RIVERSIDE, Calif.-Altura Credit Union said the tepid recovery in its service area has forced it to add $3 million to its allowance for loan losses, which in turn triggered a restatement of earnings for 2010 and the closure of several branches and layoffs.
After the addition to ALL, which came at the suggestion of auditors, Altura's restated financials show a loss of $5.8-million for 2010 on assets of $726.8 million. Originally, Altura reported a loss of $2.9 million for the year. Altura's capital ratio for 2010 was adjusted to 5.81%, from the earlier reported 6.18%.
The CU pointed out its restated results still are a "marked improvement" compared to 2009's net loss of $20.1 million.
Altura said it will be closing its branch inside a Wal-Mart Super Center in nearby Moreno Valley on May 18, is converting three other branch locations to all-electronic branches beginning May 10, and is eliminating 26 jobs as a result of the branch changes.
After May 17, Altura will have 12 branch locations in Riverside County, four of which will be all-electronic.
CEO Mark Hawkins said that while the U.S. government reported the recession officially ended in June 2009, the "Inland Empire" region of Southern California is recovering much slower than the rest of the country.
"The local economy here is not getting worse, but we are not seeing a recovery," he told Credit Union Journal. The local real estate market, after years of precipitous declines, in the last two years prices has been "essentially flat," he said.
"The problem is, prices are down 50% or more from the high water mark. The unemployment rate last July got up to 15.4%, but now it is down to 14.1%. Is 14.1% still high? Yes, it is very high, but it is better than it was. Unemployment is declining very stubbornly. Delinquencies are declining and our losses are declining. It is incremental change, but it is important to see these changes."
The CU tightened its loan underwriting standards to limit risk, which Hawkins said had the unfortunate effect of reducing the number of new loans and a resulting decrease in income
Loan Losses Decline
In 2010, Altura wrote off $28 million in bad loans, Hawkins reported. But in March, that had fallen to $18 million on an annualized basis. Last April was one of the CU's worst-ever months, but this April it expects losses of about $1.5 million, or less than half of last April.
"We think May and June look good and expect those losses to be $1 million to $1.3 million each month," he said. "We have budgeted $22 million in charge-offs for 2011, but hope to come in underneath that. With that said, we need to take one month at a time and we are not getting ahead of ourselves."
Hawkins said no credit union enjoys branch closures and staff layoffs, but added the moves Altura made were necessary. "We have to cut our cost of operations to protect our bottom line. We hope this leads to better prospects for the end of the year."
The 26 branch positions being eliminated represent 11% of Altura's workforce. The affected employees have been offered severance packages, outplacement services and Altura loan modification packages to assist them in their transition. Staffers may apply for any open positions within the organization.
Good Relationship With NCUA
According to Hawkins, Altura has a "good relationship" with NCUA and with the California Department of Financial Institutions. He said management expects to be back above 6% capital at the end of the third quarter.
"All things considered we are in a pretty good place," he said. "We knew this was not going to turn around abruptly. It requires patience from everybody. We are outlasting it. The first quarter will have a loss, but we will show a nice profit in March and the second quarter looks good as of now, so we are encouraged. But there are things we have to do to protect our franchise. The people in this marketplace have gone through a tough time, so we are having a tough time."
