Already the nation's most prolific SBA lender, Huntington Bancshares has been quietly widening its scope. Long known for deep Midwestern roots, Huntington is positioning itself as a national 7(a) lender, while the SBA's own statistics highlight the impact of the Columbus, Ohio-based institution's expanded government-guaranteed-lending operation.
Huntington expects to close well over 6,000 7(a) loans during SBA's 2023 fiscal year, which began Oct. 1, according to Brant Standridge, the $189 billion-asset company's senior executive vice president for consumer and business banking. And though Standridge's 6,000-plus estimate wouldn't set a record, it would represent the most 7(a) loans any one lender has closed since fiscal 2016, when Wells Fargo made a whopping 8,737 7(a) loans for $1.97 billion.
Huntington closed 5,675 7(a) loans for just under $1 billion in fiscal 2022, more loans than any other SBA lender. The 4,366 7(a) loans Huntington closed in fiscal 2021 also paced the nation.
"One of the things we're very proud of is how many businesses we're able to serve," Standridge said. "When we think about 5,600 loans last year and the 6,000-plus this year, there's a small business on the other end of that. The more access to capital we're able to provide — we're making a big difference."
Since many of those small business entrepreneurs also establish deposit relationships, Huntington's SBA success is helping to fuel a funding effort that has seen the bank add deposits the past two months, even as other institutions have reported outflows.
Limited by an ongoing enforcement action that has capped assets at $1.95 trillion since February 2018, Wells Fargo's SBA-lending operation remains formidable, though much reduced from its mid-2010s dominance. Through June 15, Wells had closed 1,456 7(a) loans for $276.3 million.
Under 7(a), SBA's flagship lending program, the agency offers guarantees ranging from 50% to 85% on loans originated by private lenders. Overall, SBA reported approving 38,273 7(a) loans for $18.2 billion through mid-June. Through the same period in fiscal 2022, SBA had approved 31,695 loans for $16.9 billion.
Taking a wider view
Huntington's SBA expansion can be viewed as an evolutionary process, rather than the result of a decision passed down from the headquarters office on High Street in Columbus. In essence, Huntington has been following its business banking clients as they push into new, far-flung markets. As Huntington's small-business customer count grew, and more pursued expansion, an increased proportion of Huntington's SBA business originated outside its core Midwestern footprint. Indeed, measured by dollar volume, fully 40% of Huntington's fiscal 2023 7(a) lending has taken place outside its footprint, Standridge said.
Huntington's footprint encompasses 11 states, stretching from Western Pennsylvania and West Virginia into Minnesota and South Dakota along the nation's northern tier. Huntington's core markets lie in Ohio and Michigan — where it closed more than 3,500 7(a) loans in fiscal 2022 — and it maintains a growing presence in Chicago, Denver and Minnesota's Twin Cities.
Increasingly, however, Huntington is making 7(a) loans throughout the United States, in New York and the Mid-Atlantic region, Atlanta, Florida, Texas, Arizona and California.
"This was a business where we have customers that are expanding outside our footprint," Standridge said. "Strategically, given our expertise and the infrastructure we've built, it made sense to go with them."
According to Standridge, the SBA expansion fits in with Huntington's philosophy of building specialized lending businesses into national operations. "Where we have expertise that creates a unique value proposition, it creates an opportunity to expand into other markets," Standridge said. "SBA clearly falls into that category. At Huntington, small business is big business. We've built scale. We've built infrastructure to be able to support 7(a) lending in a meaningful way. We view that as an advantage we can take to many markets."
Huntington has followed the same course with other specialty-lending business lines. "Practice finance is another business where we have a very specific product set and bankers that support professional businesses, largely veterinarians and dentists," Standridge said. "We've been expanding that business across the country."
The SBA expansion leverages infrastructure that Huntington has built over the past decade.
"We have built the capability to service, support and underwrite and fulfill SBA centrally. We have 200 colleagues across the country who support those efforts and that gives Huntington the ability to provide an SBA loan just about anywhere in the United States."
Poised for continued growth
Through June 15, just over nine months into fiscal 2023, Huntington had made 5,014 7(a) loans for $883 million, according to SBA statistics. Those numbers are likely to continue to grow into the foreseeable future, since SBA lending tends to outperform in times of economic stress, Standridge and other experts said.
The fixed-rate terms of 7(a) loans grow in appeal during downturns, said James Ballentine, CEO at Ballentine Strategies, a Washington, D.C.-based lobbying and strategic consulting firm. "The history of SBA on the 7(a) side is that as the economy gets a little more difficult, loan volume increases," Ballentine said.
Huntington has also benefited from a reputation for quality, Ballentine added. "Small-business owners talk to each other," Ballentine said. "Huntington has provided good service and it's been able to build off that."
Huntington's SBA buildout fits into a broader corporate design that emphasizes the portfolio of small and medium-size businesses it serves. "We view small and medium-size businesses as the heartbeat of America, and we want to be their choice," Standridge said. "We believe this is a space we can own."
While Standridge did not disclose any targets or goals for Huntington's business banking unit, the turbulence that has shaken the industry since March — especially with regard to deposits — has shined a spotlight on the segment's importance. Given that its business banking relationships generally result in significantly more dollars deposited than borrowed, Huntington is focused on winning customers' primary deposit accounts, including inside the SBA space, where a dedicated team of bankers services 7(a) borrowers located outside the footprint, as well as borrowers in core markets that prefer a virtual relationship, according to Standridge.
Increasingly, Huntington appears to be succeeding. Standridge noted his consumer and business banking group was responsible for about $7 billion of loans but $22 billion in deposits. Those deposits, meanwhile, have provided Huntington with a crucial alternative as commercial deposit-gathering has grown both tougher and costlier.
"Our deposit base is the foundation of value for the company," Huntington Chief Financial Officer Zach Wasserman said Tuesday at a Morgan Stanley conference in New York. "The fact we've got such a premier consumer and business banking franchise gives us the ability to lean into that."
While regional banks with assets of $50 billion to $250 billion have borrowed heavily to offset deposit runoff sparked by the failure of three big banks in March, Huntington has actually seen its deposits grow — by $2.8 billion in April and May, Wasserman said. Huntington's deposits totaled $148.1 billion as of May 31, the CFO added.
"We feel great about our position given that [SBA] is something we've consistently invested in over time," Standridge said.
