The California Department of Financial Institutions placed Telesis Community Credit Union into conservatorship and appointed the National Credit Union Administration (NCUA) as conservator. Telesis Community Credit Union is a state-chartered, federally insured credit union headquartered in Chatsworth, Calif.
The California Department of Financial Institutions placed Telesis Community Credit Union into conservatorship due to a declining financial condition.
Over the last five years, Telesis Community has reported almost $48 million in losses. The credit union went from $600.9 million in assets at the end of 2007 to $318.3 million in assets.
Over the last year, the credit union's net worth fell from $22.1 million to $17.5 million. As of December 2011, Telesis Community CU had a net worth ratio of 5.48 percent.
The credit union reported that 12.24 percent of it loans were 60 days or more past due. Total delinquent loans stood at $29.8 million at the end of 2011.
Business lending is a significant line of business for Telesis Community. In 2007, Telesis Community reported almost $338 million in business loans. By the end of 2011, Telesis Community had $175.5 million in outstanding business loans and unfunded commitments on its books. Business loans represented approximately 55 percent of the credit union's assets at the end of 2011.
More than $26 million in business loans were at least 60 days past due or 15.07 percent of all business loans were nonperforming. The credit union reported almost $18 million in business loans that had been in default for more than one year.
Additionally, Telesis Community had charged off $5.7 million in business loans in 2011.
Telesis is also under funding pressure. Its line of credit at a corporate credit union was cut from $100 million at the end of 2010 to less than $2.4 million. In addition, the credit union reported that non-member deposits fell from $32 million to $4.1 million.
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Grace Mayo, former CEO, got paid well to sink the ship. She pulled in $2.1 million in 2010 according to the credit union's IRS form 990.
ReplyDeleteAll I know is what I read in the 990. Page 7. That seems rather large. It must be based on PAY FOR PERFORMANCE. Are you kidding me?
ReplyDelete2007 Assets: $600,899,309 INCOME: NEGATIVE -$7.6MILLION
2008 Assets: $573,564,976 INCOME: NEGATIVE -$13.5MILLION CEO SALARY: $436,000
2009 Assets: $478,739,979 INCOME: NEGATIVE -$10.9MILLION
2010 Assets: $400,766,467 INCOME: NEGATIVE -$11.2MILLION CEO SALARY: $2.1MILLION
2011 Assets: $318,314,605 INCOME: NEGATIVE -$4.6MILLION
assets: DOWN
income: NEGATIVE
salary: HUGE
What happened to the Business Partners LLC CUSO that was the front end for the MBL problems that finally sunk Telesis? Also, what does this mean for those small(er) CU's that bought particiaptions from the CUSO?
ReplyDeletegreat questions.
ReplyDeleteheard the cuso was actively/frantically marketing more small biz loans over the last year, perhaps to "grow their way out of it"!
The CUSO will likely survive since it was only partially owned by Telesis. The members of Telesis should sue Grace for their money back that she took as salary while running that place into the ground.
ReplyDeleteI suspect the performance of the BP LLC CUSO portfolio mirrors the performance of the Telesis MBL portfolio since Telesis was pretty much leading the charge and controlling the underwriting of the MBL's sold as participations to unsuspecting downstream CU's that in most cases had no experience in business lending. Moat likely many more MBL's to be written off once NCUA looks deeper into this ponzi-like scheme.
ReplyDeleteThe SEC did a CLAWBACK on the Bernie Madoff ponzi-scheme.
ReplyDeleteThe NCUA should do a CLAWBACK on the Grace Mayo MBL ponzi-scheme.
5 Straight years of non-stop losses. Over 20 quarterly Call Reports reflecting continuous non-stop losses. Does anyone at the NCUA read the quarterly NCUA Call Report data? One thing about Grace Mayo - she showed 5 years of consistent losses. It was all bad. To her credit it was getting less bad. Still bad. Call it the new normal for MBL. If only we could raise the MBL - perhaps Grace could make it up in volume.
