RIVERSIDE, Calif.-Altura Credit Union has been a poster child for the troubles many CUs in California have faced in recent years, but with $7-million in first quarter net income the $708-million CU has joined a number of others in reporting stronger performance.
Altura serves the "Inland Empire" area of Southern California, east of Los Angeles, a region that was particularly hard hit by the recession and has been slow to recover. Prior to the recession, the credit union reported $7.7 million in 2007 net income. But as the economy tanked quickly, Altura went with it, posting a $13.7 million loss in 2008, and losses of $20.1 million in 2009 and another $5.8 million in 2010.
As reported in CU Journal ["
Of particular note in Altura's March 2012 Call Report is a return of $1.4 million to the bottom line from allowance for loan losses. It's a welcome change, CEO Mark Hawkins told Credit Union Journal.
"Our provision expense was negative $1.4-million," he said. "We were starting to see this at other credit unions certainly over the last year, but we were reticent to do so. Now that there is clear evidence that delinquencies and losses have tapered off, our methodology calls for periodic revisions to our provision expense."
Projections For Rest of Year
Hawkins said the reduction in ALL "is all very, very positive," but was also careful to add that Altura does not believe the corner has been completely turned.
"We don't anticipate every quarter this year will be this good, but we do expect positive numbers," he said. "Whether or not we take another negative provision is unclear, but even if we make a contribution to our provision account it will not be as much as it has been in 2010 and 2011."
In December 2008 Altura's ALL stood at $14.9 million. By the end of 2009 that figure had ballooned to $34.6 million. It remained at $35.6 million at the end of 2010, and was reduced only slightly to $30.7 million at the end of 2011.
In the March 2012 Report ALL stands at $26.8 million.
"We expect this to continue through 2012 and into 2013," Hawkins said. "Delinquencies and loan losses have fallen significantly, which has allowed us to back off from allowance for loan losses, and we are still realizing benefits from the reductions we have seen in our operating costs. We made a lot of reductions in the last couple of years, and those are paying off."
Altura's net worth ratio was 7.67% in December 2008 ("well capitalized"). It dipped to 5.61% in 2009 ("undercapitalized"), then 5.81% in 2010 ("undercapitalized"). By the end of last year it was back to a well-capitalized 7.83%.
At the end of Q1 2012 net worth was 8.1%.
Loan Growth Still To Come
Hawkins said Altura would "love to see production pick up," but there has been "nothing sustainable so far" in lending.
"The consumer is being very cautious, which makes all the sense in the world," he said. "Unemployment is still high, and as long as it is the economy in California will be slow. As long as uncertainty is out there, our membership will be hesitant to enter into new debt."
Looking forward, Hawkins said he sees more positives in the general economic situation, "but until consumer confidence really rebounds there will not be much in production-which is what we really want to see for sustained performance in the years ahead. We typically see more loan production in the summer, but we don't expect it to be all that strong. We are looking forward to 2013 and 2014, when we think we will see more economic activity and more loans."
