Credit Union Exam Solutions Presents With Flying Colors

Mark Treichel: Hey everyone.

This is Mark t Trico with another
episode of With Flying Colors.

I've got an exciting podcast here.

Today we're gonna talk with two
gentlemen from a LM first about their

recent announcement and launch of a
loan fund investment program under

N NCAA's pilot program, I've got
Travis Goodman and Mark Sun from a LM

First Gentlemen, how you doing today?

Travis: We're doing great.

Thanks for having us.

Mark Sun: Thank you.

Mark Treichel: Very good.

And give, maybe if you could give a
little bit of your background, what it

is you do with a LM first, and then we'll
just dive into this exciting news that

you announced this week or last week.

Travis: Sure I'll jump in first.

This is Travis Goodman.

Been with a LM first since 2003, so
just past my 23 year mark with the firm.

And over that timeframe, I've worked
with a lot of different groups within

our company, but more specifically
as our advisory services group which

handles our client relationships.

Then also work with our loan trading
group which is where this loan fund

ultimately sits within the firm.

So we've been very active over the last,
I would say almost 10 years or so in terms

of trying to pair up and match buyers
and sellers for loan participations.

Which kinda a matchmaking
service if you will.

We've been working with third
party origination channels.

We do securitization advisory work for
credit unions that are trying to come

to market with large scale transactions.

And the loan fund that we're gonna
talk about today was a natural

extension of that as we've been
evolving some of these services.

So I've worked with all of those things
over the last five or six years or so.

Mark Treichel: Very good.

And Mark?

Mark Sun: I'm Mark Sam.

I'm the newbie, so he
is been 20 plus years.

I was brought on board very exciting about
this new opportunity of creating a new

loan fund on behalf of a credit union.

So the concept itself
is extremely exciting.

So my background has been predominantly
me in the institutional side.

So I've been on the buy side, sell
side with money center banks doing

securitization product as well as
about four years worth of portfolio

management in qip style investing.

For a small fund,
roughly 300 plus million.

And Travis saw the need for a portfolio
manager with some of my experience

going through several economic downturn.

So I said, sounds like
an interesting challenge.

So here I am very excited to to be able to
bring his concept and mind into a reality.

So that's why we're here to talk about it.

Mark Treichel: Very good.

And, before we started up, we were
chatting a little bit about the

intensity of getting to the finish
line and getting a product launched.

And it reminded me of the
N-N-C-A-N-G-N program and the road

shows that needed to be done to go
out and try and sell the product.

Because if you're gonna launch
it you wanna have buyers, right?

I'm envisioning that might have
been a little bit of what you

guys were going through recently.

And I saw in the press release
that you had a call with potential

buyers, I think in the last few days.

But but hey explain what it is how
it works from the 10,000 or 5,000

foot level, and then maybe we can
dive into the, some of the specifics.

Travis: Sure.

Yeah.

I think your analogy is pretty accurate
in terms of the NGN notes back in

was that like 9 0 9 maybe, or 10?

Something like that.

Mark Treichel: Yes.

Travis: Yeah.

So I, I remember those coming out.

Those were those were really interesting.

It is probably, again, very similar.

I've told Mark a lot in this, 'cause,
we've done some new innovative things at

Alum first over the last, 10 or 15 years.

And every time it's, it feels
different than a, a process that is.

Well structured and figured out, and
you know exactly when you're gonna go

left and when you're gonna go right,
because the map's already been set.

Whenever you do something for the
first time for an industry and for your

company and for everything else, it,
there's a lot of questions that have

to be answered as you go along the way.

That's what's been really fun and
exciting for us the loan fund itself.

If I would just wanna give an overview
of what it is, it's a completely new

way for credit unions to buy assets.

That has never been permissible
prior to December of 2024 when

NCUA approved the pilot program.

And what it essentially does is it
allows credit unions to come together

with collective purchasing power under
a fund structure to go buy whole loan

assets from other entities, primarily
through through credit unions.

The loans that we purchase have
to be memorized, so we have

to stay within our industry.

But there's all kinds of really.

Amazing and unique things that this
new structure allows the investors and

for sellers to, to come together to do.

But essentially it's that kind of
pooling of assets and the collective

purchasing power of that pooled benefit.

Mark Treichel: And when I, what.

When I hear that, and I think about
a typical loan participation, right?

