Brockton-based Crescent Credit Union is one of four new members of the credit union service organization known as Northeast CUSO.
Credit unions are catching on that they need to offer more services to keep their members happy. The 1-year-old Northeast Members Business Services, better known as Northeast CUSO, a credit union service organization providing the infrastructure to service and manage small-business loans for credit unions, is generating new interest and new partners.
The organization is in the process of welcoming four new credit unions: HarborOne Credit Union and Crescent Credit Union, both based in Brockton; Charter Oak Federal Credit Union in Groton; and Connecticut-based Connex Credit Union. There are now a total of nine credit unions taking part in the joint efforts to be able to offer small-business loans to members.
Scott Anderson, chief executive officer of Northeast CUSO, said the concept is catching on and the group is growing faster than he anticipated.
Fitchburg-based Workers’ Credit Union, Waltham-based RTF Federal Credit Union, Chelsea-based Metropolitan Credit Union, Peabody-based Unified Federal Credit Union and Boston-based Medical Area Federal Credit Union contributed to the initial capital to create the organization.
“We are actually growing faster than we predicted we would grow,” said Anderson. “I am not surprised. We are on a good path right now. There is pretty much a lot of interest out there.”
Anderson said the concept of credit unions joining up to address the needs of the small-business lending industry in new to Massachusetts and the rest of New England. But several credit union leaders are thinking about how that could help them better their members at a rate they can afford. Anderson said it is something he sees credit unions nationwide thinking about in the future.
“It makes tremendous sense for us,” agreed Jim Blake, president and chief executive officer of HarborOne, a $1.3 billion credit union. “We see this as a natural expansion of the business we are in. It provides a great opportunity for us to continue to serve our members.”
Blake said he expects the Division of Banks to give HarborOne the official approval to enter the CUSO within 30 days. He said over the past year he couldn’t help but hear about the buzz Northeast was generating. At conferences and during casual conversations, people in the industry have been talking about what the organization can do for credit unions, he said.
‘A Delightful Expansion’
Northeast CUSO offers an alternative for credit unions looking to establish a business lending options without setting up an in-house department for it. Providing such services can prove quite costly for credit unions venturing into business lending on their own. The formation of Northeast CUSO started in December 2004. It launched in 2005 and within the first year, several more credit union have joined the pack.
“It started with a dream among credit unions,” said Fred Healey, chief executive officer and president of Fitchburg-based Workers Credit Union, which has $500 million in assets. “You see a high level of collaboration and cooperation. This is a delightful expansion. How big will it get? I would not be surprised if we saw 12 new members in ’06. And it’s going to multiply.”
According to Healey – who is also chairman of the CUSO’s board – a credit union in Rhode Island and another in New York have shown serious interest in partnering up with the organization. Although Healey believes they will be the next two credit unions to join, he said he is not ready to name names.
“Several more interested parties will surface. We have nine partners after only one year,” said Healey. “We are really excited about this organization.”
Healey said he understands the appeal of Northeast CUSO. Prior to its formation, he noted, he had to direct members of credit unions to the local bank for small-business loan requests.
“We had to send members down the street to the local bank, and we didn’t like doing that,” he said. “That and similar requests triggered us to get into business banking. Our business plan is servicing the business needs of our credit union members.”
For partners of the Northeast CUSO, credit scoring and underwriting take place in the organization’s office in Keene, N.H. Healey said the loan applications are all sent there and the response time is fairly quick, usually a few days.
There are other CUSOs in Massachusetts, but none that specialize in small-business loans, said Healey.
“Small-business loans are the backbone to the credit union industry,” he said.
Healey said the business model was based on a CUSO in Wisconsin called the Business Lenders Group, an entity owned by four credit unions. He said he imagines Northeast CUSO branching out to serve the entire region it is named after.
Healey added that he would like to see more loan activity generating out of the CUSO.
As the organization continues to grow in size, the number of loans being originated is also multiplying.
According to Anderson, the number of loans being processed has been steadily increasing throughout the first year of business. For a start-up company, that is a good sign, said Anderson.
“Our volume has pretty much doubled each month,” said Anderson. “We are very happy we had such a great initial year.”
Also new to the organization is an increase in the loan amount cap for borrowers. During the first year of business, the maximum amount a credit union member could borrow through a Northeast CUSO partner was $250,000. Effective Jan. 1 of this year, borrowers can now seek loans up to $750,000. Healey said the new loan cap will allow even more members to take care of their small-business needs and he sees the amount increasing again in the future as the demands of small businesses change.
“I really do believe it is going to grow well,” he said.
