Six New England Credit Unions Fill Resource Void, Align to Form Member Business Lending CUSO
MARLBOROUGH, Mass. - The number of credit unions forgoing single ventures to form jointly-owned member business lending CUSOs recently added another alliance to the list. Five New England credit unions and one corporate credit union have aligned to form MBL Services, LLC. The CUSO is jointly owned by Digital FCU,...
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MARLBOROUGH, Mass. – The number of credit unions forgoing single ventures to form jointly-owned member business lending CUSOs recently added another alliance to the list. Five New England credit unions and one corporate credit union have aligned to form MBL Services, LLC. The CUSO is jointly owned by Digital FCU, Marlboro, Mass.; EasCorp, Woburn, Mass.; First Citizens’ FCU, New Bedford, Mass.; Jeanne D’Arc CU, Lowell, Mass.; Northeast CU, Portsmouth, N.H.; and Rockland FCU, Rockland, Mass. Together, the five credit unions have more than $4.5 billion in assets. EasCorp is the nation’s 13th largest corporate credit union, with more than $1.5 billion in assets. Besides providing centralized underwriting and servicing of small business and commercial real estate loans, the CUSO will also help credit unions establish product packaging and pricing strategies, gain access to SBA guaranteed lending programs, and implement other types of member business products and services. “Credit unions have served business people and small businesses since their inception, though often without formal policies and practices, or deliberate intent to expand within this market,” said Tom Ryan, Digital FCU’s senior vice president and MBL Services’ newly-elected chairman. “Our research and recent surveys of credit unions indicate that this is about to change in a dramatic way.” That research came from EasCorp, which had pinpointed specific desires and needs credit unions in the New England region had indicated in their quest to offer business lending services. They included the lack of financial and human resources as well as delivery channels and how to price business services, Ryan said. From there, a short list of credit unions were identified that may be open to the idea of forming an MBL CUSO. The $2.5 billion Digital FCU, with its $104 million commercial loan portfolio, was the first to be tapped for its expertise, Ryan said. “We were focused mainly on multi-million dollar commercial real estate loans,” Ryan said. “While we recognized that there was within our field of membership (a need) for smaller business loans under $250,000, it was, quite frankly, a back burner issue.” Ryan said that niche might have remained off the radar screen if Digital FCU did not get involved in the CUSO. The credit unions and corporate that came to form MBL Services were aware of the many business lending CUSOs that had sprang up and decided to take a regional approach. “We felt that credit unions in the region will be best served by those that they already knew,” Ryan said. The new CUSO aims to serve credit unions in the six New England states: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. Operations are scheduled to be up and running by the end of the year with actual service to start in early 2005. Fred Hashway, a former business lending executive at US Capital/First International Bank has been named as the CUSO’s CEO. Over the next few months, Hashway will be charged with building the CUSO’s team, which could include several business development officers, a credit analyst and other key staff. MBL Services will be headquartered within Digital FCU’s main office. MBL Services will initially facilitate small business loans up to $250,000 and real estate loans up to $500,000 with the projection that those limits may evolve upward going forward, Ryan said. The credit union owners will also explore loan participations, a feature many MBL CUSOs currently share to spread the risk around. Business deposit services will also be offered as demand picks up, Ryan said. As for the outcry from some community bank executives who feel credit unions’ growing entry in business lending is an encroachment on an “uneven playing field”, Ryan shrugs it off. “Anything positive credit unions do, it’s always going to draw the interest of the banks and trade associations,” Ryan said. “If we’re doing something good and vital for our members, should we worry about their reaction? The obvious answer is no.” Banks may need to look at the bigger picture by looking inward, he offered. “If I were a banker, I would ask myself, `what can I do to remain competitive?’” Meanwhile, the days of “working for a company for 45 years” are long gone, Ryan said, adding that the growing number of small business start-ups, particularly among credit union members, means there’s a need for service there. “Small businesses are a growing part of our nation’s economy and oftentimes not adequately served by banks, a fact that credit unions are discovering and attending to in their business strategies,” Ryan said. -
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