor Advantage is uniquely qualified to assist any sized lender with implementing a thoughtful and profitable government guaranteed lending initiative.

Windsor Advantage has a team of 26 professionals with offices in Chicago, Illinois; Indianapolis, Indiana; and Charleston, South Carolina.

About the Author: Andrew Sheaffer manages all business development functions at Windsor.  He graduated from Miami University of Ohio with a degree in Strategic Communication.  Previously, Andrew worked in Chicago at BMO Harris Bank where he worked with financial institution clients.  He is responsible for all media relations and can be reached at (312) 248-8530.

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