1. We Make Markets for SBA Tails™ for Credit Unions
New Wave Market Makers
We Make Markets for
SBA Tails™ for Credit Unions

2. What Are We Here to Discuss?
How you can increase your credit union’s net income by up to 88%...
With a single stroke of a pen!
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3. How? By adding…
High-yield, low risk loan participations – 4.00% Gross Adjusted Yield
Adjusted for charge offs and premium amortized over 4-7 years
Complies with  NCUA rules for Loan Participations –
NO FIELD OF MEMBERSHIP REQUIRED
Highly diversified pools of loan participations
Typically 5 loan participations per $1 million
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4. Who Are We? We - the Management Team:
Have many years of experience with SBA lending at the local & national bank levels
Developed a program by which banks can now sell 90% of their SBA loans vs. the traditional 75%
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5. What Do We Do? We…
Are the program manager & market maker for banks desiring to sell the non-guaranteed portion of their SBA loans, being:
60% of the retained portion
15% of the current bank balance
Typical a 106% vs. 116% premium for the guaranteed portion
This loan segment is called “SBA Tails”
Provide a “fair & balanced” method of determining the pricing & terms between buyers & sellers
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6. Regulatory Rules – Credit Unions
Need to be a SBA Participating Lender
Complies with the NCUA Loan Participation Rules
701.22
More information is available on the "Legal Guidance" tab of our website
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7. No Field Of Membership Required – Breakthrough!
When structured using our method:
Using a Georgia chartered credit union to purchase the loan participations first and then…
Resell them to Federal and State Credit Unions nationwide
Georgia credit unions have uniquely an exemption from FOM for the purchase of loan participations
Purchasing credit unions need to be:
“Well Capitalized” Status
CAMEL #1 & #2 or 702 Capital Ratios
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8. Market for SBA Tails?
There are $600 BILLION of retained portions of SBA loans on the books of banks
The 25% retained portion that is not guaranteed
Another $4.0 BILLION is generated each year
$360 BILLION or 60% of the retain portion are sellable under the SBA Tails program
At least 50% owned by community banks
$180 BILLION
Plus $2.4 BILLION of new originations each year
$1.2 BILLION owned by community banks
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9. Who Are Sellers? Community Banks
Why?
Banks can now sell another 15% at a premium, on a non-recourse basis, resulting in:
Gains on Sale – % premium on average
Acceleration of deferred premiums (FAS 140) – up to 2.5 times the premium
Retain the 1% servicing fee
Fully controls recoveries & liquidations
Reduce default exposure by 60%, or
Originate $1.0 million of new SBA loans for each $1.0 million of SBA Tails sold, without any additional capital!
Plus additional premiums of $98,250!
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10. Regulatory Rules – Banks
No additional requirements, except “Prior Written Notice” to the SBA Area Office
Need to retain at least 5%
701.22
That is it!
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11. Who Are the Buyers… Credit Unions
Why?
SBA Tails are highly attractive purchases for credit unions
7 times the typical credit union’s earned income –
Over 400 bps Adjusted Gross Yield vs. 50 bps on average, adjusted for:
Credit risks – typically 2.00% charge offs (NAICS Codes)
Premium amortization – over 7 years for 25-Year CRE loans %
With at least 350 bps Lifetime Yield after amortizing the premium
Gross Premiums – 104% to 106.5%
Regulatory structure eliminates the need for a “Field of Membership” for the borrowers…
Highly diversified loan pools – 5 loans per $1 million
Consistent underwritings standards governed by the SBA criteria
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12. Impact on Earnings… Up to an 88% Increase
Typical Credit Unions earn 50 bps – $250 million X 50 bps = $1.25 million
Smaller credit unions earn less (under $250 million) – 25 bps
Average credit unions ($250 million) – 50 bps
Larger credit unions earn more ($500 million) – 75 bps
Super large credit unions (over $1 BILLION) – bps
SBA Tails Capacity % X $250 million
$31 million purchase
Increased net earnings = $1.1 million
88% increase in earnings from a single purchase!
Of course, you do not have to purchase your allocation all at once…
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13. Credit Criteria for LP Purchases
Determine the expected premium with our Pricing Calculator©, based on Net Interest Rates of the selected loans
Selection Criteria – based NAICS Code data:
No Default Rates over 20%
No Charge Off Rates over 3%
No Net Interest Rates under 4%
SBA Rated “4” or better
Not more than 29 days pass due – ever!
Buyer can re-underwrite all or a sample of the PLs purchased
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14. Highly Diversified Credit Risks
5 loan participations per $1 million of SBA Tails vs. typically one loan per PL
Very unlikely more than one loan defaults due to the pre-screening criteria – 20% max. limit
Recoveries average 90%, with Charge-Offs:
SBA Tails PLs = 2% per $1 million
Other PLs = 10% per $1 million
5 times lower exposure to charge-offs
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15. Advantages for Credit Unions?
Safe & Sound… means of increasing business loans with high yields
Most credit unions are not near their lending limits
Simple way of getting to understand SBA lending
Relative straightforward process to become a SBA Participating Lenders
No Fees or production requirements
Third-Party underwriting & back office providers
Variable costs
No additional low cost services
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16. Purchase Process Lead Georgia chartered credit unions can
Buy for their own account up to their regulatory limit – 12.25% of assets as business loans
Act as a “conduit” to resell to
Federal credit unions nationwide
State chartered credit unions in other states
Without the “Field of Membership” requirements
End-Buying Credit Unions
Need only be SBA Participating Lenders
6-8 weeks after the submission of application
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17. Summary Non-Recourse Sale
60% of the 25% non-guaranteed retained portion or 15% of the loan
Gross Adjusted Yield – At least 4.00%, variable rate reset monthly or quarterly
Lifetime Adjusted Yield – At least 3.50%
Complies with NCUA and SBA (Credit Unions need to become SBA Participating Lenders prior to the purchase)
Risk Adjusted for NAICS Charge-Off rates, highly diversified by having 5 loans participations per $1.0 million unit
Consistent underwriting controlled by SBA credit criteria
NO FIELD OF MEMBERSHIP REQUIREMENTS– with certain capital requirements
Classified as business loans (not as investments), with a limit of 12.25% of asset
Third-party servicing and collections
Premium amortized over 7 years for 20- year or greater terms and 5 years for terms under 20 years
Sold in $1.0 million units, ideally in $5 million amounts
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18. Contacts Robert J. Daniel, SE Area Director
Cell:
Walter H. Roder, Managing Director
Cell:
For more details -
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