Business Partners is owned by multiple credit unions with good records. Insofar as the underwriting is concerned, it is generally done by outside third party underwriters. Credit unions that rely solely on BP, which BP tells them NOT to do, could be in some trouble but the CUSO itself is doing fine. All this BS that the CUSO is in trouble because Telesis was is simply not true.
ReplyDeleteHey Deborah, prove it.
ReplyDeletewhat is the delinquent loans to total assets?
what are the total assets?
audited financials only, please.
Trapani - Isn't your CU (Sierra Point) part owner of Business Partners? I'd like to see someone who isn't an owner defend BP. Haven't seen it yet though...
ReplyDeleteGood morning Mr. Anonymous...you challenge a CEO with the courage to post her name? As an owner and someone with the courage to list her name, she clearly has complete knowledge and understanding of the details of the CUSO. Clearly something you do not have nor understand.
ReplyDeleteYou must be a sleeping banker or worse yet, a credit union executive without the courage to post your name.
As Trapani articulates, no CUSO has the authority to approve a loan for a lender. This is mandated by the NCUA.
Really, a ponzi scheme? Common on....loan losses are loan losses.
In regard to Telesis, this will surely become a congressional issue as the NCUA conserved this credit union with complete disregard of their own regulations. Their regulations call for specific timeframes in regard to net worth, these timeframes have been completely ignored. This should be reviewed by Congress due to the NCUA's rogue behavior.
In regard to Mayo, this CEO took a calculated risk many years ago and began the CUSO to assist credit unions with business lending. Mayo took a risk many of her colleagues would not take because they were risk adverse, or worse didn't want to impact their annual bonuses or even worse had no interest in servicing all of their members including their business members. Mayo was ahead of her time and has served the credit union industry in ways many never could and never would.
Unfortunately, this will never be acknowledged by the likes of you or others that didn't have the courage and never would.
If you fully review the call reports, the losses at Telesis are all related to loan losses. Their expense have been reduced year over year in an attempt to recover from the recession. Unfortunately, due to the premature conservatorship, the credit union will never have the opportunity to recover, just like the Arrowhead Credit Union.
Telesis and Mayo are a by product of an economy gone bad. Unfortunately, you sit behind you desk casting shadows without knowledge and without information.
Signed...a Telesis member....a consumer, not a professional in the industry. I can read a call report, how about you?
You have no clue...you must be a non-paid board member. "If you fully review the call reports, the losses at Telesis are all related to loan losses. Their expenses have been reduced year over year in an attempt to recover from the recession."...I believe they are trying to recover from loan losses that are eating away at the equity they have left. If you looked at the call report and understood it you would see that the loans already moving down the delinquency trail, which many likely should have already been written off, will likely erase all the equity left in the near future rendering the CU insolvent. CU/Financial institutions primarily make their money from loan revenue which pays the expenses. When a CU's balance sheet shrinks as much as Telesis' has that last several years and the earning assets are gone/not performing, there is not much choice but to reduce expenses. Sure the recession had impact on their performance but recessions hit high risk/bad loan portfolios much harder than well managed quality loan portfolios. The real problem exists in the overall management of risk and asset diversification both of which were seriously lacking at Telesis and likely BP, LLC. Signed...informed investor....gladly not a Telesis member.
