RIVERSIDE, Calif.-The road to recovery has not been a pretty one for Altura Credit Union.
It has had to close branches, let staff go and turn away many people who had turned to it for loans. But the alternative was even worse, notes its CEO, who believes it now has put the worst of problems behind it.
For Altura, the financials it reported at year-end 2011 were dramatically different than those of the several preceding years. In 2009 it lost $20 million; in 2010, the only good news was losses had been cut to $5.8 million. But it closed out last year with a $8.43 million profit, which Mark Hawkins, CEO of the $642-million, 95,000-member ACU, credits to improved economic conditions, as well as shrewd management of operational expenses, cost of funds and credit issues.
Since the economic downturn began, Altura Credit Union has cut its number of branches from 16 to eight, and shuttered two CUSOs under pressure from regulators. Hawkins estimated that as many as 120 staff members had been laid off over the past four years.
"The cuts have been pretty substantial and they've been pretty deep," he said. "People have been hurt pretty badly. There are a lot of things that you don't choose to do, but you find yourself in a situation where it's got to be done, and you do what needs to be done."
Hawkins noted that controlling the cost of funds had also made a difference. It paid $1.9 million in diviends in January 2008; by January 2012, that figure was down to $190,000, in part due to fewer accounts.
"Because we have not had any loan demand at all and have really been shutting down lending functions, we haven't had any need for monies, so in view of that we've really pushed our dividend rates to very low levels," said Hawkins.
Folks Went Looking Elsewhere
Not surprisingly, that pricing has sent some members in search of better returns. In December 2008, for instance, Altura reported 106,000 share accounts; by December that number had shrunk to 95,000.
Altura serves a market as hard hit by the real estate downturn as any, the desert to the west of Los Angeles. While Altura has not been able to do much regarding its members' personal credit issues, Hawkins noted that those who have been able to continue making payments have begun winding down debt and, in some cases have closed it out. Like many CUs posting stronger numbers, Altura has finally written off numerous bad loans; its ALL has declined 50% over the past four year. "That in itself helps resolve a lot of our bad debt problems going forward because the loans are just gone."
Altura had 62,000 loans and leases ($772 million) on its books at the end of 2008 compared to 45,000 ($442 million) for 2011. ALL in 2008 was $14 million, compared with $34 million in 2009, $35 million in 2010 and $30 million in 2011.
One of Altura's priorities in 2012 and beyond is rebuilding member trust in the credit union. "We've turned down more people for loans in the last three years than we probably ever have in the combined history of the credit union, and you pay a price for that," said Hawkins.
He declined to provide specifics on how it would be rebuilding that trust, but noted that Altura CU continues to promote a positive local image in the community and hopes that members' improving financial pictures will allow for more loan applications and approvals.
Getting Realistic
Hawkins suggested that CUs still coming through the recession's trenches should be realistic about the challenges ahead and confront them in a direct fashion. "Hopefully they have enough earnings and enough capital to get through it," he said, pointing out that a strong non-interest income position helped Altura during the worst of the crisis.
"The importance of non-interest income can't be overstated," said Hawkins. "It's the one income source that you have that is the most resilient in this kind of environment." He added that Altura didn't change its non-interest income strategy, but being in a strong position beforehand (and receiving interchange income and other revenue that comes from being a member's PFI) provided "a steady revenue source that allowed us to hold up underneath some heavy provision periods, and that has been a lifesaver."
