Wells Fargo & Co.’s lending to Orange County small businesses plummeted 74%, based on the latest Business Journal ranking of loans backed by the federal Small Business Administration.
The dollar value of its lending for the six months ended March 31 plunged from $47.5 million to $12.5 million, putting it in fourth place, its lowest ranking since 2010 during the market downturn, and breaking a four-year streak at the top. Ranked lenders overall were up 13%.
In the same period, its number of loans plummeted in half to 44, leaving it barely clinging to first place over the 35 loans of No. 2, JP Morgan & Chase Co. Wells Fargo has claimed the top spot in loans issued for eight of the past 10 years.
By contrast, OC SBA loans made by ranked banks during the period rose 5.1% to 374.
What happened?
“It’s a competitive market for SBA and small-business loans, which is good for small-business owners and the market,” said Steve Doss, Wells Fargo senior vice president in charge of the bank’s SBA lending in Southern California for 14 years.
The San Francisco-based bank has been in turmoil over its business practices, which also could’ve affected the numbers. In 2016, it reached a $190 million settlement to resolve allegations it engaged in years of improper sales practices that resulted in the opening of 3.5 million accounts without customers’ knowledge.
In February, the Federal Reserve imposed new restrictions on Wells Fargo, limiting it to $1.95 trillion in assets until it improves governance and controls. And in April, federal regulators fined the bank $1 billion for abuses that harmed mortgage and auto loan borrowers.
“Wells Fargo continues to rebuild trust in the community,” Doss said. “Our focus today is on our customers, and we’re confident we will continue to earn more business from customers seeking our experience in SBA lending.”
Wells Fargo has long been the dominant SBA loan issuer in OC, in part because it dedicates specific loan officers to that business, Doss said.
On last year’s Business Journal list, it easily retained the top spots with triple both the number of loans and loans’ value compared to the No. 2 banks in those categories.
Banks often consider SBA loans an important entry into the front door of small companies that may grow.
Wells Fargo, the largest bank in OC by deposits, isn’t pulling back on SBA loans, as its local office remains “fully staffed” at four bankers, Doss said.
“Wells Fargo remains committed to SBA lending,” he said. “Our small business relationships are a priority and we are proud of our work helping customers meet their business and financial goals.”
On the positive side, Wells Fargo’s OC office was the first in the country to issue the SBA’s newest product, a 25-year fixed-rate loan offered for the first time in April. SBA loans had been limited to 10 years and 20 years, Doss said.
“We’re excited to learn that Wells Fargo was the first lender in the country to approve” a 25-year loan, he said, teaming with CDC Small Business Finance on the transaction.
A 25-year loan can reduce monthly payments and free up to cash to increase wages, pay other debt or purchase equipment, he said.
Despite the competitive pressures and drop in lending, Doss indicated OC businesses are optimistic.
“What we see is a steady improvement in the local economy that continues to boost the overall outlook.”
