The Pros and Cons of Participation Loans

Managing these loans requires a careful and calculated approach.

December 24, 2010
/ PRINT / ShareShare / Text Size +

Loan participation case studies

The council white paper also includes several case studies from credit unions actively involved in loan participation programs. Among them are:

  • Delta Community Credit Union, Atlanta, which has successfully built a diversified portfolio of participation loans, including auto, residential and commercial real estate, cooperative housing, taxi medallion, and commercial equipment loans.
  • Evangelical Christian Credit Union, Brea, Calif., which is one of the largest providers of credit union loan participations in the U.S. The credit union began its loan participation program in 1990 and has originated over $4 billion in participations during the past 20 years. It services a participation portfolio of just over $2 billion today.
  • Arizona State Credit Union, Phoenix, with experience in a wide range of loan participation types, describes how it handled adversity with a restaurant loan, a hotel loan, and a land loan. The lesson: When you enter into a participation purchase or sale, you might not expect to have to deal with the specific terms of the participation agreement. In reality, you do; and often those terms are outside your control.
  • Sandia Laboratory Federal Credit Union, Albuquerque, N.M., which shares its loan participation policy, developed and approved by its board. The policy reflects National Credit Union Administration regulations and covers the basics of making participation loans.

The white paper also includes a section on small credit unions’ experiences with participation loans. While this type of lending is more common among larger credit unions, participation loans can provide smaller credit unions with the advantages of risk-pooling, sharing expertise, and bottom-line rewards.

Sometimes partnering with other credit unions through a CUSO is an effective way for a smaller credit union to take advantage of the benefits of loan participations. This can also allow the credit union to serve members it might otherwise have to turn away.

Next: Pros and cons

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive