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MADISON, Wis. and HARRISBURG, Pa. – In a move that could potentially create a secondary lending market for credit union member business loans, MEMBERS Development Co. LLC recently announced that it will acquire CU BizSource, a small business lending company, launched in January 2003 by the Pennsylvania Credit Union Association. The acquisition introduces the new MEMBERS Business Solutions Co., LLC (MBSC), which will use the secondary market to promote best practices in business loan underwriting and provide additional liquidity and risk management alternatives. CU BizSource will be the conduit to jumpstart the company’s business lending activities, according to Rick Rice, chairman of MEMBERS Development and president/CEO of Teachers Credit Union in Indiana. MEMBERS Development is a research and development firm owned by 57 credit unions, CUSOs and CUNA Mutual Group. “MBSC will be well suited for credit unions and credit union service organizations that are already active in member business lending or are looking to start business lending programs,” Rice said. CU BizSource currently serves 18 credit unions in Pennsylvania and three in California, Minnesota and Virginia with underwriting consultation, document preparation, loan servicing and a variety of training, regulatory and administrative support. Rice said the PCUA will have a minority interest in MBSC though MEMBERS Development. The company would not reveal what percentage will be owned nor how much it paid for CU BizSource, according to Jack Young, MDC vice president of strategic development. “MEMBERS Development did not have the credit analysis or business loan expertise,” Young said. “CU BizSource’s expertise led us to them.” Young said that unlike the growing number of credit unions that are selling off their credit card portfolios, he isn’t aware of any trend from them to sell off their business loans portfolios. He also emphasized the acquisition is not a sell-off of any kind. “We are looking to compliment existing practices not make any replacements,” Young said, adding he would compare the CU BizSource acquisition to an arrangement similar to the pooling of loans by credit unions through loan participations. MEMBERS Development began its search late last year to align with a firm that could bring some best practices and risk mitigation to credit unions on the business lending end, Young said. CU BizSource was looked at it along with a number of other organizations. When the two made contact, the PCUA’s business services subsidiary was considering spinning out of their origination into a broader model. When the acquisition becomes official sometime in August, MBSC will continue to serve CU BizSource’s current clients with the aim to extend to other credit unions nationwide, Young said. The acquisition is a win for all involved and the timing could not have been more prime, said Jim McCormack, PCUA president/CEO. “We weren’t actually looking to sell but were considering bringing in additional partners,” McCormack said, adding that PCUA’s decision had nothing to do with failed projections from CU BizSource. “The company has exceeded our expectations by satisfying a tremendous and growing need for members who looked to their credit union for small business loans.” McCormack praised PCUA executives Rick Wargo and Dave Dunn, and the rest of the CU BizSource staff “who worked extremely hard to make the program an exceptional regional success.” Dunn will continue on as vice president of member business services and Rick Wargo will remain with PCUA as general counsel, McCormack said. The newly-formed MBSC will remain in Harrisburg as will its five employees, McCormack said. A search is underway to hire a full-time president/CEO but in the interim, John Henry, MEMBERS Development CEO and CUNA Mutual senior vice president, will guide the company, Young said, adding “there are several (current CU BizSource) employees who will be a bit mobile and may have the flexibility” to transfer to Madison, Wis., MEMBERS Development’s home base. Young said while the mission is to take MBSC nationwide, there aren’t any state regulations that the company would have to conform to with the exception of underwriting practices that could vary from state to state. MBSC would more closely adhere to NCUA’s regulations, he said. Early discussions are already underway to start a new venture that will complement MBSC and serve credit unions in the Commonwealth here through the marketing of business services, McCormack said. Meanwhile, the focus over the next two months will be the implementation of MBSC’s plan to create that secondary lending market including talking with credit unions about its benefits, Young said. Henry added he envisions MBSC member business services for credit unions and CUSOs to include life and health insurance and retirement benefits. Formed in 2000, MEMBERS Development has made strides in other areas lately. In May, the company announced a customer relationship management program with Inforte Corp., and Onyx Software and in 2003, launched MEMBERS Trust Co., which is now providing trust services to 26 credit unions in six states. Its also had its failures including account aggregation. [email protected]

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