If I'm a credit union that has excess
capacity for Bo members who want loans

and I find other credit unions I can
sell to that there's a certain particular

process with that, and then there's
loan participation contracts with that.

And I'm guessing that the way this product
works, there's some advantages and it

works different than loan participations.

And it it might have some different
bells and whistles or it might have some

different limitations relative to that.

Could you come in, maybe walk through?

Yeah.

So if someone calls you and says,
Hey, I'm doing loan participation.

Why would I wanna do this instead?

Travis: Yeah, that's a great question.

I think, maybe another way to think
about that is to compare all the

different buying opportunities
that credit unions currently have,

and where this fits into that.

Because when you look at participations,
which is predominantly how credit

unions buy and sell assets today.

To your point, it's a, bespoke
transaction between two parties.

There's a legal discussion that's
going on between the two of them.

And, there's, all kinds of
individualized negotiations that

are happening at that level.

Typically the transactions
are smaller in size.

They, five to $50 million.

Sometimes they get bigger than that
for the very largest, transactions.

But for the most part, they're probably,
in that 10 or $15 million range.

And a transaction is a lot of work, right?

There's a lot of things that have to
get done to make sure that you've done

all your due diligence and you've priced
it correctly and all of those pieces.

And when you start doing it for
small sizes, it can be challenging.

When you think about on
the seller side of that.

Certainly someone who's selling a
lot, let's say they're selling, $300

million a year and they're doing
10, $30 million transactions a year.

That's a tremendous amount of legal
review pricing negotiations that

are always happening that become
really difficult to do at scale.

So what ends up happening in those cases,
as you start doing more and more trades.

Because you start thinking about
what other markets can I go to?

And so institutions from our clients as an
example, that wanted to do that, started

going to the securitization market.

And that's a place where you go and you
can sell $300 million in one transaction.

There's a standardized legal document.

There's a defined due diligence
process that's done by third parties.

You may have s and p or Moody's
that come in and do a loss estimate.

You're gonna have KPMG or somebody
like that come in and do what's

called agreed upon procedures,
which is the due diligence document.

And then you're gonna install a
payer agent, that collects all

the money on behalf of them.

And that helps serve that
kind of scalable benefit.

The loan fund kind of sits in between
those two things, where it wants to have

the same process that securitization
has, so it has a loss estimate that's

coming from a third party, from like
s and p in this case, our first one.

And then we have our due
diligence document coming from,

a, again, a reputable third party.

In this case it was KPMG.

And then, after that we have to
have a cash management process.

'cause we don't want it
all come into a M first.

We want it to be in a secure
kind of third party place.

And so Wilmington Trust comes in
and acts as that third party for

us to collect all the payments.

So when you go back to the
original question of why would

a buyer want to come into this?

They get to come in and buy in a
similar fashion that you would in a

capital markets transaction, a very
securitization like transaction.

But you get to share the resources
and benefit with other investors

in a large scale purchase.

So that helps the buyer side.

The seller side gets the same benefit
if you think about it, because

now they don't have to deal with.

30 different institutions that
are constantly coming to them with

different bespoke legal reviews.

Arguing over pricing, arguing over credit.

There's a more defined process
that makes it easier for both

the seller and the buyer.

That's I think one of those other pieces.

And then if you think about any
other transaction where you have

10 buyers coming together and say
we want to go buy this one product.

And I can give you an example of
kind of what, what helped us lead to

this loan fund to begin with, but.

You get more purchasing power by
coming in together as one versus

individually going to that seller
and saying, let me buy it out.

So that's the other benefit from
an investor who wants to become

a little more sophisticated.

They wanna either want some more due
diligence, they want some more third

party benefit of, loss estimates
that help moving from a participation

transaction into a loan fund, if you will.

Transaction.

Mark Treichel: Yeah.

And as you just described that, I've seen
some challenges, from loan participation

side, where you're describing you have
a lot of credit unions buying from you.

And they and the first three that
you do have one standard contract

and then the next one comes in and
they wanna tweak this and the next

one wants to come in and tweak this.

And then you've got your six, seven
years out on your duration there of

having done all these participations.

And then you've gotta track
those 7, 8, 9 different versions

of that loan participation
agreement and make sure that.

As lead lender if if something happens
here that you're looking at the right

one where you'd change the rule in
that way, there's a maybe a little bit

more standardization here than that
scenario and you alleviate a little bit

of that pressure from the originator.

Does that make sense?

Travis: Yeah, definitely.

We're trying to standardize all
of those processes so that they're

very consistent and uniform.

I think if you take that even further.

Where you were thinking about, let's go
back to the 21 and 22 timeframes when

everybody's working with, these FinTech
operators and that's the kind of buzz

word of the day and everybody's trying
to look at these different solutions.

I come in and work with one of those
parties, but I'm the last one to join.

There's been 20 other
credit unions before me.

The credit union that was, 20
before me, they get a much better

price because they came in earlier.

Right now I'm the last one coming in.

I'm not getting the same price.

And so you don't get that benefit
of being the early adopter.

You're actually the late adopter
and you get, it's reflective in

your return as a result of it.

Whereas, structure like this can
say, look, we're all getting the

same thing because we're coming
in together and therefore we're

gonna have standardized documents.

We're gonna have standardized
pricing, we're gonna have

standardized underwriting procedures.

And because you're only dealing with
the one party here coming into it.

It doesn't matter that there's 30
people behind it or 50 people behind

it, because it's all being viewed by
the seller as the one channel coming in.

And that creates all kind of operational
efficiencies for the seller and

for the investors, whether it's
legal, pricing, credit, you name it,

Mark Treichel: And that's interesting.

And then if I understood this right the.

And correct me if I say
anything that's wrong.

The first fund is there's a limit of
30 participating buyers of that have to

be complex, meaning over 500 million.

Did I get that right?

Travis: Yeah.

This is probably one of our most
challenging aspects of this this process.

And when everybody comes back to you, we
are actually only allowed to work with

30 ever, not in the first fund and not
per fund, which would be way easier.

But we're only ever allowed
to work with 30 total.

So that means that, the investors have
to be willing to work with us in terms of

being able to look at multiple strategies.

We have to be able to deal with
certain size and investing benefits.

We are allowed to have up to $10 billion
outstanding at any one point in time.

That's a pretty decent amount of money.

It's not insignificant by any means but
if we only have 30 institutions that can

work with it, that's pretty interesting.

That changes how it works.

And beyond that, we are actually,
are allowed to work with state

chartered credit unions as well.

But they have to have federal
parity with NCA regulations, so

that doesn't count against R 30.

So that's how we can
broaden the the universe.

Oh, that's interesting itself.

But we're only allowed to work with
30, but that $10 billion cap does

not determine, it doesn't matter
how many people are involved in

it, we still, whether we have 30
federal and another 30 state, we

still can't go above the 10 billion.

So that's something that we are
always mindful as well as we think

about who can come invest with us

Mark Treichel: and thinking out loud.

I saw reference to a five year
window and a seven year window.

I think the longer might have
been from approval, what is it?

The earlier of one of the, if you
could maybe kinda walk through

Travis: that.

Yeah.

We'll give you the update there.

So we from the time that we were approved,
and maybe just going back a little bit

in terms of yes, this process took about
three years for us to get approval with.

There was a couple of, large market
dynamics occurring, if you remember

between Silicon Valley Bank and some
of those other things that, I think

helped, maybe distract N-C-U-A-A
little bit from our our little

pirate program here, but that's
certainly reasonable and justifiable.

But we started at the application in
2021, in addition to some of you've

already talked about, because we
felt like credit unions needed a way

to be able to pull the money have a
disciplined asset pricing approach.

We saw a lot of transactions
that were occurring.

Where trades were happening without kind
of good pricing methodologies behind it.

And we saw some opportunities to
work with third parties that would be

beneficial for credit unions to work with.

And so we submitted the application
in 2021 and we didn't get approval

until 2024, December of 2024.

As part of that though, they said.

How long should this last?

And we said let's talk about that.

And they said we'll, we think that we'll
give you seven years from when the product

was approved, which is December 20, 24
or five years from your first trade.

If you don't get a trade done for a
couple years, this thing will expire.

No matter what.

And that way that will
be the first litmus test.

And the second one is if you get a trade
done, which we did last week, that will

start the clock for now five years, for
us to evaluate whether or not this is

truly a better way for us to buy assets.

And that gives them that
window to evaluate our process.

They get to come in and take a look
at the investors that are in the book.

They get to look at our books
and processes and due diligence.

They get to do a joint exam
with the SEC when they come in.

