Being 'Modest': Negative Numbers a Plus

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RENO, Nev.-Defaults have begun declining at Great Basin FCU, which is allowing it to enjoy "modest profitability."

Net income for the third quarter was negative $607,000, which Dennis Flannigan, CEO of the $101-million Great Basin, said was due in part to the hit it took from assessments.

"We had an improvement of capital ratio to 5.28% from 5.15% on June 30," he said. "We saw a modest profitability in July and August, but the NCUA assessment took care of any profit in September. Exclusive of the premium, we would have seen positive for the quarter."

Unemployment in Washoe County, where Reno is located, has been 13.3% to 13.6% all year, "It is not getting any worse, but is not getting better. There continues to be a decline in the number of people actually employed."

The economy continues to be "soft," he assessed, as the housing sector struggles. "There are not a lot of signs of a turnaround this year. It will be next year after some people get employed."

After poor numbers in the first four months of 2010, Great Basin has seen five straight months of declining defaults, especially in consumer lending. Flannigan said consumer loan losses are 50% to 60% below prior months, which he attributed to the stabilization of employment numbers."We have reduced our Allowance for Loan Losses the last four months, which helps."

Loan demand remains "very weak," as local automobile dealers are experiencing historic lows in the number of vehicles sold, Flannigan reported. He said Great Basin has instituted multiple loan promotions, including a 3.99% rate and a $100 refund for doing a new loan.

"We have been pulling out every stop to maintain the quality of the loan portfolio. There have been a good number of loan applications, but credit quality is not very strong."

Membership is down slightly overall, but Great Basin is seeing positive growth in multi-service members. Flannigan said people are leaving banks and bringing their entire relationship to GBFCU, which has seen growth in checking accounts.

"I think 2011 will be better, but it is totally dependant on recovery in the area. The credit union has stabilized and we probably will be profitable in every month except when NCUA sends up a little bill."

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