Centennial extends credit union reach

FREDERICK — Twenty years ago, a handful of local credit unions were hoping to get a toehold in commercial lending, but few of those executives probably foresaw the breadth of business they would create with Centennial Lending of Frederick.

“At the time there were three or four credit unions interested in stronger business lending services,” said Michael Martin, chief lending officer at Blue Federal Credit Union of Cheyenne, Wyoming, which at that time was Warren Federal Credit Union. “We all threw in some cash, hired a staff and began originating and serving commercial loans.”

Today there are 24 co-owning credit unions, including Blue Federal, which has nine outlets in northeastern Colorado, and Premier Members Credit Union of Boulder. But aside from the co-owners, Centennial also serves about 110 total credit unions, which mostly choose to contract with Centennial for its loan servicing expertise, said Centennial president and CEO Michael Nagl.

In the beginning, cooperating on commercial lending was the No. 1 priority of Centennial, known in the industry as a Credit Union Service Organization or CUSO. Essentially this allowed the owning credit unions, which now range from $50 million to $1.2 billion, to cooperate on larger scale commercial loans and allowing Centennial to produce most of those loans

“With such a wide swath of credit unions and strategies, I want to deliver all of them the opportunity to become involved in a commercial real estate deal,” Nagl said. “The credit unions themselves don’t necessarily have the expertise to drive those loans.”

Typically, Centennial said its targets are loans in the $1 million to $3 million range, but they also encompass larger loans, especially when they serve community interests. Credit unions can take all or a portion of these loans.

Martin noted that either of the participating credit unions, or the CUSO, can now also take a look at large investments in their communities, such as a $50 million hotel. “None of us can do that alone,” said Martin, whose credit union has tripled in size, to $1.2 billion, in the past seven years.

“It allows everyone to partner together, by taking some portion of a loan on their books, to serve a greater variety of customers,” said Martin, noting there are some complex rules regarding how things are actually divided up.

“I might bid to take 100 percent of a certain loan and end up with a third of that.”

While commercial and construction loans may be the most highly visible part of the Centennial portfolio, it’s hardly the largest. Today, Centennial is servicing $900 million in first mortgages, $350 million in commercial loans and $150 million in auto leases.

“We have business development officers out on the street,” said Nagl about the business loan development. “We source the loan, but we depend on our credit unions to finance the loans. Their loan committee gives their thumbs up (on potential loans).

“We send it out to a group of credit unions, and they determine whatever their appetite is for the loan,” he said, noting the individual credit unions can take as much of the loan as desired.

Servicing loans is the largest endeavor for the 52 employees at Centennial, which is why so many of the contracting credit unions turn to it for servicing first mortgage accounts. There are more than 1,000 CUSOs in the United States, which specialize in a number of different loans types, such as real estate lending, auto lending and leasing, information technology or payment processing

“We, as a CUSO, are focused on increased efficiencies, economies of scale and most importantly, collaboration,” Nagl said. “To my knowledge, there isn’t another CUSO in the country originating and servicing first mortgages, commercial real estate, construction loans and vehicle leases.”

It is those economies of scale that helped Blue Federal become not only the largest credit union in the Centennial family, but also keeps it the largest user of Centennial’s services.

“By utilizing Centennial we get more efficiencies,” Martin said. “I have originators on the mortgages, but we don’t have to have closers, processing and serving. Those are shared, and it lets me keep my staff leaner and more efficient.”

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