It, it allows for that kind of to
occur and for them to evaluate whether

or not this makes sense for credit
unions to have on a more permanent

basis after the five years is up.

Mark Treichel: And I'm
glad you brought that up.

'cause before we, again, before we
hit record, we, you and I chatted

a little bit about the derivatives
pilot program from 20, I don't know,

25 years ago, probably 23 years ago.

Yeah.

Which ultimately led into some
authorities being granted by NCA

'cause they were comfortable with
how pilot programs were working.

And that's why if someone's listening
to this to, and saying, wow, I'm,

I'm 490 million, so I'm not complex.

And I can't be one of those 30
credit unions that participating.

That doesn't mean at the end of this,
at the end of this pilot, that maybe

NCUA tweaks some regulations to the
extent that's what it would take

to offer this on a broader scale.

There, there's still that
option down the road.

Is that, am I interpreting that right?

Travis: Yeah, I think so.

And if we do our job correctly,
this will hopefully become a more

permanent program for NCA to be able
to offer to credit unions which I

think will be trend, tremendous for
them to be able to go buy assets and

pooled format, especially for smaller
credit unions, if you think about it.

Like those are the ones that could really
benefit from pooling assets together.

So that would be really
advantageous for them.

I do think while we can't put you
in the fund, if you're, below that

threshold, if you reach out to us,
we may have some other solutions that

might help you, that could piggyback
along certain aspects of this.

I wouldn't say that the benefits are
completely off for those credit unions.

But yes, we can have you in the
funds, but we may have something

else that can be, similar to that.

Mark Treichel: Got it.

Got it.

And then you walked through the.

The different the independent side
of it and the loss determination.

So how now we've talked more about the
investor, but, so let's talk a little bit

about the loans that would go into it.

I think I saw somewhere there
consumer under 10 year maturity.

Travis: Yeah.

And maybe Mark, if you wanna talk
about the underwriting process and

the vendors we worked with, but
I'll just give you the guardrails.

We're allowed to work with any.

Asset that has a maturity date
and an amortization schedule

that's less than 10 years.

So I think NCAA's thought process there
was, they didn't want something in a pilot

program that ends five years from now.

Let's say that, they decided
not to continue with it.

They don't want something sitting out
there for 30 years or 25 more years

because of, there was a bunch of
30 year mortgages I have purchased.

So they wanted to keep it at least
initially to short term assets.

So maybe that'll be something that
changes when they hopefully make

the pro the program more permanent.

But maybe to talk about some of the
pieces of like when we buy assets and

the third parties we're working with.

Mark, why don't you, do you wanna
describe a little bit, what we did there?

Mark Sun: Yeah.

Everything basically starts pretty much
in terms of how you evaluate credit is

looking at the different aspect, the
consumer product, auto being the primary.

So everybody has pretty much a large
percentage of the investment in the

auto, so it wasn't as difficult, but
the pro, but the process that you have

to go through is you wanna at least
benchmark what versus what individual

credit union has been producing the
product, so that means static pool

information and looking at losses over
time, particularly doing through crises.

Those are the one that tells you how
well from a collection as well as risk

adjustment that the company has made.

Everybody points to the
2223 as the, oh my God, era.

And that certainly we are seeing
a level of stabilization, but we

are stabilizing at a higher value
than what we saw pre COVID crisis.

So when I say that is because if you
look at the affordability as well as the.

Loan balances.

They are a lot higher than previously.

So that's a challenge for us as we go
through that process with Radiancy.

Why we need a rating C is because Ency
sees so many institutional deals that

come across is for us to have a third
party valuation, is if we show you this

particular portfolio, how they underwrite.

What do you think the
expect a loss would be?

And we take that in and we work
with the the seller in here.

And the way we look work with seller
is we wanna produce a buy box that's

incrementally for a efficiency on
their end as well as from a risk

perspective that we can accept.

That means when we have to develop
that static pool loss information

to the third party to evaluate,
we're very much focused in terms of

what we're buying, not a complete.

Here's the book.

When you guys take a look and tell
us what it is, we wanna be very

focused in terms of what we back buy.

So that's about a three weeks process and
it's a very extensive operational review.

So if you have gone through
securitization, one of the benefit

is the operation review is more of an
update, but it allows us, as a portfolio

manager to listen to the differences
that they have progressed through the

time that data securitization to now.

So for us, it's more of an update and
allow us to follow the progression.

