Quarterly Business Credit Review (Q3 2013)

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Quarterly Business Credit Review for Q3 2013

December 10th, 2013

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Welcome

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Our Speakers

Joel PruisSr. Business ConsultantExperian Global Consulting Practice

• Senior Business Consultant dedicated to delivering programs to his clients that increase productivity and profitability, provide financial services organizations with tools to gain a competitive edge.

• More than 22 years of experience in origination and portfolio management for small business and commercial credit

• Bachelors in Accounting, MBA from Indiana Wesleyan University

Our Speakers

Nate KelleyAssociate Economist

Moody’s Analytics• Covers regional economies • Researches and writes extensively on macro topics, including labor, consumer, and small-

business economics. • Former municipal bond trader at The Reserve Management Corporation in New York City.• Bachelor’s degree from Baruch College of the City University of New York

Quarterly Business Credit Review

Presented by Joel Pruis

Small Business Credit Index

Delinquency Rate Hits New Low

11 12 13

Outstanding credit, % change yr ago (L)

Delinquency rate, % (R)

Sources: Experian, Moody’s Analytics

National PerspectiveExperian Metro Business Pulse

Q2 2013 Q3 2013 ChangeDelinquency 13.43% 12.89% -0.53%Days Beyond Terms 5.71 5.62 -0.09 daysBankruptcy Rate 0.99% 0.95% -0.04%

Fewer and Faster – Just the way we like it!

Source: Experian Metro Business Pulse – Average Metropolitan Data

Performance by IndustryRanked by Delinquency %

Industry Delinquency Days Beyond Terms Bankruptcy Rate

TopHealth Services 8.05% 3.93 0.68%Hospitality 9.52% 5.28 1.51%Education Services 11.40% 4.33 0.64%Agriculture 11.56% 7.12 1.42%Legal Services 12.54% 6.06 0.44%

BottomManufacturing 15.56% 6.45 1.86%Transportation 18.83% 8.14 1.93%Finance 19.08% 9.88 1.34%Communications 19.79% 7.81 1.50%Construction 22.64% 12.18 2.35%

Source: Experian Metro Business Pulse

4.5% to 15.6%15.7% to 25.1%

1.1% to 4.4%

U.S.=10%

Delinquency Rate, $ volume

0 10 20 30

Wholesale trade

Real estate

Health services

Business services

Agriculture

UtahIdahoFlorida

High Delinquency Across Industries in Florida

Sources: Experian, Moody’s Analytics

Delinquency rate, $ volume

Top/Bottom 10 - Delinquency

Salt Lake City, UTHouston, TXBoise City, IDTucson, AZSan Diego, CAPhoenix, AZBaton Rouge, LASan Francisco, CALas Vegas, NVFresno, CA

0.95% - 5.02%

West Palm Beach, FL Baltimore, MD

Philadelphia, PAJacksonville, FL

Atlanta, GAMemphis, TN

Fort Lauderdale, FLOrlando, FL

Cincinnati, OHMiami, FL

20.19% - 30.77%

San Francisco, CAOmaha, NENew York, NYSeattle, WAMilwaukee, WIMinneapolis, MNSalt Lake City, UTRochester, NYOklahoma City, OKPortland, OR

3.19 - 3.99

West Palm Beach, FL Sarasota, FL

Chicago, ILAtlanta, GA

Jacksonville, FLTampa, FL

Fort Lauderdale, FLMiami, FL

Las Vegas, NVOrlando, FL

14.08 - 7.83

Top/Bottom 10 – Days Beyond Terms

New York, NYNassau-Suffolk, NYBaton Rouge, LAHonolulu, HIMiami, FLNew Orleans, LANorfolk-Virginia Beach, VAFort Lauderdale, FLRichmond-Petersburg, VAWashington, DC

0.27% - 0.56%

Portland, OR Albuquerque, NM

Rochester, NYTacoma, WA

Santa Rosa, CADenver, CO

Colorado Springs, COSan Bernardino, CA

Bakersfield, CASacramento, CA

1.49% - 2.34%

Top/Bottom 10 – Bankruptcy Rate

Still low in the East

Still higher in the West

Overall Bankruptcy Rate continues to slightly decline across the country

Overall Delinquency is improving in the East

What about that Bankruptcy Rate?

