By the 1990s, the lending landscape in South SanFrancisco had changed considerably since a group of teachers cametogether in 1954 to charter a new credit union for access to small,personal loans.

Originally named the School Personnel Credit Union of South SanFrancisco, the cooperative decades later received regulatoryapproval to change its name to Sierra Point Credit Union and expand its field of membership toserve the entire area.

The $27 million credit union in South San Francisco is one ofthe more than 150 financial institutions that are clients ofBusinessPartners LLC, a Chatsworth, Calif.-based CUSO founded andco-owned by the failed Telesis Community Credit Union. Sierra Point partnered with BPin 2004, nine years after the business lending CUSO launched in1995, said Deborah Trapani, president/CEO of the credit union.

Sierra Point's initial investment of $500,000 in BP has paid offover its nine-year relationship by 230%, Trapani noted.

In even in 2012, when the NCUA had complete control of the CUSO,she said Sierra Point still managed to receive a return of morethan 5%. That despite the fallout from Telesis' conservatorship andlater, its absorption by the $1.2 billion Premier America Credit Union, also in Chatsworth.

And Sierra Point plans to stick with BP for the long term.

“They're on better footing now that the NCUA is out. Now thatthey have three credit union owners, new guidelines have beeninstituted,” Trapani said. “The changes have been verybeneficial.”

“In many ways, Business Partners is redefining itself by getting back tobasics. We have a very strong capital position so we can reinvestin the business by making improvements in technology, while at thesame time making significant improvements to our balance sheet byreducing expenses,” said Dave Maus, president/CEO of the $1.2billion Public Service Credit Union in Denver and board chairman ofBP, in the May 1 issue of Credit Union Times.

Still, the NCUA's takeover of BP created a tense atmosphere.Trapani said the regulator had concerns about the servicing notbeing done as timely as it would have liked. She disagreed with howthe agency conducted its audit.

“They audited BP the way they would a credit union and I justthink it was wrong,” Trapani said. “They were recommending thingsthat didn't make sense. Mostly, it was loan reviews and gettingthem done on a timely basis and more global cash flow analysis.Those things had already been implemented.”

John Fairbanks, NCUA public affairs specialist, said since theregulator sold its interest in BP last year and no longer has anyownership interest or control, it would not comment.

Trapani emphasized the separation between Telesis and BP eventhough the credit union owned 60% of the CUSO.

“Now, Telesis may have overextended itself. I really don't haveany knowledge of that. They are two separate entities, and theyalways were,” Trapani explained. “We made sure we tried to keep itseparate.”

Going back to 1998, Sierra Point made its entry into businesslending through participation loans, Trapani said. Located in anurban area in San Mateo County, an ethnically diverse and affluentswath that covers most of the San Francisco peninsula with SiliconValley situated at the southernmost tip, the credit union waslooking for new ways to generate income, she recalled.

“It was very difficult to get consumer loans, so we lookedoutside of the box,” Trapani said.

A meeting with Jean Faenza, the former president/CEO of BP, who was working atTelesis at the time, introduced Trapani and Sierra Point's board ofdirectors to the CUSO. Trapani said Grace Mayo, Telesis' former president/CEO, spent two hourstalking with the board about what BP had to offer. After six monthsof due diligence, including look at other potential partners,Sierra Point solidified a deal with BP.

There's a notable connection between BP and Sierra Point. Jean'ssister, Jill Faenza, is executive vice president of Sierra Point.When asked if Jill had any influence on the credit union signing onwith the CUSO, Trapani said it was not a factor.

“The decision was made by the credit union's board,” she said.“I've known Jill for 30 to 35 years. Jean and I actually workedtogether at one point. We have stayed in touch but now, it's moresocial. I don't talk to her often. I try to keep business andsocial matters separate.”

Trapani said, like Jill, she feels that BP is a boardcommitment. She did not want to comment for this article.

“She is part of the strategic planning but the board decidesbased upon my recommendations and their due diligence what is bestfor Sierra Point,” Trapani said.

Meanwhile, in 2005, the credit union closed its first loanthrough the CUSO for a furniture store, Trapani said. The loans,which tended to be around $1 million, were for gas stations,storage units, and health care and retail offices, among others.While the participation loans with other credit unions were instates such as Colorado, Florida, Illinois, and Texas, Trapani saidmost of the business loans were in Sierra Point's area.

According to Sierra Point's NCUA Call Report, as of March 2013,the credit union is considered well-capitalized at 10.38%. Threedelinquent member loans totaled $421,200. There were no MBLcharge-offs and of the 126 participation loans on the books, fivewere delinquent. In all, Sierra Point has $5.7 million in businessloans.

Pulling out a spread sheet of all the loans Sierra Point hasclosed on through BP, Trapani said there have not been any losses.There are two troubled debt restructuring arrangements pending NCUAapproval, a couple of forbearances and a loan that ran into someproblems because of a decrease in property value making it hard forthe member to refinance, she explained. Since 2009, the creditunion has had at least 20 payoffs, Trapani noted.

“It isn't that we've had some problems but we tend to be moreconservative,” Trapani said.

Sierra Point was approved for a waiver in 2006 to do 12.25% ofits assets on business loans, she said, adding, the credit unionhas had to pull back on lending since reaching its cap in January. To those credit unions that have either left BPor are skittish about partnering with the CUSO, Trapani said takeanother look. But, ultimately, the responsibility falls with thecredit union.

“I would tell them to revisit BP and you'll see that there's adifference,” Trapani said. “Credit unions are responsible for theseloans. BP is not an underwriter. We use a third-party underwriter.There have been loans that I've said 'no' to. It's up to the creditunions to do their homework.”