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2013 Small Business Credit Trends
Patricia Hines, CTP
Director, Financial Services Industry Marketing
GXS
Slide 2 © 2013 GXS, Inc.
Small businesses confidence
dips in early 2013 after 2012 gains
80.0
85.0
90.0
95.0
100.0
105.0
1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13
February 2013: 90.8
January 2006: 101.6
NFIB Optimism Index
Sources: NFIB Small Business Economic Trends Quarterly report
Slide 3 © 2013 GXS, Inc.
Sources: Federal Reserve System H.8 Release
Commercial and industrial loans up almost
14% over the past year
$17 $17 $16 $16 $15 $14 $14 $14 $14 $14
$16 $15
$13 $12 $12 $13 $13 $14 $15 $15
$33
$32
$30
$28 $27 $27 $28 $28 $29 $30
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
12/08 12/09 12/10 12/11 12/12
Commercial real estate Commercial and industrial
Slide 4 © 2013 GXS, Inc.
Small business loans outstanding flat with a
continued increase in volume
Sources: FDIC Quarterly Banking Profile, Loans to Small Businesses
Amount outstanding
(USD in billions)
Number of loans outstanding
(in thousands)
120.3 120.2
46.8 46.9
115.7 116.7
0
50
100
150
200
250
300
12/31/2011 12/31/2012
282.7 283.7+0.4%
19.6 20.8
0.5
0.50.4
0.4
0.0
5.0
10.0
15.0
20.0
25.0
12/31/2011 12/31/2012
20.4
21.7
+6.3%
> $100K $100k to $250K $250K to $1M
Slide 5 © 2013 GXS, Inc.
Delinquency rates continue to improve for all
loan types except residential real estate
11.2%
10.6%9.1%
4.6%
3.6%
6.7%
2.8%
2.4% 3.8%
2.6%
1.2%
4.4%
1.2%
0%
2%
4%
6%
8%
10%
12%
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12
Residential real estate loans
Commercial real estate loans
Credit card loans
Consumer loans
Commercial & industrial loans
Sources: Federal Reserve Statistical Release
Slide 6 © 2013 GXS, Inc.
$46
$51
$55
$60
$67
$71
$75
$79 $82 $85
$92
$95 $96
$0.3
$0.4 $0.5
$0.3 $0.3
$1.0
$0.5
$1.3
$1.3
$2.3
$2.1
$2.1
$1.9
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$0
$25
$50
$75
$100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Unpaid principal balance Charge off amount
Charge-offs (USD billions)Principal balance (USD billions)
In 2012, Small Business Administration lending
jumped up with charge-offs leveling off
Est.
Sources: Small Business Administration budget and performance reports
Slide 7 © 2013 GXS, Inc.
-70%
-50%
-30%
-10%
10%
30%
50%
70%
90%
3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13
Small C&I loan demand Small C&I loan standards
Large and medium C&I loan demand Large and medium C&I loan standards
Loan demand
Loan standards
Commercial and industrial (C&I) loan demand
reflects economic uncertainty
Quarterly percentage change
Sources: Federal Reserve Board senior loan officer opinion survey
Slide 8 © 2013 GXS, Inc.
2.4%
3.6%
4.0%
1%
2%
3%
4%
5%
3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12
More than $1,000,000 $100,000–$1,000,000 Less than $100,000
Spreads narrowing, especially
for large C&I loans
3.3%
1.4%
2.1%
3.2%
4.0%
2.0%
1.6%
Sources: Federal Reserve survey of terms of business lending
Spread percentage
Slide 9 © 2013 GXS, Inc.
4
6
8
10
12
14
16
18
0%
2%
4%
6%
8%
10%
1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13
Business bankruptcy filings Unemployment percentage
Unemployment percentage Number of filings (000s)
Es
Business bankruptcy filings a bright spot in
the picture for small business risk
4.7%
10.0%
7.7%
Sources: American Bankruptcy Institute, U.S. Bureau of Labor Statistics
Est.
