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SCOTTSDALE, Ariz. – The number of loan participations bought and sold last year by credit unions were in the billions and industry experts predict those figures will continue to soar. Jean Faenza, president/CEO of Business Partner, LLC, told attendees at this year’s symposium that loan participations not only allow a buying and selling exchange for credit unions who want to dabble in business lending to see if it might be a fit for them, it can also increase earnings, satisfy liquidity needs, utilize and leverage the expertise of credit union partners but also be “fast to market with no or low additional cost to your current infrastructure.” Getting started still means doing due diligence in finding the right partners, determining yield, product type and whether risk is commensurate with price. “If a credit union isn’t able to garner market share, loan participations are one way to do it,” Faenza said. Founded in 1995 as Telesis Partnerships, Inc., a subsidiary of Telesis Community Credit Union, the CUSO has $1.5 billion in assets under management, 11 credit union owners, 170 credit union clients, 70 employees and does lending in 32 states. Telesis sold it equity in the CUSO in 2003. According to Callahan & Associates, Inc. credit unions purchased $3.1 billion and sold $2.1 billion in loan participations in 2005. Asset liability management and yield strategies tied to loan participations include helping match assets to liabilities and allowing a quick mix of assets provided the network to buy and sell is there, Faenza said. The products can also assist with managing spread. “It provides a viable tool to attain needed yield,” Faenza said. “Your market may be saturated with a particular product and therefore you may need to compromise yields to gain market share.” While some credit unions may think “yield is a good thing to chase,” it may not be a good move for the long haul. Once the board approves a policy overview for loan participations, the process doesn’t stop there, Faenza said. “The key to your success will be establishing, implementing and monitoring your policies,” she suggested. That includes periodic reviews, identifying risk factors such as past due taxes and lapse of insurance coverage, and reviewing the policy’s purpose and intent. “Remember the good, the bad and the ugly – scrutiny, scrutiny, scrutiny,” Faenza said. “This rears its head in many ways…what is the objective of the credit union – to make loans to creditworthy members, source of revenue to pay for operating expenses, retained earnings? Good practice is good business.” -

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