Members continued to draw their funds out of ailing Cal State 9 Credit Union at an increasing rate in the first quarter, while losses at the one-time $465 million-asset institution, another victim of the mortgage crisis, continued to grow.
Cal State 9, in Concord, Calif., lost another 10% of its deposits, almost $29 million, in the first quarter, on top of the more than $100 million it lost during 2007, according to the National Credit Union Administration.
The regulator is attempting to sell the remnants of the credit union.
First-quarter losses topped $53 million and delinquencies in the credit union's home equity loan portfolio rose 38% from the end of the year. It lost nearly $62 million in 2007.
The NCUA, which has been running the credit union since November, said it is negotiating with potential acquirers. But any deal would require the agency to assume all of the troubled loans, a liability estimated at more than $100 million.
"NCUA is seeking a resolution partner through an acquisition," John McKechnie, the agency's chief spokesman, told Credit Union Journal. "We are using the region's normal purchase and assumption processes to resolve the situation."
He declined to say how many credit unions have submitted bids for Cal State 9. No timetable has been set for the sale, Mr. McKechnie said.
Under a purchase and assumption, reserved for troubled credit unions, a healthy credit union purchases the solvent assets — such as branches, headquarters, and member accounts — while the NCUA assumes the insolvent assets.
Sometimes the NCUA gives the acquiring credit union a cash inducement to make the purchase, as is expected for Cal State 9.
The NCUA made a $100 million loan to Cal State 9, one of two troubled credit unions to receive a Section 208 emergency loan from the agency over the past few weeks.
