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