PHOENIX – Officials of Arizona FCU are notifying the credit union’s 220,000 members of the financial health of the institution in the face of a $42.5 million mid-year loss, almost $30 million of it in the second quarter.
A notice by President Ron Westad posted on the credit union’s website does not disclose the size of the loss, but says Arizona FCU has experienced increased loan losses, which are backstopped by “multiple layers of protection,” including continuing high income streams and federal deposit insurance.
“We thought it was important to be proactive, rather than wait for people to come to us and ask questions. We wanted to put it up front,” said Randy Baldwin, chief financial officer for the $1.8 billion credit union.
Arizona Federal is just one of several large credit unions in the state – once one of the hottest economies in the country – that are reporting large mid-year losses. Others are: First CU, a $4.1 million loss; SunWest FCU, a $1.9 million loss; Altier CU, a $1.4 million loss; Deer Valley CU, a $1.2 million loss; Arizona Central CU, a $950,000 loss; Tempe Schools CU, a $740,000 loss; and, Tucson Old Pueblo CU, a $635,000 loss.
Arizona Fed’s Baldwin attributed his credit union’s large losses to rising delinquencies and charge-offs – mostly mortgages – in the hard-hit Arizona market, where declines in home prices have rivaled California, Nevada and Florida as the worst in the country. Delinquencies for the credit union rose to 3.4% at mid-year, while charge-offs soared to more than 6%. Over the past year, net capital has declined to 8.2% from more than 10%.
“It’s a perfect storm of financial and economic issues across the country,” said Baldwin, former president of Tucson Old Pueblo CU, who was brought in to Arizona Federal in an upper management shake-up just three months ago.
But he was confident the credit union, which earns $5 million a month in income, will be able to pull itself out of its problems eventually. “We have this incredible revenue-producing machine,” Arizona Fed’s CFO told The Credit Union Journal yesterday.
“There are some signs now where we may be at the bottom or we may be on an upswing,” said Baldwin, of the state’s economy. “(But) I don’t think there’s going to be a quick turnaround.”
