8 FOCUSREPORT/CUSOs
For many credit unions, partnering with a CUSO makes perfect sense. A CUSO can help your
credit union offer a new service,
enter a new market or serve your
members’ needs better. Through
a CUSO partnership, credit unions
can leverage the expertise and resources of an organization focused
on a single area of business, often
more economically and efficiently
than they can do it themselves.
However, some CUSOs are
better equipped to support their
credit union owners or clients for
the long-term. What should you
look for in selecting a CUSO that
will meet your needs now, and
for years to come?
The Service Life Cycle
To help you achieve maximum,
sustainable success, your CUSO
partner must be able to adapt to
your credit union’s changing needs
as it progresses through the service
life cycle, which typically consists
of startup, growth and maturity
stages. Some CUSOs are very adept
at supporting the startup phase,
but once you are up and running,
you will no longer need those services. You will, however, likely require some operational support
to help fill in the gaps as demand
fluctuates, volumes increase or
during temporary staffing shortages. Is your CUSO prepared to help
you through the growth and maturity phases as well?
When CU Business Group first
got started 15 years ago, we fo-
cused primarily on helping credit
unions start up their
business services pro-
grams through strate-
gic planning, market
analysis and policy
development services,
and by offering com-
mercial loan under-
writing and documen-
tation support.
“We found CU
Business Group and
decided they would
be able to help us
set up a full-service
program and give us
the expertise that we
didn’t have in-house,”
Brenda Worrell,
COO/EVP of Ida-
ho Central Credit
Union ($3.6 billion
in assets, Chub-
buck, Idaho), said.
“They helped us
write our policies
and procedures.
They also helped
with the initial
training of our team on the loan
officer side as well as the deposit
side.”
CU Business Group supported
the startup phase of Idaho Cen-
tral’s business services program
in this way for the first four years.
But the credit union’s commercial
loan portfolio grew fast, and Idaho
Central began hiring experienced
commercial lending staff, benefit-
ting from reduced expenses due
to economies of scale.
“I think if your volumes are
small, it makes sense to continue
with the CUSO be-
cause they have the
expertise and all of
the resources that
you can’t afford to
staff full time,” Wor-
rell said. “But we hit
a level where, from
a cost and a ser-
vice perspective, it
made more sense to
bring the program
in-house.”
Adapting for the
Long Haul
In the early days of
CU Business Group,
For instance, CU Business
Group conducts an independent
third-party portfolio review for
Idaho Central on an annual basis.
CU Business Group has also provided Idaho Central with expert
technical assistance in areas like
the allowance for loan and lease
losses, where we can offer a broad
industry perspective.
“CU Business Group has been
really good at helping us,” Worrell
said. “They bring different ideas
in to help us make our program
better.”
Mid Oregon Credit Union ($273
million in assets, Bend, Ore.) re-
lied on CU Business Group to help
start its business services program
nearly 15 years ago. Since then,
it has used the CUSO to help di-
versify its loan portfolio through
participations, vet commercial
lending staff hires and even con-
duct due diligence on a bank loan
portfolio it recently purchased.
“This was right before Thanks-
giving, and a team from CU Busi-
ness Group was
onsite within a
week, reviewing
every single one
of the loans, about
$9 million in total,”
Bill Anderson, CEO
of Mid Oregon,
said.
Choosing the Right Partner
Not all CUSOs are structured the
same way. Some are more narrowly focused on offering a single
service and are not set up to help
a credit union succeed through
their entire product life cycle.
Others may not have the size, resources or expertise to serve a
large swath of the market.
Here are some questions to ask
a prospective CUSO partner during the due diligence phase:
• How long have you been offering this service? It’s important to
dig into the CUSO’s relevant background and experience, ensuring
alignment with your specific needs.
“I really like finding out about the
history of the organization,” Anderson said. “Why were they created? What kind of expertise do
they have? And how have they
been growing through the years?”
• What challenges has your
CUSO faced, and how have you
dealt with them? During her initial round of questions, Worrell
asks about issues the CUSO may
have faced in the past, and how it
has maintained its service levels
in dealing with them. “I also like
to ask about the current or future
risks they may see in their industry or service areas,” Worrell said.
“What are their plans to mitigate
these threats?”
•Are your strategic goals
aligned with ours? It is critically
important for the CUSO and cred-
it union to be on the same page in
terms of strategy, goals and phi-
losophy. In the case of a business
lending CUSO, for instance, will
it underwrite loans in line with
your commercial loan policy, or
will it take a “one-size-fits-all” ap-
proach, relying on a centralized
standard policy? “I want to know
how the CUSO makes money, and
what its motivations are,” Ander-
son said. “What are the goals of
the organization?”
• How many clients have you
lost? Why did they leave? This line
of questioning can be very telling.
By asking if the CUSO has lost any
key customers recently, you may
uncover some hidden service is-
sues that have yet to bubble to the
surface. “If you see a loss or decline
in the customer base, I would be
concerned,” Worrell said. “Some
CUSOs are afraid to discuss this,
while others are very up front and
explain who they lost and why.”
It is important to take the time to
conduct comprehensive due dili-
gence on any new CUSO partner,
just as you would with any new
vendor relationship. Reaching out
to current references is vital.
When Is It Time to Say
Goodbye?
Of course, not all relationships are
designed for the long term. Organizations grow and change, and
the time may come when your
CUSO can no longer meet the
needs of your credit union.
How do you know when it’s
time to say, “It’s not you, it’s me?”
It’s important to keep close tabs
on your CUSO relationship over
time, just as it is to conduct full
and comprehensive due diligence
before the contract is signed. This
way, you can ensure your CUSO-credit union partnership will remain a match made in heaven. n
Is Your CUSO Marriage Built for the Long Haul?
Larry Middleman
President
CU Business Group,
LLC
CONTACT
503-232-2876 or
larry.middleman@
cubg.org
Worrell
Anderson