By Ray Birch
MINNEAPOLIS, Minn.–Too many big commercial lending opportunities have slipped past credit unions—including state and local infrastructure projects—due to cooperatives’ limited size and risk appetite, according to the leader of a new CUSO that aims to change that.
The CUSO is United Financial Capital. It was formed by four Minnesota credit unions with a goal of collaborating on lending opportunities for public and private commercial and infrastructure projects throughout Minnesota and the Upper Midwest. It is led by CEO and Founder Micheal Dalglish.
The four credit unions backing the CUSO include:
- $3.8-billion Affinity Plus Federal Credit Union, St. Paul
- $1.6-billion Hiway Credit Union, St. Paul
- $2-billion SPIRE Credit Union, Falcon Heights
- $674-million TopLine Federal Credit Union, Maple Grove
Dalglish points out the new organization arrives at a time when mortgage lending could be hitting the brakes due to rising rates. As CUToday.info reported, “an astonishing turnaround,” may be occurring and the pandemic-fueled housing boom is now “careening to a halt” in many markets, where the days of waiving inspections and bidding above the asking price now seem to be over, according to a new report.
Why Turn Away Opportunities?
“Credit unions have strong relationships with their member base and they're connected with a lot of people,” noted Dalglish. “And they represent a lot of people collaboratively. To put it simply, why do we have to turn these lending opportunities away? Why can't we collaboratively work on these projects and be able to do these deals that have been turned away?”
Dalglish said by spreading the loan over the participating CUSO credit unions, the group can now confidently bid on projects that can reach $50 million in size.
“Now, we can collaboratively look at those opportunities as a combined entity and play in that lending market space,” said Dalglish, who noted typical infrastructure projects are building new schools, adding infrastructure enhancements to buildings, and recreation complexes. “We already had connections here and we can start serving members who have been long-time great members.”
Given their size, credit unions have traditionally avoided lending on big infrastructure projects for the obvious reason.
“To be blunt, the size of the project. If you look at a $20-million-plus project—that presents a lot of risk,” Dalglish said. “That’s a lot on the balance sheet for one credit union. This creates an avenue to look at those opportunities that were being missed.”
Asked if individual credit unions are perceived by leaders of these infrastructure efforts as being too small to provide the kind of financing needed and, as a result, overlooked, Dalglish said the decision not to participate falls more on credit unions.
“In general I don't think credit unions have been actively looking for these projects,” he said. “I think it has more been about credit unions turning away from them.”
Refined Skill Sets
He said credit unions have had the lending skill in house to take on the bigger projects, but those skills are being further enhanced and refined with a CUSO that focuses on infrastructure financing.
“I think all of our credit unions have the skill-sets on their teams, but collaboratively I believe we are much better,” Dalglish said. “And our skill-sets in this area of lending will just get stronger.”
Dalglish said he believes the credit unions that have invested in UFC can compete with large players, such as Wells Fargo, on large commercial projects—and they may even have an advantage.
“We can compete and our story is unique,” he said. “We are lending money for projects within our own communities. We are a local financial institution and our story is our members, who live here, are putting their dollars to work for their communities. That is a big selling point when these bids come up.”
Confidence in Future
Dalglish is confident UFC will grow.
“We are definitely going to expand,” Dalglish explained. “We're 100% focused on the four credit unions, who will just bring us more opportunities and more credit unions our way. We've already been involved with several projects already and provided funding. There are more credit unions that are interested and I will have news to share on that at a later time. But, at a time when mortgage lending is slowing, these projects can bring credit unions a great deal of new lending business without the risk they once carried.”