Of the way they underwrite, the
way they collect, the way, how the

portfolio has been performed over
that, that period while they do

securitization after securitization.

So that's the framework for ways
to, to which we look at losses.

On a operational side equation where a UP
comes in, which is agreed upon procedure,

that's when you start underwriting
the pro the collateral itself.

So that's when we'll take samples of those
loans that we anticipate to, to purchase,

and they, that give us a sample in terms
of how those loans are matching to the

way the underwriting process has done.

We go a little bit, step further than
the traditional securitization, A UPA.

In the sense that we also
do an audit on the vintage.

When I say vintage, is basically
following through certain loan through

their collection process, making sure
they are managed as well as conforming

to their own collection policy.

That includes skip a pay that
include extension and what have you.

That way we know that they're doing their
collection as described in their manual.

Since all of our loans, our
preference is having servicer.

Retain the seller retain the
servicing so that in the cell is what

delivered the performance back to us.

So we wanna make sure that
they're following their own steps

in terms of how they collect.

And also more importantly, is is defaults
is how you progress through the default.

And that is something that we also tested
to make sure that it is following the

right collection in terms of how you, how
you repo if you call repossession timing,

and there's certain timing, we wanna make
sure that it's following their own process

and that we can see from the performance
that are they typically 45 days out or

are they 60 days out from a cashflow
perspective, that, that is important

in terms of how we look at recovery
value coming back into the system.

And that's how we, as a encompassing
everything that give us a overall view.

What we should be paying.

For collateral, how you should be valuing
this collateral that we are we're wanna

buy on behalf of the credit union.

Mark Treichel: Got it.

Got and you, I might be oversimplifying
this, but so someone gets into

the fund and there's cash flow
monthly on the loan portfolio.

They get cash in on the.

On the program, I'm presuming monthly.

The somewhat, there, there's x
number of charge offs at a loss

of Y, but there was also yield.

Of a bigger number is that netted
during netted in the and then at

the end, at the takeout, right?

When the, when there's the, when
it all comes to maturity later that

would be the great equalizing moment.

As the loans have all matured and
then the cash is just paid out,

or a, that might be over some.

Travis: Yeah, that's exactly right.

So basically what happens is on
a month to month basis the seller

is remitting payment to our
collection agent, essentially.

Mark Treichel: Yep.

Travis: From there expenses are
removed from the fund structure and

then everything that's left over.

Is remitted back to the
investors on a prob rata basis.

They're getting a full,
principle and interest cash flow.

Now as charge offs and things like that
are coming in, it's obviously reducing

the overall cash position, but, this
is not a structured fund, if you will.

There's no like priority of cash
flows that are pushing up or down.

It's just coming back to the investor
based on their ownership percentage

of how they invested coming in.

Mark Treichel: Yeah.

So like there, there's no super tranches
and the these guys get paid first.

It's everybody's an equal buyer.

Travis: That's right.

Mark Treichel: Yeah, that's

Travis: right.

Yeah,

Mark Treichel: that makes sense.

And then the credit unions that are
putting loans into the program how are you

looking for people in, on that side of the
equation or is that side already lined up?

Or how does that work?

Travis: Yeah.

Yeah.

We have a couple of entities that
we are currently working with.

And the every loan that we purchase
has to come through a credit union.

The first purchase was through
a single entity credit union.

And they sold us a pool of assets.

We are working with other
people to bring on more.

We can also look at, for example.

A third party that wants
to sell into credit unions.

And let's say that we like the
attractiveness of the product but they

have no existing way to get into the
credit union industry, if you will.

Then we have a credit union that
we put on the front end of the

cashflow, front of the process.

They memorize and essentially bring
the loans into the credit union system.

Mark Treichel: Sure.

Travis: And then that credit
union then turns around and

sells it to the loan fund.

And that allows us to work
with, FinTech partners or third

party origination channels.

And I think that's, the second phase or
third phase of like where some really

value comes here, where we can then
work with entities that would normally

not work with any one credit union.

Because there's not enough purchasing
power from that one party, but the fund

itself has a much more, much greater
amount of purchasing power and therefore

gives the collective benefit to its
investors through those channels.

Mark Sun: Yeah.

I just wanna add a little
bit to the investor base.

Having 20 plus years dealing on the
institutional side when the when the

top approach, Hey, why don't you come
in and help us with a credit union?

