It's All About Ownership at XCU Capital Corporation

XCU Capital Corporation recently expanded its ownership to nine of the country's largest credit unions, including WesCorp, the country's largest corporate CU. While it plans to use the cash infusion to grow the business,

 
 

Mark Allen, the president/CEO of XCU Capital Corporation, the Carlsbad, California, CUSO that expanded its credit union ownership to nine of the nation's largest credit unions in late February, is perfectly comfortable with XCU being labeled a "Super CUSO."

"It became clear five or six years ago that if we wanted to grow the business, we needed to offer larger credit unions the established programs they wanted. But getting the board comfortable with giving up the controlling ownership interest -that 50% hurdle- took some time."

Seven of the nine CUs that now own 60% of the outstanding shares of XCU are in California: TRW Systems FCU and Schools Financial Credit Union, Sacramento; Safe Credit Union, North Highlands; Premier America Credit Union, Chatsworth; The Golden 1 Credit Union, Sacramento; Travis Credit Union, Vacaville; and WesCorp, the nation's largest corporate credit union, which is located in San Dimas.

State Employees Credit Union of Raleigh, North Carolina and Mountain America Credit Union of Salt Lake City, Utah also bought a stake. Xerox FCU, El Segundo, California, which founded XCU as a wholly owned CUSO in 1987, sold down its interest, but remains as a XCU client.

But what, exactly, are they buying into? First, emphasized Allen, they are buying into the very idea of credit unions becoming their own broker/dealer, rather than doing business with a third party. For an ownership level of 6.66% each, it means the credit unions are no longer "basically renting" their financial investment services from other entities, said Allen. "That's a significant difference," he said.

"This will benefit XCU, of course, with an influx of money that will boost our net capital by three times and gives us a cushion of additional capital," said Allen. (Xerox FCU gets a return on its original investment.) XCU will use the money to grow the business, provide new services and bring them to market faster.

The new owners all have a long-range business plan, Allen said, that involves a 10-20 year commitment. "We're not looking just quarter to quarter. Will there be challenges in the short term? Yes, of course; last year wasn't a really good year, but cycles come and go. The important thing is to take advantage of opportunities while you can, and ownership is crucial to long term success."

The fact that one of those new owners is WesCorp, the largest corporate credit union brings a "level of credibility, business development acumen and clout with the many credit unions it deals with," said Allen. Another advantage is that this group of CU owners has been planning and negotiating this deal over a two-year period, and they've developed a solid working relationship. "I'd have to say that it's easier to have client/owners than clients," said Allen.

XCU's assets under management, after the conversion may reach $1.5 billion, with near 50,000 client/member accounts, said Allen

 

 

 

April 15, 2002


Comments

 
 
 
  • useless propaganda
    Anonymous
     
     
     
  • I would like to know more about how it works.
    Anonymous