With the high rate of deposits across credit unions, leaders are deploying creative ways to generate funding and improve their capital ratios. In addition to alleviating balance sheet margin pressures and improving net worth, credit unions need accessible capital to pursue long-term strategic plans, such as acquiring another financial institution, undergoing a digital transformation, and more. 

In this episode, Doug is joined by returning guest Bill Paton, vice president of lending, loan participations, and subordinated debt at Alloya Corporate Federal Credit Union, and Patrick Roberts, chief revenue officer at MountainSeed. They discuss their new sale-leaseback partnership, which offers a non-dilutive solution that can help credit unions generate immediate capital and enhance their financial standing by leveraging existing real estate assets. 

MountainSeed is the country’s largest commercial appraisal management company, offering tech-enabled real estate lending solutions to 10% of the nation’s credit unions and banks for the past decade. The firm consists of three business units: valuation, real estate data, and capital markets—an investor and advisory for financial institutions. Patrick is an accomplished organizational sales leader with deep experience driving high revenue growth focused on solving complex customer problems within the selling cycle. Bill is responsible for Alloya’s overall corporate portfolio performance. 

What is a Sale-Leaseback?

Within the context of this conversation, a sale-leaseback is a financial transaction where a credit union sells its real estate assets, such as branches or buildings, to an investor, and leases the same property back from the buyer. The lease agreement is typically long term and meant to convert the value of owned assets into immediate capital. The funds can be used to fund strategic initiatives, address balance sheet concerns, or support growth plans.

Should My Credit Union Consider a Sale-Leaseback?

Patrick shares that MountainSeed focuses on coaching and education first and the transaction second, with a sale-leaseback not necessarily making sense for every credit union. For example, credit unions flush with capital or no significant current or upcoming spending needs may not benefit from a sale-leaseback. 

He encourages credit unions to consider the following before pursuing a sale-leaseback:

  • With respect to your strategic goals and stressors, what does your credit union’s capital look like now, compared to the next 12 to 18 months?
  • Do you have a long-term strategic roadmap, such as acquiring more financial institutions or making a big technology spend?
  • Are you operating under a low net worth-to-assets ratio and need a funding contingency plan?

If any of these fit your credit union, a sale-leaseback consultation may be beneficial.

How Can Credit Unions Benefit from a Sale-Leaseback?

There are significant benefits for credit unions that need capital and secure a sale-leaseback:

  • Quick Process and Immediate Use: Previously, financial institutions could only spread and use gains from a sale-leaseback transaction throughout their loan. With new accounting standards, participants can immediately access and direct funds from a transaction where they’re needed most. Additionally, the sale-leaseback process, from consultation to funding, takes around 45 to 60 days on average or faster in some cases.
  • Non-Dilutive Solution: A sale-leaseback converts assets already on your balance sheet, such as legacy branches and buildings, into capital that can enhance a credit union’s net worth, financial standing, and ability to act strategically.

Stream the episode to learn how credit unions can unlock hidden capital and potential within their branches with a sale-leaseback, plus:

  • Hear Patrick and Bill address common concerns credit unions may have about the transaction and some landmines to avoid.
  • Learn how subordinated debt compares to a sale-leaseback and when a credit union should consider one over the other or a combination of solutions.
  • Discover why engaging your CPA before, during, and after a sale-leaseback is critical.

Listen to the show now.

William Paton, Alloya Corporate Federal Credit Union, Patrick Roberts, and MountainSeed are not affiliated with or endorsed by ACT Advisors, LLC. 

Audio Transcription (pulled from the podcast)

Doug English  00:00

Welcome back to “CU on the Show.” Today, we have two distinguished guests joining us, each bringing a wealth of experience and expertise to the table. Please give a warm welcome to Bill Paton, vice president of lending, loan participations, and subordinated debt at Alloya, and Patrick Roberts, chief revenue officer at MountainSeed. Bill and Patrick are here to shed light on sale-leaseback transactions. In this episode, they will share their expert advice on navigating the intricate world of sale-leasebacks, providing valuable insights, strategies, and considerations to ensure your credit union can make the most of these transactions. During our discussion, we will also delve into the exciting opportunities these transactions can unlock for your credit union. So whether you’re looking to enhance your understanding of sale-leaseback transactions or discover new ways to strengthen your institution’s financial position, you’re in for a treat. Stay tuned for a knowledge-packed conversation that’s bound to be a game-changer for your credit union.

