- Expert quote: “Credit unions are no longer the small players people once assumed,” said Citadel Chief Commercial Banking Officer Thomas Sebok.
- Key insight: Ongoing consolidation in the financial services industry has created opportunities for community institutions willing to provide personal service to small-business owners, according to Sebok.
- Forward look: Citadel plans to open three new branches in Philadelphia over the next three years.
A Philadelphia-area credit union is starting to see a payoff from a major investment in its business banking operations.
Citadel Credit Union in suburban Exton, Pennsylvania, reported commercial loans totaling $449 million on Sept. 30. That was up 17% from the same period last year, according to data from the National Credit Administration.
Net income, which totaled $28.8 million through Sept. 30, is up 6% year-over-year.
The increase came after the $6.5 billion-asset Citadel added lenders and upgraded its payments and treasury management offerings, Chief Commercial Banking Officer Thomas Sebok told American Banker. Since the start of 2025, Citadel has added nine business relationship managers and two business development officers, Sebok said.
Citadel is also expanding its branch network, with plans to open at least three branches in Philadelphia in the next three years.
“Credit unions are no longer the small players people once assumed,” said Sebok, who joined Citadel in January, after a 24-year banking career at JPMorganChase, Citigroup and PNC Financial Services Group.
Citadel’s increased business banking activity mirrors wider trends within the credit union industry. Commercial loan portfolios across the entire credit-union sector have grown by 16.5% since the end of 2023, topping $183 billion on June 30, according to NCUA statistics.
Bankers object
For banks, which have long viewed credit unions’ brisk expansion in business lending with a gimlet eye, the trend is tough to swallow. Banks argue that credit unions’ growth has been facilitated to a substantial degree by their exemption from state and federal income taxes, which banking advocates have labeled an unfair competitive advantage.
Business lending — much more than auto loans, mortgage loans and other consumer lines of business — remains a point of contention for banks.
In 2016, the Independent Community Bankers of America sued the NCUA to block a business-lending regulation it claimed was too permissive. That suit was dismissed the following year.
More recently, banking advocates have concentrated their fire on bank acquisitions by credit unions. Such deals have led to a steep decline in Small Business Administration lending within the acquired bank’s footprint, the ICBA has claimed.
Meanwhile, the American Bankers Association has declared its opposition to legislation that would double the dollar volume of business lending that’s exempt from counting against the member business lending cap. Federal law caps the size of an individual credit union’s business lending portfolio to 12.25% of total assets, but it also exempts the first $50,000 of each loan from that cap.
“The small loan exemption was tailored to ensure that credit unions have sufficient lending authority to meet the credit needs of their members, without allowing them to stray from their congressionally mandated mission of serving people of modest means,” Kirsten Sutton, an ABA’s executive vice president, wrote in a Sept. 8 letter to lawmakers.
A natural extension
Citadel Chief Lending Officer Michael Desimone, who joined the credit union last year, told American Banker that Citadel’s new commercial lending strategy is a natural extension of its larger consumer business.
“It’s a way for us to amplify our impact on our communities,” Desmione said. “The businesses that we’re going to be working with employ people that live and work locally. Those are our consumer members.”
While Citadel serves business clients with up to $150 million in annual sales, its “sweet spot” is companies in the $1 million to $10 million range, according to Sebok. Citadel’s strategy is simple: provide entrepreneurs and business owners with a level of personalized service that larger banks no longer offer them.
“As banking consolidation happens, the institutions are getting larger and larger,” Sebok said. “A lot of the large competitors or commercial banks are taking an opportunity to move to a virtual environment, to a call-center-type environment. Many of the business entrepreneurs and the small business owners yearn for the opportunity to have the personal touch and in-person relationship.”
“We see a clear market to be able to deliver the personalized, hands-on touch to the small business owner, and it’s working very well for us,” Sebok said.
Citadel was certified as an SBA lender in May, but it’s taken a go-slow approach to government-guaranteed lending. Progress was further slowed by the 43-day government shutdown, which ended Wednesday.
The credit union will likely focus on the SBA’s 504 program, which meshes with its emphasis on commercial real estate lending.
“We lost a tiny bit of momentum, but it didn’t stop us from figuring out how we’re going to continue to build and grow the business, to reach into the Philadelphia market and support our expansion plans,” Desimone said.