Slide 10 © 2013 GXS, Inc.
0%
1%
2%
3%
4%
Up to $300M $300M to $1B $1B to $10B $10B to $20B Over $20B
2009 2010 2011 2012
Smaller banks continue to struggle with non-
performing commercial loans
3.9%
Ratio of non-performing commercial loans to total
commercial loans (%)
Sources: Federal Reserve Bank of St. Louis
0.7%
Slide 11 © 2013 GXS, Inc.
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2009 Actual 2010 Actual 2011 Actual
2012
Projection 2013 Forecast
Developing
Asia
LATAM
CIS*
United States
Japan
Euro Area
2012 did not meet expectations, recovery
stalls for 2013
3.8%
0.8%
3.9%
7.8%
2.2%
*CIS = Commonwealth of Independent States (former Soviet Republics)
1.6%
Sources: International Monetary Fund World Economic Update January 2013
Percent change in GDP
Slide 12 © 2013 GXS, Inc.
Trade payables and receivables
at 12-year lows
11.7%
14.1%
10%
12%
14%
16%
18%
20%
22%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Trade Payables Trade Receivables
Recessionary Periods
Percent of company net worth
Sources: Federal Reserve Bank of St. Louis
Slide 13 © 2013 GXS, Inc.
• Risk metrics continue to show a mixed bag, but underlying improvement
seems to be taking hold
• Small Business Credit Index points to improving environment for small
businesses by end of 2013, and continuing into the next couple of years
• Small business lenders continue to lend to borrowers who meet their
desired risk/reward profile
• Close monitoring needed to identify emerging adverse trends and
minimize loan losses
• Investments in credit analytics and
monitoring tools continue to pay off,
reflected in decreases in non-performing busi ness
loans
Parting thoughts
Slide 14 © 2013 GXS, Inc.
Thank You and Q&A
Patty Hines, CTP
Director, Financial Services Industry
Marketing
E-mail: patty.hines@gxs.com

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Small Business Lending Trends

  • 1. 2013 Small Business Credit Trends Patricia Hines, CTP Director, Financial Services Industry Marketing GXS
  • 2. Slide 2 © 2013 GXS, Inc. Small businesses confidence dips in early 2013 after 2012 gains 80.0 85.0 90.0 95.0 100.0 105.0 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 February 2013: 90.8 January 2006: 101.6 NFIB Optimism Index Sources: NFIB Small Business Economic Trends Quarterly report
  • 3. Slide 3 © 2013 GXS, Inc. Sources: Federal Reserve System H.8 Release Commercial and industrial loans up almost 14% over the past year $17 $17 $16 $16 $15 $14 $14 $14 $14 $14 $16 $15 $13 $12 $12 $13 $13 $14 $15 $15 $33 $32 $30 $28 $27 $27 $28 $28 $29 $30 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 12/08 12/09 12/10 12/11 12/12 Commercial real estate Commercial and industrial
  • 4. Slide 4 © 2013 GXS, Inc. Small business loans outstanding flat with a continued increase in volume Sources: FDIC Quarterly Banking Profile, Loans to Small Businesses Amount outstanding (USD in billions) Number of loans outstanding (in thousands) 120.3 120.2 46.8 46.9 115.7 116.7 0 50 100 150 200 250 300 12/31/2011 12/31/2012 282.7 283.7+0.4% 19.6 20.8 0.5 0.50.4 0.4 0.0 5.0 10.0 15.0 20.0 25.0 12/31/2011 12/31/2012 20.4 21.7 +6.3% > $100K $100k to $250K $250K to $1M
  • 5. Slide 5 © 2013 GXS, Inc. Delinquency rates continue to improve for all loan types except residential real estate 11.2% 10.6%9.1% 4.6% 3.6% 6.7% 2.8% 2.4% 3.8% 2.6% 1.2% 4.4% 1.2% 0% 2% 4% 6% 8% 10% 12% 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 Residential real estate loans Commercial real estate loans Credit card loans Consumer loans Commercial & industrial loans Sources: Federal Reserve Statistical Release