Most Improved Award by Category

Industry

Delinquency Real Estate 12.69% -1.48%Days Beyond Terms Communications 7.81 -0.38

Bankruptcy Rate TransportationBusiness Services

1.93%1.33% -0.16%

Geography

Delinquency Miami, FL 30.77% -13.95%Days Beyond Terms Chicago, IL 8.19 -0.11Bankruptcy Rate San Antonio, TX 1.39% -0.16%

“Greatest Opportunity for Improvement” by Category

Industry

Delinquency Hospitality 9.52% 0.44%Days Beyond Terms Construction 12.18 0.24Bankruptcy Rate Finance 1.34% 0.05%

Geography

Delinquency Cincinnati, OH 29.43% 3.85%Days Beyond Terms Jacksonville, FL 8.34 0.60Bankruptcy Rate Baltimore, MD 0.58% 0.03%

Key take away

► Keep watching the Bankruptcy rate

► Retail performance?

► Growth is available

► Watch for seasoning of the new credit balances

Key Take-Away’s:

Macro Outlook: The Right Pieces Are Falling Into Place

Nathan KelleyMoody’s Analytics

-6-5-4-3-2-1012345

05 06 07 08 09 10 11 12 13F 14F 15F

Private economyFiscal policyTotal

Fiscal Headwinds Are Set to Fade…

Source: Moody’s Analytics

Contribution to real GDP growth, %

10,500

11,500

90 92 94 96 98 00 02 04 06 08 10 12

Trend Vacancy

Sources: Census, Moody’s Analytics

Vacant homes for sale, for rent and held off market, ths

Housing Will Provide the Catalyst…

02 03 04 05 06 07 08 09 10 11 12 13 14 15

…Pushing Housing Starts Upward…

Sources: Census, Moody’s Analytics

Single-family and multifamily starts, mil

122,000

124,000

126,000

128,000

130,000

05 06 07 08 09 10 11 12 13

Housing-Related (L)Non Housing-Related (R )

…Meaning More Homebuilding and Jobs

Source: Wall Street Journal, Moody’s Analytics

Millions of jobs

Home Prices Will Appreciate Fastest in the West…

Case-Shiller Index, average annual growth, %, 2013-2016

Sources: CoreLogic, Moody’s Analytics

U.S. = 5.9

≥7.15.1 to 73.1 to 5≤3.0

-4-3-2-1012345678

08 09 10 11 12 13

Confidence, 3 mo MA (L)Real spending, % chg yr ago (R)

Debt Ceiling Debate

S&P Downgrade

A Bumbling Congress Hurts Confidence

Sources: BEA, Conference Board and Moody’s Analytics

The Shutdown’s Impact

Nathan KelleyMoody’s Analytics

08 09 10 11 12 13

Shutdown/debt ceiling standoff

Federal Impasse Severely Rattles Psyches

Moody’s Analytics policy uncertainty index, 4-wk MA, 2004-2005=0

Source: Moody’s Analytics

Lehman collapse

U.S. Small Firms Shaken by the Shutdown

Sources: NFIB, Moody’s Analytics

NFIB small business optimism index, 1986=100

-40-35-30-25-20-15-10

Net % expectingeconomy to improve (L)Composite index (R)

Gap Closing for Small-Business Loan Volumes

Approved SBA 7(a) and 504 loans, ytd $ vol, % change yr ago

Sources: U.S. Small Business Administration: Weekly lending report, Moody’s Analytics

-60-55-50-45-40-35-30-25-20-15-10

Oct 18 Oct 25 Oct 31 Nov 8 Nov 15 Nov 22

05 06 07 08 09 10 11 12 13

Borrowing at least once per qtr (L)

Credit is “hard to get” (R)

But Credit Supply Doesn’t Seem to Be the Issue

% of small firms who say…

Sources: NFIB Small Business Optimism Survey, Moody’s Analytics

HOT TOPIC:

SHUT DOWN CONSEQUENCES

Impact on Retail?

Employment outlook?

ACA impact?

What may we see in the 4th quarter?

QUESTIONS

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