To me, it was like we never heard
credit Union having the ability

to invest in product like this.

So when we did our initial outreach
to some of third party, they realized

that the funding that's coming
from, it's very different than

what you typically would see in the
institutional funded private credit.

Because what typically happened
there is everybody have a

different investment threshold.

So the.

Portfolio manager is always tasked
which dollar do I need to invest

first to get the best return for my
investor in a credit union setting?

One of the thing that I realize,
again, I'm a newbie in the in

the credit union space, is how
steady and stable the funding.

Dollar is meaning if there is a
decline in the economic scenario, you

actually see the deposit rate goes up.

That is something a lot of folks out in
the institutional side do not recognize.

So I think credit union actually have
advantage because we are actually

providing an incremental amount of
funding into the system that is not as

volatile as you will in a traditional
private equity or private credit form.

Mark Treichel: Interesting.

Yeah.

And

Mark Sun: secondly,

Mark Treichel: go

Mark Sun: ahead.

Yeah.

Secondly, for credit union investor
coming in, because now you're you

have a marketing not marketing, but
a avenue for third parties such as

any OEN, any financial independent
finance companies or even FinTech

company, as we talked about quite a bit.

They also recognize that this is a
separate pool of fund that's available.

And they're more willing to start
working on the one central point, just

because we are bringing more of an
institutional way of looking at this.

As I, if I was an institutional buyer
today, I like to know that there is

standard pro process and policy that's in
place that could easily identify radiancy.

I could easily identify a UP process.

I could easily identify.

That takes a lot of that mystery,
if you will, from the third party

while you guys are credit union,
how are you guys looking at this?

We're standing in between showing
them, look we're following exactly

how you guys do securitization, but
our process is to make sure that

we bring that knowledge base in.

The disseminate into our investor,
which are credit union that you guys

had not seen before, other than maybe
indi individual discussion that you

have maybe didn't have, we can't
keep doing this 10 million, 5 million

or a hundred thousand dollars loan.

Here's a way for us to create a big
scale at the same time protecting the

credit union investor that's coming in.

Mark Treichel: No,

Mark Sun: that's, yeah.

It's something very interesting in
the marketplace that, again, I 20

plus years in the institutional side.

When Travis asked me to
join, I go, credit union.

Are you freaking kidding me?

Really?

So when he showed me
the number, I go, wow.

Really?

So even someone like me has been
in the profession this many years.

I never really took a look
at what the credit union can

really bring to the table.

Mark Treichel: Sure.

Mark Sun: And this is something that
we did pitch to a few, even OEM.

They thought that this was a very.

Interesting product because
we are bringing capital in

without asking for leverage.

That's one of the, one of the thing
about the fund is we're truly a cash

increment to the capital market today.

For a lot of folks that are doing a,
b, s Secur or whole loan, if you know

all, a lot of the whole loan that's
being created today, it's almost I would

love to buy a whole loan, but you guys
gotta gimme leverage at the same time.

'cause this is a traditional private
private credit is I need to make

sure that I make the most money
and that what we're coming in is

I'm willing to buy your product.

I don't need leverage, so I'm not gonna
compete against your own capital market.

Banks that providing you leverage
today because we're truly are

incrementally adding additional
cash value to your program.

Mark Treichel: Yeah.

That's exciting.

It's the credit union difference, I
guess is what you're experiencing here.

Travis: Yeah, it's been really fun to
see Mark, his eyes illuminate about,

working with, in this industry and all
the really great benefits of doing so.

And Mark touched on a really great one,
which was that like funding benefit that

most credit unions don't really, I think
really quantify well enough because

when you look at credit unions that that
are high, highly retail, deposit based.

They're usually below the the excess
capital, at least the the $250,000

threshold for uninsured limit.

That means that depositors,
especially in times that are

tough, is trying to save money.

They're putting money like they're
hoarding back away that cash, and that

brings cash to the credit union system
where they're getting excess liquidity

when everybody else is needing it.

And that creates an amazing opportunity
to provide liquidity to people

who want it at a better return.

And we used to always say, we talk
about this to our clients all the time.

I want to give my liquidity when the
market needs it so I can get paid for it.

And then when the markets have excess
liquidity, I'm gonna pull it back.

And that's a great way that we can think
about the benefit of this fund being able

to do as markets are fluctuating around.

Mark Treichel: Sure.

No, that makes a lot of sense.

