FORT WORTH, Texas – Five credit unions covering the state'smajor population centers have combined to create one of the state'slargest credit union service organizations in a bid to boost memberservices and expand their niche in small and mid-sized commercialmarkets primarily served by community banks. Based on the groundfloor of EECU in Fort Worth, Texas, Business Lenders Group LLCopened officially August 1 and added its final member/owner,Firstmark Credit Union of San Antonio, in a meeting Aug. 23. Aftera year of planning, credit unions began joining the organization inMay. Besides Firstmark and EECU, the CUSO includes as permanentmembers Community Resource Credit Union of Baytown Texas, FirstCommunity Credit Union of Houston and United Heritage Credit Unionof Austin. The CUSO is backed by nearly $2 billion in assets and isheaded by former local Chase/Bank One executive Robert M. Campbell.It includes three credit unions that owe their origins to Texaseducators. One is headed by a former Texas Credit Union Departmentcommissioner and a second by a former member of the statecommission. Robert Rogers, the former state credit unioncommissioner who heads EECU, said the new group is focused onmember business loans of less than $250,000 – a market oftenignored by the mega-banks flooding into Texas. “One of the thingswe've had a hard time doing is finding non-credit union partners –and I'm talking about banking institutions – that wanted to handleloans of less than a quarter of a million dollars and evensometimes a half million dollars,” Rogers said. “We're not tellingyou we won't take bigger loans. But we certainly are going to belooking at targeting the smaller businessman – the businessman whoneeds some help.” The newest mover in a growing trend towardCUSO-managed commercial loans is one of four or five major CUSOs inTexas, said Richard Ensweiler, president and CEO of the 637-memberTexas Credit Union League and the national chairman of CUNA.Ensweiler and Texas Credit Union Commissioner Harold E. Feeney saidthe trend toward CUSOs is driven by the ability to pool resourcesand hire the expertise needed to handle complex commercial loans. Aside benefit is the CUSO's size allows its owner credit unions tooffer members more and sometimes larger loans. Federal regulationscap member business loans at 12.25% of a credit union's asset baseand 1.759% of its net worth. While the credit union tradeassociations are lobbying to raise the asset cap to 20% and toadjust the minimums factored into the formula as part CURIA, theoutcome is uncertain amid opposition from the nation's bankers.With nearly $579 million in assets, EECU's member-business loansare capped at about $70.9 million. With $392 million in assets,United Heritage's business loans are capped at $48 million.Processed by staff in Fort Worth, the loans will be originated andissues through the individual credit unions. They represent acumulative member-business-loan cap of about $245 million. “I don'tthink it's about making bigger loans,” Ensweiler said. “I thinkit's a matter of sharing the cost of acquiring the expertise.” HalThomas, president and CEO of Community Resource Credit Union, saidhis Houston-area institution has $170 million in assets and 22,000members and can't handle larger member-business loans – at leastnot alone. So far, it's made one $90,000 loan through the new CUSO.“We simply were not at the size that in our opinion we could do avery good job of hiring and locating and getting that programgoing,” Thomas said. “We combined to so that our investment wouldhelp hire a qualified candidate. We've got the technical expertiseto provide all of the things necessary. It just seemed to cometogether.” Thomas said each loan will be limited to the asset capon the originating institution – regardless of the size of theCUSO. “Each credit union will stand on its own,” he said. “However,one of the things we're looking forward to is that one CUSO couldparticipate through another CUSO. We as a smaller credit union mayhit our ceiling, but we can offer the loan to another CUSO member.”“The other thing it allows you to do is limit the liability,”Campbell said. “It's a way to broaden our services to thecommunity.” Campbell said the CUSO will team with non-member creditunions outside its prime market areas, in effect giving TexasBusiness Lenders a statewide reach. But he said the core groupshould remain at five. Rogers said the credit unions explored avariety of options but found their mutual interests provided a goodmix. All five of the credit unions are members of the Credit UnionLegislative Coalition – an unusual association of 23 large Texascredit unions that lobby issues independent of the Texas CreditUnion League. Community Resource's Thomas chairs the coalition.Rogers said coalition alliances help drive formation of the CUSO.“We're comfortable with working with each other,” he said. “We'reable to spread the risk but only spread the risk. We can manage therisk better than a single credit union could.” Campbell couldn'timmediately provide details on how many loans have been madethrough the CUSO or how many are in the pipeline. In Austin, saidUnited Heritage President and CEO Buddy Schroeder, the CUSO hasprocessed $9.9 million in business loans with another $745,000 inthe pipeline. “We've done everything from a couple of milliondollars in real-estate deals down to some simple $50,000 lines ofcredit,” Schroeder said. United Heritage has used the CUSO tofinance buses for a church and is working with a minority-ownedbakery looking to expand in Austin. All of the United Heritage'sCUSO business has come from members walking into the lobby lookingfor a commercial leg up and from word-of-mouth, Schroeder said.“Under their parameters, probably the bakery would have a hard timewith a bank,” he said. “It's a fairly well-established business.But (as an outside banker) you probably would have to get morecomfortable with the business.” With the prospect of a CUSO thatcould operate across north, east and south Texas, United Heritagepassed up a CUSO formed to make business member loans by Austincredit unions and opted for the statewide possibilities offered byTexas Business Lenders. It joined 12 other Texas credit unions in aCUSO formed in 1992 around a sub-prime auto lending program andwithdrew in 1996. “It was a great program for years. But then itran its course,” Schroeder said. “I think, like many credit unions,we had members approach us for member-business loans. A lot of themwe were able to take care of with personal loans – with regularconsumer-lending material. We just saw the demand for the businessside as being a really great opportunity that we were letting slipaway.” Rogers said he expects to compete with community banks in amarket demanding full service across the spectrum of institutions.“Today, why would you put your deposits in our institutions ifyou're a small businessman and you don't have loans?” Rogers asked.“I'm not going to sit here and tell you that we've got everythingfigured out. But there are a lot of good things happening withcredit unions, and we just believe that we're one of those things.”[email protected]