Launching Member Business Lending: In House or CUSO: A Panel Discussion November 9 th 2015 1
Moderator and Panelists: Moderator: Bob Stowell, SVP/COO, U.S. Federal CU, Burnsville, MN Panelists: Gwen Wong, VP Business Banking, Meriwest Credit Union, San Jose, CA Tom Ries, AVP Director of Business Services, US Federal Credit Union, Burnsville, MN Andy Weingartner, EVP Business Lending, Cooperative Business Services, LLC, Cincinnati, OH 2
Gwen Wong Vice President, Business Banking Meriwest Credit Union San Jose, CA $1.1B Asset CU $85MM MBLs 60-40 direct vs participations purchased Started in 2005 Re-direction in 2013 3
Tom Ries AVP, Member Business Services US Federal CU, Burnsville, MN $1.1B asset CU $60MM in MBL s 75% self originated; 25% participations purchased MBS Started in 2000 MBS Reorganized in 2008 4
Andy Weingartner EVP Business Lending Cooperative Business Services, LLC Headquartered: Cincinnati, OH Offices: Toledo, OH, Columbus, OH, Cleveland, OH, Louisville, KY and Charleston, WV Credit Union Service Organization (CUSO) Established in 2003 $500MM+ Portfolio 85 Clients representing 10 states $20 Billion dollars in aggregate assets 5
WHY Member Business Loans? MBL borrowers are major economic contributors to your local communities; more visibility in the communities that we serve Benefits to Credit Unions New products New markets Cross sell opportunities Better service to members New income streams Increase interest margins Fee income Greater diversification of portfolio Stronger relationships
Major Considerations Regulation 723 Strategic Planning Policies & Procedures Staffing Systems Tools & Resources Lender Responsibilities Competencies Know your borrowers Relationship Management Risks and Early Problem Detection
Where to begin? Buy only loan participations Originate only Commercial Real Estate Loans Build a full Member Business Services Infrastructure Define your niche Create a combination of choices
How do you make this happen? Use a CUSO? Build your own infrastructure? Create a hybrid? Build a partial infrastructure Partner with a CUSO Other creation Whatever you decide, the right resources need to be in place.
Which Road to Take? CBS: Cooperative Business Services, LLC Andy Weingartner, EVP Business Lending Meriwest Credit Union Gwen Wong, VP Business Banking US Federal Credit Union Tom Ries, AVP Member Business Services
Overview of CBS Services Offered Loan Origination Credit Underwriting and Syndication Loan Documentation Loan Closing Pre/Post Closing Loan File Audit Loan Servicing Portfolio Management Loss Mitigation Risk Management/Risk Analytics Shared Business Development Officer Models 11
Our Financing Products Conventional Commercial Real Estate Acquisition/Refinance/Expansion SBA Lending 7a Express 504 Term Financing M&E Purchase/Refinance Construction Loans Conventional or SBA 504 Programs Lines of Credit 12
Advantages of CUSO Affiliation Cost management efficiencies Direct access to over 125 years of direct industry experience Effective management of liquidity/revenue Growth Geographical diversification of portfolio Loan participation advantages Borrower concentration management tool Lead Credit Union can fund as little as 5% of their loan 13
Getting Started Credit Policy Risk Assessment/Management Specific Trade Area Underwriting Appraisal Concentrations: loan types, market Loss mitigation 14
Shared BDO Program Sales Engine First Launched in 2006 Six Models as of 2014 Over 65% of CBS credit union clientele are utilizing a Shared BDO Model BDO sales team averages over 10 years of direct industry experience 15
Shared BDO Program Year Credit Union Joined SBDO Model 2008 (six years) 2008 (six years) CUs / asset size each under $200 million 2011 (three years) 2011 (three years) CUs / asset size each under $200 million Total Cost compared with Total Net Interest $147,682 Income Since $1,047,389 Joining SBDO Model $92,556 $966,817 $42,897 $174,524 $42,897 $153,317 Takes an average of 18 months for any Shared BDO Model to break even and enter in to a profitable endeavor. 16
Meriwest Credit Union Business Banking began in 2005 Members Business Services Revitalized in 2013 New staff in 2014 CU Business Partners Loan types today vs future
2005 to 2013 Sales Team Members Business Services Strategy Buying Participations Some investor CRE Some C&I, SBA 7a 50 50 Participations and Direct Loans Approximately $50,000,000
2013-2014 MBS Closes June 2014 Staff changed and redeployed Symitar with IT Enhancements Defining commercial lending parameters NCUA & DBO Regulatory Findings and Concerns Financial Spreadsheet Model Tickler Monitoring System LaserPro Commercial Loan Documentation Rapid Production Growth Expectations
Business Banking Profile Today Experienced Staff Solid foundation and infrastructure NCUA Exam; 3 rd Party Loan & Operations Review Sustainable Profitability Make money to spend money Spend money to make money Building reputation in marketplace Under Promise and Over Deliver Partners CU Business Partners; Other Vendors $85,000,000 & aggressive Pipeline
Things to Think About What is your credit union charter? Attracting the right talent & mix of talent Generating sustainable profitability Initial and future investment CRE vs creating relationships Creating a suite of business products & services Training retail, contact center, and other CU staff Portfolio Management; Reporting; Controls Diversification
US Federal Credit Union MBL started in 2000; perfect example of what not to do!! 2006 identified significant problems with portfolio 2007 started process of cleaning up portfolio 2008-2012 Reduced portfolio from $60MM to less than $28MM Hired new staff Rewrote policies and procedures 2013-Present Started to actively seek lending opportunities Ytd originations at $21MM; fee income $160k
US Federal CU Products Commercial RE Construction loans SBA Lending (504, 7a, Express) Term Financing Lines of Credit Receivable and Inventory Operating lines Vehicle loans Unsecured Loans Business Visa
USFCU Present Staff Director Credit Officer Credit Analyst Business Service Representative (2) Future Plans Two CLO Jr. Analyst BSR
Things to Consider Reg 723 Written Business Plan Written Policies and Procedures Staffing needs Products and Services Portfolio Management; Collection Procedures Pricing Matrix Loan Risk Rating Formula Appraisal policy Environmental policy Underwriting guidelines Approval Authorities Independent 3 rd Party audits Loan Type Concentrations
Questions and Answers 26
Contact Information: Bob Stowell U. S. Federal CU, bob.stowell@usfed.org, (952)-736-5310 Tom Reis US Federal Credit Union, tom.ries@usfed.org, (952-736-5327) Gwen Wong Meriwest Credit Union, gwong@meriwest.com, (408-363-3285) Andy Weingartner Cooperative Business Services, aweingartner@cbscuso.com, (888)-697-9555, ext. 105 27