Patrick and Bill, welcome to the show and Bill in your case, welcome back. Bill from Alloya is back to educate us on great ideas for getting some capital in these times. And Patrick from MountainSeed will talk about the activity in sale-leaseback of branches for the credit union movement. So welcome both of you. Tell me a little bit about what’s going on Bill, how about a quick update on what’s happening at Alloya and then Patrick, just give us a short bit about what MountainSeed focuses on for credit unions.

Bill Paton  01:24

Sure. So Alloya, we’re a small but mighty team; we’ve got about 200 individuals. We recently bought a fintech to help get into the automated lending space—we purchased QCash. We’re really, really excited about that. We’re heavily involved in getting into the FedNow space and that payment side of things. And then of course on my side of the coin, the capital market side, we are still seeing a lot in the loan participations, the sub debt and now something we’re really excited about, the sale-leaseback transaction, which is what we’re here to talk about.

Doug English 01:58

Great, Patrick?

Patrick Roberts  01:59

Yeah, for sure. Well, thanks for having me. First off, I’m really excited to be on with you. So we serve roughly 10% of the credit unions and banks throughout the U.S. today through one of our three business units. We have a valuation side of our company, which sees about $100 billion annually in commercial real estate volume, where we serve as a kind of third-party appraisal review company, appraisal company, evaluation company, environmental business. We have a second business unit that is all about real estate data. So when you’re pressured with Cecil or you’re pressured with anything you guys have to deal with from a balance sheet management perspective within your portfolio, we can help. And then lastly, what we’ll talk about today is our balance sheet and capital markets group. That group does a number of things, one being we provide performing and distressed debt but also where we’re most excited in this environment is our sale-leaseback initiative where we’re going out and purchasing credit union branches and then leasing them back to credit unions. So our company is headquartered out of Atlanta. We have about 150 employees and love serving credit unions and banks throughout the U.S.

Doug English  03:04

So in this arrangement you have with Alloya, credit unions are coming through their relationship with Alloya and partnering with you and you guys, your company, actually purchases credit union branches as an investment strategy that’s core to what you do as a firm. Is that right?

Patrick Roberts  03:25

Yeah, that’s spot on. Alloya has been a great partner; we’ve launched a partnership with them over the last two, three weeks, which we’re super excited to get started. They are kind of serving as a partner with us to bring in interested credit unions that would like to sell their branches to MountainSeed and we are the investor. So it is our capital, it is our money, we are not a broker, we are not a go in between group, it is our money, and we will buy those branches. And we will lease them back out to that given credit union for some long duration. We like the investment in credit unions for the long term. We think with our investment thesis, we look at it very much like a bond investment and we’ve got long-term money given some of our capital that is the shareholders base of MountainSeed.

Doug English  04:14

With deposits being on everybody’s mind these days, and where you are going to get your deposits, let’s kind of talk about sale-leaseback as far as one of the options. At what point do you need to start to look at that? And what is that sort of cost of capital arrangement versus borrowing versus other systems of gathering capital? Talk to me about that.

Patrick Roberts  04:40

This environment is unique, right? Credit unions have not seen this in a long time. I don’t think really any of us have seen this in a long time. But ultimately, funding pressures moved at such a fast velocity, you started to see spreads just go off the wall. And now you are a credit union in central Iowa, you’re having to pay out your deposit base. And that’s a little bit unique. You weren’t doing that two years ago, or a year and a half ago. So because of that, and what that actually means to a credit union’s balance sheet, it’s important to have other solutions to generate liquidity and capital. This is one of those—and Bill can speak to this—there’s probably a number of other solutions. This is one we really like from our seat as an investor, because it’s a non-dilutive way for a credit union to get that capital. Why would you hold a piece of real estate on your balance sheet when you can kind of unlock the value of that real estate today and get that capital today when you’re facing this funding pressure in this environment? Doug, that probably covers some of the funding questions. But Bill, do you want to maybe add on to that at all?

