Texans CU Quietly Sold Texans Commercial Last Year to Real Estate Investor
RICHARDSON, Texas -- The $2 billion Texans Credit Union last year sold its majority interest in Texans Commercial Capital, its once successful lending CUSO, the CU told Credit Union Times last Thursday.
Texans retained a minority interest in the company and retained 100% ownership of the pre-existing loans, according to Matt Davis, executive vice president at the credit union. Texans sold the commercial real estate loan origination platform, which included the people and the processes, to TCC but not the loans and loan relationships, Davis said. At the time of the sale, Texans CU signed a loan servicing contract with TCC. The CU sold the majority share of the business "to an experienced real estate professional with Wall Street connections," Davis said.
"Recently, Texans Credit Union brought the servicing of these loans and relationships into Texans Credit Union from TCC," Davis confirmed in a Sept. 4 e-mail to Credit Union Times. "The same employees who had been responsible for servicing the loan portfolio at TCC have been hired into Texans Credit Union, ensuring our members continuity of service."
Davis said one of the primary purposes for selling the majority of TCC was to enable it to more easily pursue capital outside of the credit union industry. While a majority-owned subsidiary, Texans CU was able to fund TCC activities from its own balance sheet and other sources of funding within the credit union industry, such as loan participations and corporate credit union lines of credit, he explained.
"We expected TCC could grow much larger if it had more efficient access to capital. As the credit union industry is relatively small, access to capital was less efficient than if TCC had access to Wall Street sources," Davis said. "Texans Credit Union was told by several Wall Street firms that a credit union-owned entity was less likely to get funding than one owned by an outside firm, one known to the street."
Launched in May 2004, TCC is the same CUSO that funded a number of high-dollar sales in the industry. Some of the CUSO's financing deals have ranged between $10 million to $30 million. The credit union has acknowledged that its delinquency rate rose sharply in late 2007 compared to 2006 and 2005 as a result of its commercial and real estate loans. The CUSO has since pulled back the reins on member business loans.
Meanwhile, Davis said the sale of TCC "was appropriate at the time." It was Texans CU's vision, he explained, that TCC would continue to service previously originated loans while conducting additional revenue generating transactions utilizing additional funding sources outside of the credit union industry.
"Unfortunately, the marketplace and the economy changed dramatically just at the time of the sale of TCC. As is still the issue today, most sources of funding on and off Wall Street for real estate transactions have all been reduced dramatically," Davis said.
While Texans CU remains a minority shareholder in TCC, Davis said "it is not appropriate for us to comment on the businesses' various operating strategies and the specific elements of its business."
Meanwhile, the credit union plans to uphold its service to borrowers, Davis said.
"Texans Credit Union is committed to maintaining a high level of service quality to all of our borrowers. Having full control of that service, no longer outsourcing it, gives Texans Credit Union assurance that this service level will not wane."