  • 6. Slide 6 © 2013 GXS, Inc. $46 $51 $55 $60 $67 $71 $75 $79 $82 $85 $92 $95 $96 $0.3 $0.4 $0.5 $0.3 $0.3 $1.0 $0.5 $1.3 $1.3 $2.3 $2.1 $2.1 $1.9 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $0 $25 $50 $75 $100 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Unpaid principal balance Charge off amount Charge-offs (USD billions)Principal balance (USD billions) In 2012, Small Business Administration lending jumped up with charge-offs leveling off Est. Sources: Small Business Administration budget and performance reports
  • 7. Slide 7 © 2013 GXS, Inc. -70% -50% -30% -10% 10% 30% 50% 70% 90% 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 Small C&I loan demand Small C&I loan standards Large and medium C&I loan demand Large and medium C&I loan standards Loan demand Loan standards Commercial and industrial (C&I) loan demand reflects economic uncertainty Quarterly percentage change Sources: Federal Reserve Board senior loan officer opinion survey
  • 8. Slide 8 © 2013 GXS, Inc. 2.4% 3.6% 4.0% 1% 2% 3% 4% 5% 3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12 More than $1,000,000 $100,000–$1,000,000 Less than $100,000 Spreads narrowing, especially for large C&I loans 3.3% 1.4% 2.1% 3.2% 4.0% 2.0% 1.6% Sources: Federal Reserve survey of terms of business lending Spread percentage
  • 9. Slide 9 © 2013 GXS, Inc. 4 6 8 10 12 14 16 18 0% 2% 4% 6% 8% 10% 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 Business bankruptcy filings Unemployment percentage Unemployment percentage Number of filings (000s) Es Business bankruptcy filings a bright spot in the picture for small business risk 4.7% 10.0% 7.7% Sources: American Bankruptcy Institute, U.S. Bureau of Labor Statistics Est.
  • 10. Slide 10 © 2013 GXS, Inc. 0% 1% 2% 3% 4% Up to $300M $300M to $1B $1B to $10B $10B to $20B Over $20B 2009 2010 2011 2012 Smaller banks continue to struggle with non- performing commercial loans 3.9% Ratio of non-performing commercial loans to total commercial loans (%) Sources: Federal Reserve Bank of St. Louis 0.7%
  • 11. Slide 11 © 2013 GXS, Inc. -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2009 Actual 2010 Actual 2011 Actual 2012 Projection 2013 Forecast Developing Asia LATAM CIS* United States Japan Euro Area 2012 did not meet expectations, recovery stalls for 2013 3.8% 0.8% 3.9% 7.8% 2.2% *CIS = Commonwealth of Independent States (former Soviet Republics) 1.6% Sources: International Monetary Fund World Economic Update January 2013 Percent change in GDP
  • 12. Slide 12 © 2013 GXS, Inc. Trade payables and receivables at 12-year lows 11.7% 14.1% 10% 12% 14% 16% 18% 20% 22% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Trade Payables Trade Receivables Recessionary Periods Percent of company net worth Sources: Federal Reserve Bank of St. Louis
  • 13. Slide 13 © 2013 GXS, Inc. • Risk metrics continue to show a mixed bag, but underlying improvement seems to be taking hold • Small Business Credit Index points to improving environment for small businesses by end of 2013, and continuing into the next couple of years • Small business lenders continue to lend to borrowers who meet their desired risk/reward profile • Close monitoring needed to identify emerging adverse trends and minimize loan losses • Investments in credit analytics and monitoring tools continue to pay off, reflected in decreases in non-performing busi ness loans Parting thoughts
  • 14. Slide 14 © 2013 GXS, Inc. Thank You and Q&A Patty Hines, CTP Director, Financial Services Industry Marketing E-mail: patty.hines@gxs.com