Bill Paton  05:47

Yeah, I’m going to break it up into two things. So this is much more of a capital solution, and not necessarily a liquidity play; now they can be intertwined. And you can leverage capital for more liquidity, right? But from a credit union perspective, kind of just going back to what Patrick said, over the last three, four years balance sheets have exploded, and then all of a sudden they shrunk really, really quickly with deposit outflows and margin pressures due to having to pay off. There’s supreme pressure on the capital of a credit union. And so this is another way for credit unions to unlock potential on their balance sheet and these assets that formerly you’re not able to unlock to get capital. You know, so this isn’t in the vein of sub debt in the sense that you’re getting capital on your books, not necessarily liquidity. Well, we can talk about liquidity for hours and hours and hours and all the opportunities there but specifically capital-related sale-leasebacks are going to be at the forefront of credit union minds moving forward.

Patrick Roberts  06:57

Bill is spot on. Does it help your liquidity metrics? Yes, absolutely. It will help your liquidity metrics. Would you do a transaction for just that? Probably not. You would probably do it for capital. Now, you don’t have this as a credit union but inversely, if you were a bank and you had a 20-year bond portfolio duration, and you had losses like crazy within your portfolio, different story, then you would absolutely do this for that reason. For a credit union, it really wouldn’t be as paramount. Just because your bonds aren’t going to be long dated, you probably don’t have all kinds of losses within that portfolio.

Doug English  07:34

So talk to me about the accounting around a sale-leaseback. How does that work? How has that changed over time? Go through that.

Patrick Roberts  07:44

Yeah, for sure. So it’s a great question. And there was a pretty major accounting standard change that took place three to four years ago, in that range. And that was part of our genesis for saying, you know, this is a transaction that credit unions really need to consider. And that’s where our momentum the last six months has been wild. How many credit unions we’ve engaged and banks that have a deep desire to do this transaction that we’ve done it with. So the accounting standard change from ASC 840, which was roughly, again, four years ago, it switched to ASC 842. So for any nerds out there who want to go look at the statute, there you go, those are the standards you need to look at. Doug, I’m not referencing you, by the way. With those standard changes, the old standard would make you actually take the gain on sale, and spread it throughout the life of your new lease. So let me give you a for instance, you sell your branches for $40 million, you have a book value of $10 million, net gain of $30 million. The old standard would say, take that $30 million and you’re going to spread that gain across the life of the entire new 15-year lease, let’s call it. That changed. When that standard was in place, a lot of credit unions and others thought that was a true off-balance sheet transaction. And to some degree it was. But there’s a little bit of a misnomer, because when the new standard came out— ASC 842—now the new standard allows for that gain. In that instance, that $30 million gain from the example before, you could take that gain immediately. So it is an immediate impact on your balance sheet. It’s not an off-balance sheet transaction. But it does immediately affect your numerator when you’re looking at your calculations for capital. So it is tremendously more efficient than what it was four or five years ago. No one’s talked about it frankly until about 12 months ago when the world started to change a bit. But it’s really quite an efficient way now in this environment from an accounting standpoint to kind of get that capital and do something with it. There are a few landmines around that which I don’t need to get into. I can get into that if it’s helpful, Doug.

Doug English  09:56

Yeah, let’s talk a bit about the big ones. This is a delicate thing, right? Like if you go back to the foundation of the way people think about a credit union, they think about the people inside the building I went to outside the plant, right? That’s the origin of most credit unions. And to not own that physical place is a pretty big deal, a big thing to overcome conceptually, I would think, for a lot of boards, for a lot of executives. Can you help provide any sort of philosophical help, like how credit unions work through that. And when does it really make sense to work through that?

