Pennsylvania Credit Unions Form Bond to Launch Business Lending Back Office Support Services CUSO

MOON TOWNSHIP, Pa. -- Clearly seeing an underserved niche, seven Pennsylvania credit unions have joined together to launch a new business lending CUSO.

Set to open for business April 1, Keystone Business Lending Solutions, LLC is the brainchild of $580 million Clearview FCU, $236 million Erie FCU, $49 million A-K Valley FCU, $37 million United Community FCU, $124 million Century Heritage FCU, $36 million Pittsburgh Central FCU, and $123 million West-Aircomm FCU.

While the CUs will issue business loans, Keystone will provide the back office support including underwriting, loan documentation, loan servicing, annual reviews and loan participations. Wayne Grinnik, who served as director of business services at Clearview for the past two years, has been hired as the CEO of Keystone.

Grinnik said after Clearview converted to a community charter in 2004, the CU knew that if it really wanted to benefit from the expansion it would need to offer business banking. In that vein, Clearview hired Grinnik and a business development officer to develop the CU's business services program. The new offering was expensive to roll out in part because of the different data processing systems needed for business loan documentation and other ancillary services, he recalled. Discussions began at the tail end of 2005 and into 2006 with the other CUSO owners and in the spring that year, the CEOs of the respective CUs gave a formal presentation on the direction of the new business lending subsidiary. "The fact is you have seven credit unions that are forming [this CUSO] because they had real concerns about serving their members and their communities," Grinnik said. "They were very empathetic and that's where we started." Grinnik, who previously worked in community banking for 32 years as a chief lending officer among other roles, has seen first hand the impact mergers have had on business lending departments at community banks.

"The three banks [ranging between $300 and $550 million] I previously worked at are no longer around," The niche community banks used to fill--loans under $5 million--hardly exists anymore. So, there's a big niche for credit unions to fill. The small business person that needs to have a business banking relationship is not getting that at a big bank."

Collaborating with seven other CUs, as with other jointly-owned networks, could help spread the risk and volume around through loan participations, Grinnik said. The alliance especially helps CUs meet members' business needs while staying under NCUA's 12.25% member business lending cap.

"That was a very important part of this whole CUSO. We can build relationships with business members and we can maintain them," Grinnik said.

Grinnik will head the new CUSO and is currently looking to hire a credit analyst and a business loan officer. Keystone, which will lease office space from Clearview, will strictly do lending back-office support at this point, Grinnik said. The seven owners will decide on their own whether they want to offer business deposit services. Over the next month, staff will be trained and the appropriate software and systems will be purchased. Grinnik said he is aiming to start underwriting loans beginning April 1. As the CUSO gets underway, Keystone plans to open up subscriber opportunities to other CUs.

Pennsylvania is quickly becoming a hot bed of business service ventures serving the CU industry. In 2003, the Pennsylvania Credit Union Association launched CU BizSource, LLC, which was later bought by CUNA Mutual Group's MEMBERS Business Solutions Co. and currently provides certification for CUNA Mutual's CU Systems Fund, an outlet created for the purchase of business loans from credit unions and the sale of shares in them to other interested credit unions. Last year, PCUA launched Business Advisory Services, a suite of educational and consulting programs aimed at assisting CUs that plan to serve small businesses. Impel Consulting Group, LLC, a business services consulting group founded by PCUA, Mennonite Financial CU, Park View FCU, First Capital FCU and Mid-Atlantic Corporate CU business services consulting group also made its debut in 2006. --msamaad@cutimes.com