TAMPA, Fla. – Count Suncoast Schools FCU as another credit union giant making a turnaround, after the one-time $6.2 billion credit union reported a $4.5 million net for its first quarter – its first profitable quarter in more than three years.
Tom Dorety, president of Florida’s biggest credit union, touted the turnaround as a cooperative effort between members and employees. “The members had to take their share of suffering and the employees did,” Dorety told Credit Union Journal yesterday, of slashing deposit rates along with employee pay and benefits to bring the bottom line back into balance. Dorety was particularly proud, however, of the fact the credit union was able to do so without closing any branches or laying off any workers. “We tried to keep the core of the organization intact,” he said.
The strategy behind this credit union turnaround in one of the worst real estate markets in the country was two-fold: an aggressive setting aside of allowance for loan losses, combined with a major reduction in the balance sheet. The first resulted in big losses in each of the last three years – a total of $185 million. The second resulted in declines in loan and investment income, but also a 29% drop in cost of funds for the first quarter from the same period last year. “We used to pay way above market rates [on deposits], now we pay market rates,” explained Dorety.
The lower asset base also allowed Suncoast to rebuild its net worth ratio all the way to 6% at March 31, qualifying it as “adequately capitalized” under NCUA minimum capital rules.
Despite lingering troubles along Florida’s Gulf Coast real estate market, Dorety is confident his credit union had turned the corner and expects to remain in the black for the remainder of 2011. “Absolutely,” he said, “Our bottom line is getting better every quarter.”
Yesterday’s news from Suncoast Schools comes after NCUA reported Friday that Arrowhead Central CU, a troubled one-time $1 billion credit union it took over last July, had net income of $3.9 million for the first quarter, its first net in three years.
Other big credit unions that struggled the past few years also are reporting returns to profitability for the first quarter. Desert Schools FCU went from an $18.9 million loss for 2010 to a $5.6 million net for the first quarter; America First CU from a $9.3 million 2010 loss to a $5.8 million net; California CU from a $4.5 million loss to a $2.1 million net.
Still other credit union giants in the troubled Sand States are reporting more robust first quarter financials. California’s SAFE CU a $7.8 million net for the first quarter; North Island Financial CU a $10.7 million first quarter net; Patelco CU a $24.6 million net and The Golden 1 CU a $28.8 million net, up 82% from last year’s first quarter.
The healthy financials are continuing evidence that California is climbing out of the depths, slowly though, according to Daniel Penrod, economic analyst for the California CU League. “Parts of California are starting to grow again,” Penrod said yesterday. He cited strong fundamentals along the Pacific Coast and the big cities, Los Angeles and the San Francisco Bay Area. “Technically, the recession has been over,” he said. “But the feeling around the state is the recession is still lingering.” He said there are some pockets, such as the central valley, where job growth and other indicators are still lagging.