Looking at the notes here from the
release and or the NCA website.

Let's see.

It looks like there's a 50% limit on
net worth for all of the funds and

a 15% net worth for any single fund.

Do I have that right?

Travis: Yeah.

And what NCUA did that I think makes
things pretty simple for the investors

to come in and take a look at is that
they said that no one fund first of

all, they're gonna be closed end.

So they're open for a
window and then they close.

And so the first two fund windows are six.

And that allows them to go, okay, we
closes, no new money can go in there.

It just goes back to the investors fund.

Two opens up after six months and
it's open for another six months.

After that, total 12 month
window, it closes as well.

And they said that in aggregate as
you invest in all of these funds,

'cause they're just gonna be kind.

Terminating and then, reinvesting
cash flow into new ones.

You can't have more than 50% of your
net worth in all of them, and you can't

put more than 15% in any one fund.

And so that just helps distribute
from a concentration risk perspective.

Sure.

But because of the closed end nature of
this and they open, essentially every

three months after the first year.

Be really hard to invest 15% of your
net worth into one fund, but that

also helps with tracking performance.

So we now get to look at individual funds
historically and say, fund one has this

return, fund two has this return, and
we're not adding new dollars into that.

So it doesn't make the tracking
of performance, of fund over

time very muddy if you will.

Mark Treichel: Sure.

That makes sense.

That makes sense.

Gentlemen this has been a lot of fun.

What is there anything that I didn't ask
you that you'd like to highlight as it

relates to this exciting new opportunity?

Travis: Mark, anything you
wanna add before I jump in?

Mark Sun: Besides, trust us other than
that it's an exciting opportunity.

I want to, just to make sure that, that
credit union that participate in the fund

as well as that they're looking to sell.

And this is something that's
very unique in the marketplace.

I'm certainly excited
to be part of the team.

I think as we continue to build success
on that I think for the folks gonna

realize that this is truly a wholesale
level of bringing a lot of benefit

to both sides, both seller and buyer.

Travis: Very good.

I, what I would maybe add is that
I would think that, whenever you do

something new or different like this,
there's obviously a lot of questions that

come up from everyone because they're
understanding how to, how does this work?

How am I protected what, what is
the real risk associated with these

transactions and things like that.

And certainly from a risk perspective,
you're buying whole loans.

So we wanna make sure that you
understand that you're just

like buying a participation.

There's credit risk in that transaction.

And there's credit risk in
this transaction as well.

But one thing that I think Mark
and I have tried to do really

well is to understand that.

Not everyone understands all
of this stuff right away.

This, a fund structure is not
common in credit union land.

So if you have questions, please ask us.

We're happy to walk through all of
these pieces and there's, all of our

investors that have, participated with us.

And these are some very large
investors that, that are, 10

plus billion dollars in assets.

They've had tons of questions
and it's okay to do that.

So we've spent hours on the phone going
through all these little scenarios

or how we're gonna do stuff and what
we're gonna do and what the process

looks like and how does this reflect
in the legal documents, how think

that's more than fair from anyone
who's considering something like this.

So if you have questions, feel free
just to ask and we will talk through it.

And there's no shortage of
or no maximum limit as to how

long we wanna do this 'cause.

We know when we do something
new that there, there's some,

questions that have to get answered.

So we're happy to do

Mark Treichel: you, and that's a
perfect segue to, so if someone is,

has listened to this or watched it and
they're going, Hey, that I'm really

excited about possibly talking to
you guys about participating, what's

the best way for them to reach you?

Travis: I would say we have an email
address it's loan fund@aamfirst.com.

That goes to Mark and I,
that's an easy place to go and

probably the most direct place.

But if you go to our www.aamfirst.com

as well, there's a bunch of links related
to the loan fund additionally there.

So you can go to either avenue, but loan
fund at a first is probably the easiest.

Mark Treichel: Perfect.

And I'll put that in the show notes.

Travis: Great.

Mark Treichel: Very good.

Guys.

This has been a lot of fun.

I wanna thank you for your time
and talking about this exciting

new opportunity for credit unions.

Travis: Absolutely.

Thanks for having us, mark.

Mark Treichel: Thank you.

You got it.

And listeners, watchers, I want you,
I wanna thank you for listening or

watching, whichever you're doing.

I hope you'll do that again soon.

This is Mark TriCal signing
off with flying colors.