Patrick Roberts  10:33

Yeah totally, some very good questions there. And you’re spot on, you as a credit union don’t want your members to number one probably know you’re selling a building you occupy because they might think you might be fleeing the market. We all know in this environment that would be a horrible move from a funding perspective. You don’t want members to think you’re leaving the market. So naturally, when you deal directly with us as an investor that doesn’t come up. Now, if you were to broker this, it would come up. There’s not a lot of gamesmanship and what people pay one way or the other, which I can talk about later. But yeah, you’re spot on right as you think about trying to navigate does this make sense for our credit union? I think your first calculation is what does my capital look like now? And what is it going to look like in 12 to 18 months, and thinking through that very hard and thinking through some of the stressors that could be in our environment today, dependent upon your exposure and certain asset classes, and then doing that computation, I think is really, really important. That’s number one. Number two, every credit union should remember, as an investor, MountainSeed is not in the business to go get the real estate and then to kick out the credit union at any given moment. Our entire reason for doing this is to have a long and I mean, very long tenant that is a financial institution as our lessee. Part of our thesis is we want to be in the business with credit unions for the long term. So our leases, we had one last week, there was a 15-year lease with two 15-year extensions, 45 years. Economic life of a building’s usually not more than 50 years, right? So I think ultimately, that is not our goal at all. And in your lease, if you were to explore this with us, that would not be part of the lease; you’d feel very comfortable, at least everyone I’ve engaged with on this who’s read the lease and read our LOIs have said, okay, this makes fundamental sense. Now, that doesn’t mean it makes sense for everybody. I’m the first to tell you our approach at MountainSeed is always kind of advisory first, and then let’s get a transaction done second. I think we try to more so than anything else consult and coach and educate and if that leads to no transaction, that’s totally okay. The reasons it wouldn’t lead to a transaction for a credit union would be if you’re flush with capital and you don’t have a real need for cash, if you’re not going out and buying other credit unions; if you’re not gonna have a big technology spend, if you don’t have some platform you’re switching; if you don’t have a real need for cash or a reason because the regulators are looking at you under the microscope in the future then it might not make sense. But if any of those things line up to where capital was tight, you plan to maybe exit a building in 10 years, 12 years, 15 years, and you want to take advantage of the real estate market right now, that could get you some capital today that would make your balance sheet a little bit healthier. That’s a good time to do it. It would make sense to do it. Bill, did I miss anything from your perspective?

Bill Paton  13:30

No, you hit everything. But I do want to say to Doug, I mean, you can’t open up any of the industry newspapers or media outlets without people talking about digital strategies. And so this to me makes all the sense in the world if you’re a credit union and you’re thinking about 15 years down the line, and you have this long roadmap of your digital strategy, and you need the investment now, and you’re not sure if you need the building in 15 years but you want to have it, you want to be able to kind of kind of vacillate between both a digital strategy and exiting the real estate strategy. This is perfect, as Patrick just said, you can take advantage of a nice market for your building while then taking the capital you get and redeploying it in your digital strategy. For me, that’s one of those strategies—this makes a tremendous amount of sense for something like that, to utilize a transaction like this.

Doug English  14:21

Yeah, that makes sense, sort of modernizing your use of capital to go from a brick and mortar to some kind of intellectual capital. What are the landmines to watch out for that you mentioned, Patrick? You know, kind of give us maybe just the top examples that have gone through, that have run into these things.

