CHATSWORTH, Calif. – From the very beginning, Telesis Community Credit Union intended its wholly-owned member business lending CUSO, Telesis Partnerships, LLC, founded five years ago would become a national CUSO. Now that it has become one, CUSO experts say it's indicative of what's happening on the CUSO scene. In June, the $306-million credit union sold equity interest in the CUSO to seven credit unions and one corporate CU. Now, in addition to Telesis Community CU, the owners of the CUSO are now: Community One FCU, Las Vegas, Nev.; Public Service CU, Denver, Colo.; USA FCU, Auburn Hill, Mich.; Sierra Point CU, South San Francisco, Calif.; Travis CU, Vacaville, Calif.; Community CU, Plano, Texas; Patelco CU, San Francisco, Calif.; and WesCorp, San Dimas, Calif. Telesis Partnerships, LLC is now operating as Business Partners, LLC to reflect the multiple ownership. Telesis Community CU President/CEO Grace Mayo said the seven credit unions were "deliberately selected by the credit union. They've been business partners with us for years and they're strategically placed throughout the country for a national MBL CUSO." Mayo said the sale of equity shares in the CUSO was "the first step to accomplishing our goal of establishing a nationwide member business lending CUSO. The new equity ownership will provide a greater platform for our CUSO to operate from so it will have the ability to offer more products and services to credit unions nationwide." It's exactly this impetus and the greater economies of scales that national cooperative CUSOs offer that are making them an increasingly attractive option, said NACUSO President Bob Dorsa. "With the passage of incidental powers, most wholly-owned CUSOs are trying to figure out how to work with this expansion of credit unions' powers," said Dorsa. "They're realizing the economies of scale to get in to the CUSO business, and that's why we're seeing more cooperative CUSOs turning up in areas like trust services and real estate lending." Dorsa said a cooperative CUSO allows for operations expense sharing and a wider distribution of the CUSO's product. It also allows the CUSO to leverage the expertise of the equity owners. Alan Pughes, president/CEO, Community One CU said that was one of the reasons the $142.2-million credit union decided to buy a 5% equity interest in Business Partners. He said the credit union saw the opportunity as an "economically viable investment." He explained that, "The equity owners now have a greater incentive to generate loans and bring them to the table for everyone to participate in, rather than just having Telesis Community bring loans to the table. With the way Business Partners is structured, the more loans you bring in, you're rewarded with a greater piece of the pie." Pughes sees CUSOs increasingly moving in the direction of becoming cooperative entities because "they allow credit unions to diversify their risk while expanding their service offerings to their members." Sixty percent of Business Partners' loans are participated out. The CUSO has 84 credit union partners ranging in size from $8 million to the largest which is $3 billion, throughout the U.S. that buy or sell business loans within the CUSO network. Over the last five years, Telesis has underwritten more than $1 billion in business loans – Mayo emphasized that not all of the loans were approved – and there is an additional $500 million in loans that the CUSO is servicing. "Business lending is a volume driven business. The network allows us to move more volume through the pipeline. That's been key to our success," said Mayo. The CUSO only does A paper loans. Mayo said the CUSO "doesn't like to have to reject loan applications, but at this stage we don't have the choice to take undue risk. It's taken us five years to develop the infrasutructure that can support these types of loans and has gotten us to where we are now." To date, she said the CUSO hasn't had one delinquent loan. Mayo said she's not too concerned about the effect the soft national economy may have on the CUSO's business. "We're as careful if not more in the type of business loans we make to be sure they can be sustained in a declining business environment. That's where due diligence comes in. The economy is different around the country, but we can't afford to be too lenient." Dave Purcell, vp of lending for Travis CU which bought two shares of Business Partners, said these are the types of things about the CUSO the credit union evaluated when it considered buying an equity interest in it. "Business Partners has a lot of experience in business lending, and it seemed like a worthwhile venture for us," he said. Travis has been participating in business loans with the CUSO for about a year and a half. He said the credit union's goal is to generate enough demand among its nearly 113,000 members to become a lead lender and be able to bring loans to the CUSO for participation instead of just participating in loans that Telesis brings. The credit union also wants to reach a point where it can do its own underwriting and selling of business loans. Travis also participates in business loans with North Island Financial CU, Mountain America FCU, and Evangelical Christian CU. According to Mayo, the board of directors of Business Partners will be elected at the end of July. There will be nine seats on the board, and since Telesis has a majority ownership in the CUSO it will have four seats. -

[email protected]