DeleteI have firsthand knowledge of the quality of many of deals that were underwritten and funded through BP, LLC as well as seasoned experience in CRE and commercial lending outside of the CU space. BP, LLC was primarily sourcing hard to bank CRE deals from loan brokers across the country on higher risk asset classes that were clear turn downs for the borrowers at their local banks (or loans that the banks wanted off their books) that had knowledge of the true quality/risk of the deals. I am not saying that everything BP, LLC put o the books and lured unsuspecting CU's to participate in were bad loans but they were certainly provider of low cost funding to higher risk deals. I would suspect that since Telesis took the lead positions and only retained the required 10% that the BP, LLC portfolio surely is showing some strains on the other 90% sold to the unsuspecting/trusting CU’s that bought the participations. I too would like to see how the BP, LLC portfolio is performing but doubt that information will be made public until they have already imploded. Point of clarification for Deborah, just because a third party underwriter may have been used in some cases does not necessarily mean that the bad deals were not approved and funded through BP, LLC. I saw many deals that were approved that certainly should have been declined by the actual decision makers and not passed along to the unsuspecting CU participants. Underwriting only tells the story for the decision makers which I believe many CU blindly trusted Telesis and BP, LLC’s decision makers. Those CU’s that did not trust and independently verify what they were being sold by BP, LLC will surely be negatively impacted by their involvement with the Telesis/BP, LLC scheme.
ReplyDeleteCorrection.."Those CU’s that did not trust and independently verify what they were being sold by BP, LLC" should read " Those CU’s that trusted and did independently verify what they were being sold by BP, LLC will surely be negatively impacted by their involvement with the Telesis/BP, LLC scheme.
DeleteAnonymous, who does not state his name but is critical of others that also choose to remain anonymous, I agree that Ms. Mayo did have a great deal of courage to venture out into a business/business model that she clearly did not have the experience or foresight to fully understand in the CRE/commercial lending world. But if you are a member I would view her "all in" bet on MBL's, rather than serving the needs of individual with modest means, a seriously careless and costly bet. You are obviously not a professional in the industry since you think that you can point to expense savings over the last few years as a means to save your way out of a huge portfolio of bad loan decisions resulting in large loan losses. You obviously have not checked on Ms. Mayos compensation over the last several years while the CU was bleeding losses. You might want to review previous 990 filings for Telesis to get a sense for what Ms. Mayo was rewarded for running the CU into the ground and compare to the less courageous CU CEO’s that have successfully guided their institutions through the last recession. Greed and ego can be very dangerous when you are using other people’s money and I believe this is exactly what happened at Telesis.
ReplyDeleteAnother salient point that really has never been debated as an industry is whether or not we as credit unions should be funding large multi-million dollar commercial projects. If we have limited our scope of commercial business loans to sole proprietorships and other small companies that we champion to federal and state legislators, the risk would have been partially mitigated. I fault Ms. Mayo for taking on too much risk the other BP partners for not adequately overseeing the monitoring the risk, and NCUA for not stopping it much sooner.
ReplyDeleteI agree. CU's should really be focusing on their members and small business and sole proprietoerships within their FOM. The loans that Ms. Mayo and BP were taking on were far from what a true member would be defined as and were using good memebers deposits to fund their their projects. Rarely were they depositors with any meaningful relationship excelt the large outstanding MBL.
DeleteTelesis' failure has more to do with the Credit Union than with Business Lending. You can blame management for the failure but this was mostly due to a poorly managed credit union.
ReplyDeleteIf you look at the reported losses on the 5300 Call Report from 2007 to 2011 you will see that Member Business Loans Net Charge-offs as a percentage of loans was only higher than all other categories in 2011. From 2007 to 2010 all other loan categories experienced a higher percentage of charge-offs.
Many things were done poorly at Telesis, such as Autoland, but the CRE business lending was one of their least comparatively troubled activities.
I counldn't agree more that management is to blame for poorly managing the CU into the ground. No sense for managing risk and diversification of assets.
DeleteWouldn't they also be capturing CRE related losses for the 10% of the loans they were the lead lender on for BP loans under Participation Loans? Is so, I believe this would negate your belief that CRE lending was one of their “least comparatively troubled activities” if you add the MBL and Participation losses together. If not, what makes up the large losses in the Participation Loan category?
I worked at BP as a CLO. Grace and Jean are 100% responsible for a lot of the issues the CU has. This was a LONG time coming. In fact, when I resigned in 2004---well before the market meltdown, but Jean told me I would regret leaving. I can say that for sure I DO NOT!
ReplyDelete