Patrick Roberts  14:38

Yeah. And it’s a great question. So it goes back to the accounting standards, that is where the landmines typically come up, right? From a strategy perspective, you as a credit union, you’ll talk to your board, you’ll get there from an executive standpoint, and one way or the other, if it’s a right or wrong strategy. There’s a number of questions that naturally come up when you’re meeting as an executive team, or my team would give you FAQs and coach you through that process. But there are some landmines to your point, Doug, and those landmines are all about ensuring you can recognize that gain, that $30 million gain from the example before, upfront. There’s three things I think are relevant. There’s truly five landmines, two of them are irrelevant. Three of them are relevant. So number one, the transaction must be an arm’s length transaction. Okay, MountainSeed, if you sell to us, it’s an arm’s length transaction. If you sell it to one of your board members, arguably, that’s not an arm’s length transaction. Number two, there can be zero reversion. Think of a lease purchase. If you want to lease a home and you want to go buy it in five years, in real estate you can do a lease purchase. You cannot do a lease purchase with these transactions. You as the credit union cannot get this piece of real estate back in seven years if we document that in a formal manner when we enter into the transaction. Now, if you call us in six years and say, hey, MountainSeed we want to buy this back from you and it wasn’t documented in an agreement that’s okay. But you cannot go into the transaction knowing you’re going to have a reversion event. Regulators do that specifically because they know there’s a lot of advantage to doing this transaction. And they don’t want you to kind of play games. And then the last one is probably the most complex. So I’ll try not to spend too much time on this. I can spend a little time on this but I won’t spend too much. Anybody who’s a CFO on this podcast will understand this. So the net present value of the lease payments cannot exceed 90% of the fair market value we’re paying. And remember how I said there’s very little gamesmanship? Part of the little gamesmanship is this exact covenant or this exact standard. It’s very difficult to run out that standard and charge a credit union an exorbitant rental amount that’s not market. It’s pretty much impossible to do that. Now, of course, with a net present value calculation, some of that depends on your borrowing rate. Okay, well, that’s the discount rate naturally. So dependent upon what that borrowing rate is, that’s what you discounted. You need to engage with your CPA, to have that dialog. I can give you all the guidance in the world because we do these transactions weekly. However, I would 100% no matter what tell you you need to speak to your CPA. You might even talk to us five times in our conversations when we’re doing this transaction. And I’m going to tell you every time, talk to your CPA; it’s that important to make sure you get that NPV calculation right. It sounds a little scary. I’m telling you, it’s not scary. Are there people who have made mistakes? There are. But the reason they made a mistake is because they were not thinking through with their CPA what the net present value actually was given that transaction. MountainSeed will provide on the front end, once we go through our analysis and put together our LOI, we will tell you what we think that NPV calculus will be. And we use a kind of a borrowing rate that we see pretty standard in the market. However, and every one of ours, we don’t ever present anything that comes within two to three points of 90%. We’re always below that kind of threshold. But once you talk to your CPA and put those inputs in from them on the borrowing rate, then of course we would talk with you further if we need to adjust anything within the LOI. So that’s kind of the number one landmine I’d say, Doug.

Doug English  18:27

The interesting idea that Bill had given me in regard to sub debt is that you could get pre-approved for sub debt, and then sort of just in time issue, quickly bring it to market. Talk to me about whether there is a strategy around that for sale-leaseback, getting the vetting out of the way, knowing what the numbers are? And then be ready to do it? It appears to be part of your strategy. Include in that if you would the cycle time of these transactions.

Bill Paton  18:57

From Alloya’s perspective, it’s one of the reasons why we kind of like this. If you’re comparing it to sub debt, one of the nice things is you do not need to get it approved by the NCUA. Additionally, I do want to just point this out, this is not new. This has been around for a very, very long time. The other day I was just reading a letter from 1981 from the NCUA about these transactions, right? On our prior podcast, Greg Hill, who was on the sub debt call with me, he did one of the sale-leaseback transactions in the late 1990s at the credit union he was the CEO at. So credit unions have been doing this for a long time. It’s way different than sub debt, which was brand new in 2022. So it’s a little history just comparing those two right now. Alloya likes these for a variety of reasons, a lot of what we just talked about. But the main thing for me is how quickly you can be done. And I’ll let Patrick talk about it. But you know, NCUA, from what we’ve seen with sub debt, you’re talking at best from the day you think about going into issue sub debt to the day you close, somewhere between five and six months and it can be upwards of nine months, right? So it’s a process. And that can be difficult, right? It’s a lot of lead time. Sale-leasebacks are much, much quicker transactions—you’re talking 30 days, maybe at best, probably more like 45 to 60 days—but far quicker transactions for credit unions. So I just want to point all those things out. And I’ll let Patrick get into the nitty gritty, answer the questions you’ve just asked.

