After years on a regulatory watch list, NCUA and the CaliforniaDepartment of Financial Institutions finally pulled the plug lastweek on the $318 million Telesis Community Credit Union, placingthe Los Angeles-based credit union into conservatorship. The NCUAwas appointed conservator, ending a troubled saga. 

News Update, April 2, 2012, Telesis Management Taken Over By PremierAmerica

Exactly what triggered the agencies' move against the creditunion at this time was not entirely clear, but the credit union hadbeen under close examiner scrutiny for its large exposure and losses on out-of-state business loans,primarily within its CUSO operations.

Last year Telesis lost $4.6 million and its capital ratio hadfallen to 5.48% from 9.61% in 2007 as the California housing bustand subsequent recession hit hardest. In 2010 Telesis lost $11million, the same year the California credit union paid itsnow-ousted president/CEO Grace Mayo $2.1 million, according to IRS 990 forms.

The collapse of Telesis into conservatorship set off a firestormof internal industry debate and angst, as well as well-orchestratedand fierce attacks from the bankers' associations about theefficacy of credit union business lending.

The conservatorship of Telesis also comes as Congress is aboutto undertake key votes on proposed legislation lifting the creditunion member business lending cap.

The conservatorship of Telesis, which serves 36,700 members,marks the second credit union taken over due to business loantroubles. The now $1.4 billion Texans CU in Richardson was seized in April 2011 and is still being run underconservatorship. Telesis was the third federally insured creditunion conservatorship so far in 2012.    

In assessing the Telesis aftermath, much attention was beingfocused last week on Mayo, once a visible advocate before lawmakersin Sacramento and Washington in support of credit unions taking onmore business lending powers. 

Mayo served on several committees of the California/NevadaCredit Union Leagues and was first elected to the CUNA board in2004 serving until February 2008. 

Publicly available biographies show Mayo joined Telesis in 1986,at a time the credit union had $600 million in assets and 41,000members with 10 branches. It now has dropped to $318 million inassets and four branches. 

Mayo also chaired Business Partners, a multi-owner memberbusiness lending CUSO with 15 equity owners' nationwide managingassets of $1.5 billion. She also served as chair of CU VehiclesLLC, the holding company for Autoland Inc., described as the“largest vehicle purchasing CUSO serving hundreds of credit unionsnationally.”

Mayo received her bachelor's degree in business management fromUniversity of the Pacific, graduate degree in financial managementfrom UCLA, and a certification in commercial lending from theUniversity of Louisiana. In addition, she attended the executivedevelopment program at Stanford University School of Business. Shewas a frequent industry speaker. 

The California league said she was an ex-officio director andhad been a member of the Applied Research Institute 2000-2005,Competitive Environment Task Force 2000-2005, Government RelationsCommittee 2000 and 2005-2007, Technology Task Force 1997,Facilities Review Committee 1998, and Renaissance Task force2001. 

Lamenting the Telesis fallout in a blog posted last week,Charles Bruen, president/CEO of the $920 million FirstEntertainment CU of Hollywood, called the conservatorship a sad dayin the industry's stature, both in Los Angeles and across thenation.

“Picking up The Los Angeles Times and reading theseheadlines: 'Telesis Credit Union Fails' or 'Chatsworth Credit UnionDemise Ignites Pay Business Loan Debate' can't be good for anycredit union.” He added that it eroded member and public confidencein all credit unions.

The Telesis “cloud dims the light for everyone starting with thestaff, the CUSO partners, the local credit union community and thenthe entire credit union movement,” he said.  

Like other industry observers, Bruen noted also that the mediacoverage has been on “how the banks will use the Telesis failure as exhibit A in their caseagainst granting additional MBL powers to credit unions.”