Robert Familant, president/CEO of Progressive Credit Union, New
York explained that selling parts of loans -loan participations- to
other credit unions was an idea conceived through necessity. "As a
state charter, we had a lending limit of $1 million per individual,
which, based on our capital, is significantly less than if we were a
federal charter. Because our niche is loans to purchase New York
City Taxi Medallions, we couldn't serve our members who wanted more
than one, so we had an idea to sell parts of loans to other credit
unions."
Seven years ago doing that wasn't as easy as it is
today, he noted. "The first guy with the courage to get involved was
Ed Callahan of Patelco CU, and to this day, Patelco has the largest
participation in the program," Familant said.
Buyers of the
loans get increased yield over other investments (as much as 200
basis points better than Treasuries) and have marginal risk. "No
participant has ever lost a nickel with us," Familant said, due to
thorough due diligence.
Progressive now has a gross loan
portfolio of $300 million, of which $60 million is participation
loans, capital of 45%, assets of $240 million and 5,000 members. But
accounting for the loans as the program grew was a time consuming
thing, Familant said, until WESCO developed an online program that
automatically does calculations for accrued interest payments and
generates reports for all participants in a
loan.
"Progressive passes the principal and interest payments
to buyers of loans," said Jim Vilker, VP of business development for
WESCO (www.cubase.org) the Kentwood, Michigan CUSO, "and that's what
our software does. It allows a settlement to occur that's automatic.
Bob sees a report that lists amounts owed to all buyers of any loan.
What used to take five days now takes ten minutes."
"We see
this as taking it a step further, to assist credit unions in
building their ROA (return on assets) because ewe aren't just a data
processing vendor, we are a CUSO," said Vilker. "It's made our
lives easier," said Familant, and it wasn't easy because we are an
unusual credit union that needed a specialized solution. We needed
something that didn't fit the box, and they
delivered."
Progressive's participation loans are available
to all CUs in the WESCO network and beyond. "We are always looking
for more participants," said Familant.