Patrick Roberts  20:20

Maybe to start from a cycle time, Bill is spot on. We can move super fast. I mean, right now, for instance, we had a group last week that engaged us on Thursday for the first time. And they said, we need to wrap this by quarter end. Our valuation, we have an entire team of appraisers on our staff. Remember one of the business units we have is an appraisal business unit. We have like 70 MAI and certified general appraisers all throughout the U.S. So we leverage that valuation team, we’re going to turn a valuation on those branches. My hope is by the end of business tomorrow, we’ll have an LOI out—by Wednesday. We are meeting with their executive team on Thursday. With all that said, we think we can get a purchase and sale agreement and get this thing wrapped by quarter end. So it can move super fast. Now, does every transaction move that fast? No. Most are probably in that 45- to 60-day window, and most don’t need it to move that fast. Now, from the standpoint of does it make strategic sense to do an assessment on this as a viable strategy now even if you don’t want to do this transaction in the next six months, three months? Yes, it absolutely does. And I’ll tell you why. Number one, you probably don’t know what your branches are worth. We’re going to be able to help give you some guidance there. Okay, you have a book value but we can actually tell you what the real estate’s worth and what you actually have. Number two, I would say that nine months ago, the banking landscape and the credit union landscape was in a situation where we thought, oh, no, what’s going on, the velocity has continued to move harder and harder with fed funds pushing higher and higher and higher. But we’re probably going to stop soon. Well, guess what? We didn’t stop. Are we going to stop now? Probably so but what if we don’t; it would be good to know if you’re stressed on the funding side. Or if you’re stressed on the capital side, hey, I have this solution that’s ready. And then I’d say lastly, this is not an all or none, I should have mentioned this earlier, you don’t have to sell all 10 of your branches. I mean, I have someone right now that has 12 branches; we’re going to buy one. So you can do this in a strategic manner over time, start slow, and then kind of do it methodically as you go, or you can do it in a big full swoop or half of your branches at once. But no doubt, I think information is power. And if you guys actually will learn what this can do to your balance sheet here and now, come January or come February, it can be pretty meaningful if you guys need a solution and to come up with a plan.

Bill Paton  22:50

I would like to just add on that because I’ve been doing some stuff for presentations around liquidity management and the NCUA coming out and talking about contingency funding plans and how important those are. I think it’s a great strategy especially if you are generally running below 9% capital, 8%, 7%. And you’re kind of in that mid-tier range. And you might need capital quickly for whatever reason to both get all your ducks in a row for sub debt because we might need to pull that trigger as well as sale-leaseback. And the reason why I say both is because working with Patrick and MountainSeed and understanding the value of your real estate is great and being able to see how much capital you can extract from that is great but then on the sub debt side, one of the real nice things about that is you’re able to actually go forward and apply for how much capital you might need. I’m putting my credit union hat on saying, hey, an examiner’s coming in. I want to make sure all my lines of credit are tested. I’ve been able to get a real value on my assets. These are all the different tools of the trade. I want to have that line ready. So I can go to my examiner and say, hey, I’ve got liquidity ready, I’ve done my homework on the capital, we need to do it. And we’re ready to go. So in the event the examiner comes in and says, actually, you do need a little bit more capital. Okay, here are your options, which option is going to be the best for you right now? 

Doug English  24:11

Very good. Bill, that got me wondering about is anyone taking this to the extreme, where you build for immediate lease? Where do you build it and then sell it before you even occupy it? Have you seen any activity like that?

Bill Paton 24:25

I haven’t.

Patrick Roberts  24:26

Yeah, I’ve not seen that either. 

Bill Paton  24:28

I don’t think you would. I guess maybe that makes sense but you’re probably not going to get as much from a capital perspective, right? If you’re building right now your land is worth X, I guess you could turn around and see a little bit of appreciation in capital. But the most bang for the buck is going to be on those credit unions who have had buildings for decades and decades. 

