Since signing on its first credit union in April to its new loanparticipation program, Catalyst Corporate Federal Credit Union saidmore than $46 million of the loans have been bought and sold.

The Plano, Texas-based corporate said it began developing itsprogram in 2013 after the NCUA's issuance of final rules that increased the loanconcentration limit to 100% of a credit union's net worth, up fromthe 25% limit that the agency had first considered.

Catalyst Corporate's loan participation program officially launched in July 2013.Nearly two dozen credit unions have signed on sinceApril.

The corporate serves as facilitator, bringing the buyers andsellers together in the loan participation process, but does notparticipate in the loans. It works with sellers to identify andassemble loan pools, which are comprised of auto loans andmortgages, and develop pricing.

Once a participation package has been assembled, CatalystCorporate staff outlines the offer for sale, locates buyers, andgathers and provides the due diligence information on a securewebsite for buyers to review.

The corporate then coordinates the processing of documentsbetween sellers and buyers, processes the settlement transaction,and provides monthly reporting and remittance services.

“Loan participations are an effective tool to help credit unionsmanage their business and their balance sheets,” said JeffreyHamilton, vice president of lending at Catalyst Corporate, “Theycan help offset liquidity challenges and concentration issues andenable credit unions to meet their members' loan needs withoutexceeding policy limits or pressuring capital ratios.”

The $544 million Denali Alaskan Federal Credit Union in Anchorage, was among thefirst to bring a loan package to the table, according to CatalystCorporate.

The credit union assembled a $39 million package of new and usedcar loans for participation to help a balance sheet that was 106%loaned out at the time.

“This helped us to mitigate risk,” CFO Eric Bingham said of theprocess that helped the credit union avoid new capital to offsetloan growth.

The loan package was parceled out to a combination of more thana dozen credit unions in Texas, Hawaii, California, Oregon andWashington – some, by design, with less than $50 million in assets,according to Bingham.

For the $670 million Neighbors Federal Credit Union in BatonRouge, La., the loan participation program helped to assemble asmaller package of $1.3 million worth of indirect auto loansearlier this year.

“The first loan participation package was just a test run,” saidJody Caraccioli, CFO at Neighbors FCU. “We wanted to get all theprocesses, G/Ls and reporting set up so we could do more.”

Based on its success so far, Caraccioli said the credit union isnow following up with a $27 million package for participation inAugust.

“We happen to be located in an area that is going through an(energy-related) economic boom. We've experienced a 26% loan growthfor the first six months of 2014,” she noted. “That loan growth hascaused a liquidity challenge for us. This participation program hasbeen helpful in allowing us to continue making loans.”

The program has been beneficial for buyers as well, said JackieSo, vice president of finance at the $300 million Foothill FederalCredit Union in Arcadia, Calif.

“We've been buying loans to help meet the growth outlined in ourstrategic plan,” So said.

Auto loans purchased through Catalyst Corporate's loanparticipation program would help mitigate a loan portfolio stackedwith real estate and business loans that Foothill FCU acquired fromother credit unions and CU Business Group LLC, a Portland, Ore.-based business lendingand services CUSO, she added.

“This helps us diversify,” So said.

Much of the recent loan growth in the credit union industry hasbeen driven by larger credit unions, said Bruce Fox, EVP and chiefinvestment officer for Catalyst Corporate.

“We've listened to our membership, and we were able to bringtogether a loan participation opportunity that specifically setsaside a portion of the package for smaller-sized credit unions sothey can get a much needed boost in loan activity,” he explained.“It is a win-win-win all the way around.”