Meet Loan Objectives by Participating

Considering buying loans because of persistent low loan to share ratio?

Considering selling loans due to liquidity or concentration risks?

Already buying or selling loans and want to stay abreast of recent NCUA developments?



Related web seminar on this topic:

Loan Participations

Buying and Selling

June 14 • 2018

11 am PT • 12 pm MT

1 pm CT • 2 pm ET


Credit unions across the country are experiencing a great deal of disparity when it comes to loan-to-deposit ratios. For many credit unions and their lending programs – it’s feast or famine. Loan Participations can help credit unions bring their loan-to-deposit ratios closer to objectives. TCT Risk Solutions, LLC (TCT) and its strategic partners help credit unions with their Loan Participation programs.

Credit unions will face challenges meeting lending, liquidity and profitability objectives for the foreseeable future

· Recent data suggests consumers in some areas of the country are already slowing their borrowing activity

· While indirect loans have played a significant part in consumer loan growth, lenders are now pulling out of the indirect loan market due to rising delinquencies and low profitability

· Small business loans are slowing as owners face uncertainty due to rising labor costs and new tax laws

· While consumer debt has reached pre-recession levels, lower-income consumers will probably reduce their appetite for debt if wages do not increase sufficiently to service existing debt

· Rising rates will reduce loan demand among rate sensitive borrowers

· CUNA Mutual Group predicts decreasing loan demand for credit unions in months ahead

· Changing tax laws will impact demand for HELOCs

· NCUA announced it will be paying more attention to the imbedded risk in individual credit union’s auto loan portfolios. Particular attention will be devoted to payment periods, loan-to-collateral ratios, effective risk-based loan pricing, portfolio concentrations in indirect loans, and more

· The implementation of CECL will impact credit unions’ ALLL placements and will probably require changes in Loan Concentration Policy limits

Loan Participations are a viable solution to credit unions’ loan-to-deposit ratio challenges

The challenges listed above means credit unions will need to rely on unorthodox methods to maintain profitability, loan portfolio, liquidity and Concentration Risk objectives. Loan Participations can serve as a solution for credit unions that have loan-to-deposit ratios above desired levels by selling excess loans to credit unions that could use more loans to meet objectives.

There are a number of benefits for credit unions who are sellers of participation loans:

· Balance sheet diversification

· Manage to MBL caps, Concentration Risk limits, loans to one borrower limits, etc.

· Liquidity management

· Risk management

· Asset/Liability management

· Increase non-interest income

Likewise, there are a number of benefits for purchasers of participation loans:

· Balance sheet diversification

· Geographic diversification

· Asset/Liability management

· Risk management

· Increase interest income


Loan Participation programs require special skills and oversight

Once on the books, participation loans require much of the same risk management tools and oversight as “home grown loans”. However, special expertise and training is needed to find, evaluate, account for and maintain participation loans.

TCT and its strategic partner LoanStreet provide the expertise for successful Loan Participation programs

TCT provides a plethora of stochastically-derived risk management tools including:

· Risk Based Loan Pricing

· Credit Migration

· Asset/Liability Management

· “Vital Statistics” Dashboard reports

· Budgeting and Forecasting

In addition, TCT has established partnerships with institutions expert in providing the skills, training and services necessary to assure a credit union’s Loan Participation program meets regulatory requirements and is profitable.