Patrick Roberts  24:49

Yeah, remember the book value? The impetus for this in a lot of cases is for depreciation of branches. So as you think about a building that’s 20 years old, it’s almost fully depreciated, you’re going to get a huge gain versus a shorter time frame. I was on with a credit union last week that just acquired another credit union a year and a half ago. And when they made that acquisition they reset their book value. So are they going to get some gain? They are but they’re not going to get nearly the same gain of credit unions with legacy branches.

Bill Paton  25:19

That’s a good point. You know, Patrick, you and I were talking about this. It’s the same concept of a credit union buying a bank or a branch at a bank, right? When I initially thought about this, I was like, geez, you could fund your own merger, you can fund your own purchase, your capital if you purchase the bank. But it doesn’t really work like that because the goodwill is already involved with the sale of the branch. You might get a little but probably not as much as you initially thought. I thought that was the case—credit unions going around buying branches the entire time—but you wouldn’t get that goodwill.

Patrick Roberts  25:49

As it relates to an M&A strategy, I think the way you have to look at it is if you own legacy branches already, you can do the transaction on the legacy branches today, generate the capital for the transaction on the acquisition side, or even in post-acquisition, if you own legacy branches you could do it at that point to kind of refill the refill bucket, so to speak, make sure you’re in a good healthy spot.

Doug English  26:11

As always, on this podcast, we like to try to think about bold ideas to push the credit union movement forward to be the tip of the idea generator for credit unions. Patrick and Bill, both in what you’ve seen and what you intellectualized about with regard to sale-leasebacks, what are the boldest ideas for credit union leaders in this particular space?

Patrick Roberts  26:36

I think the boldest idea from my perspective is to look at your balance sheet. Bill threw out a number with a capital, I mean, if you’re sub 13%, 12%, engage, at least find out what this can mean for you long term. We’re not going to spend more than 30 minutes to an hour of your time doing this. So would you sell every one of your branches? That would be a bold move. Do I have people we’ve done this with who have sold all their branches? They have. I would say, think of this as really a strategy that hasn’t been as in vogue. But now that you are faced with some pressure on your balance sheet, at least take the call. I mean, we’re not a broker, right? So it’s not like we’re trying to incentivize you to do a transaction. I’m just simply stating as an advisor, you’d be doing yourself a favor if you took the time to actually learn a little bit more about what mechanically this can do for your balance sheet. So that would be the bold suggestion. I mean, it’s not a rocket science transaction. So I don’t want to overcomplicate any of this. It’s pretty simple. But ultimately, take the bold strategy to understand, hey, what can this transaction do for my balance sheet, regardless of where you are in a capital position? 

Bill Paton  27:44

I think of this as being the funding mechanism for the future credit unions, which I consider to be digital. If you have real estate assets and you’re not sure where real estate plays 20 years down the line, 30 years down the line, probably all of us on this call won’t be in the industry then, maybe Doug as he’s looking around, right? If you are going all in or pretty heavily in on this digital strategy, there’s a major capital requirement to do so. Take the assets you have now and then look at this transaction. And you can still continue to keep that real estate presence but you can fund that digital strategy. And I think to me, that would be the boldest action anybody could take.

Doug English  28:30

Right on that and M&A is the other obvious outcome, right?

Patrick Roberts  28:34

That’s a really good point, Doug. If you’re going to go out and make acquisitions this should no doubt be your way to do it. That would be the bold thing I would state. If you are actively going out and acquiring others, you can generate the capital, you don’t have to raise any money. You don’t have to go through any long, laborious process. Just get it today, you have it on your balance sheet. That’s what’s funny. People don’t realize they have it, they own it with their real estate. 

Doug English  28:57

Thank you, Patrick. Thank you, Bill. Thank you for your work for the credit union movement, through it through the members. I appreciate the work you do in helping support this movement to grow and to be bold and to be strong for generations to come. So thanks for your time today. I will look forward to talking to you again in the future. 

Patrick Roberts 29:17

Thank you gentlemen. Enjoyed it. Thanks again guys. 

Bill Paton 29:20


Patrick Roberts 29:21

Bye bye.

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