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Catalyst Corporate's Loan Participation Clears $100 Million Milestone
Thursday, January 15, 2015 6:30 AM

Since launching earlier in 2014, the Catalyst Corporate Federal Credit Union loan participation program has helped 41 credit unions buy and sell more than $100 million in loans, closing five deals in less than one year. And millions more dollars are in the growing pipeline. Early success with the program has sellers—and buyers—lining up.

It's no secret that much of the credit union industry's recent loan growth has been driven by larger credit unions, said Bruce Fox, EVP and Chief Investment Officer for Catalyst Corporate. "We knew it was important to develop a loan participation offering that could serve the interests of all of our member credit unions. That's why Catalyst Corporate's program has no limitations on the size of the loan pools—or the credit unions—involved."

Denali Alaskan Federal Credit Union, a $544 million credit union in Anchorage, was among the first to bring a loan package to the table. The credit union assembled a $39 million package of new and used car loans for participation to help a balance sheet that was 106 percent loaned out at the time. "This helped us to mitigate risk," CFO Eric Bingham said of the process that helped the credit union avoid new capital to offset loan growth.

The loan package was parceled out to a combination of more than a dozen credit unions in Texas, Hawaii, California, Oregon, and Washington—some, by design, with less than $50 million in assets.

Catalyst Corporate began developing its new loan participation program during 2013, following the National Credit Union Administration's issuance of a final rule detailing what credit unions can and cannot do when sharing loans.

The rule includes numerous provisions designed to mitigate risk, setting guidelines in the areas of concentration limits, risk retention, and underwriting. With many hurdles to clear, credit unions value the expertise that Catalyst Corporate brings as a facilitator to the loan participation process. The program follows a straight-forward framework for both buyers and sellers.

"Catalyst Corporate is a one-stop shop that offers a full range of services, making the loan participation process easy and convenient for all parties," Hamilton said. First, Catalyst Corporate works with sellers to identify and assemble loan pools, which are comprised of auto loans and mortgages, and develop pricing. Once a participation package has been assembled, Catalyst Corporate staff outlines the offer for sale, locates buyers, and gathers and provides the due diligence information on a secure website for buyers to review. Catalyst Corporate then coordinates the processing of documents between sellers and buyers, processes the settlement transaction, and provides monthly reporting and remittance services.

"Loan participations are an effective tool to help credit unions manage their business and their balance sheets," Hamilton said. "They can help offset liquidity challenges and concentration issues and enable credit unions to meet their members' loan needs without exceeding policy limits or pressuring capital ratios."

For more information, call Jeff Hamilton at (214) 703.7870 or visit online.

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Catalyst Corporate Federal Credit Union is a wholesale cooperative financial institution with more than 1,400 member credit unions throughout the country. Catalyst Corporate provides its members with core financial services and back-office support, including payments and technology solutions, liquidity, investment options and balance sheet management.