COMMERCE, Calif.-Nearly every CU in the U.S. has seen a decline in net worth. But the case of the former Certified FCU here may set the record for fastest decline ever.
When 2010 debuted the credit union was reporting positive net income (prior to its NCUA assessment) and operating with 7% net worth. By June, the one-time $52-million CFCU was reporting losses of nearly $10 million and an adjusted net worth of -17%.
The radical reversal led to Vons Employees FCU stepping in and acquiring Certified FCU, which was originally chartered to serve employees of the state's grocers cooperative.
Steve Weakley, president of the $315-million Vons Employees FCU, told Credit Union Journal that NCUA had been closely monitoring Certified since January and dispatched an examiner to remain on-site in April. Soon thereafter the regulator invited a number of credit unions to bid on acquiring the now $38-million institution.
Weakly said CFCU was forced to record several "major write-downs," which resulted in the adjusted net worth, including a $6.7-million non-operating income charge and $528,000 of losses in fixed assets. Delinquencies were adjusted to 13% from 3.8%, forcing the CU to set aside $1.23 million for loan losses, far more than the $744,724 it set aside for all of 2009. Weakly declined additional comment, citing the confidentiality agreement with NCUA. The agency also declined to comment on the matter.
Weakly is confident that its acquisition will pay dividends as it gained access to a strong SEG and one it understands well, as Vons Employees also serves the grocery industry. The $332-million credit union reported $2.3 million in net income through the first half of the year and boasted a 20% net worth ratio prior to the merger.
We've had a strategy to stay conservative, build our reserves and work with our sponsor and it has paid off. This will bring down our capitalization a small amount, but we'll still be around 18% even with the acquisition," Weakly asserted.
We've acquired a very good membership group and we'll work very closely with them."
Vons Employees got to work right away putting its stamp on Certified as it is repainting and remodeling its branch location. Certified FCU will continue to operate under its own name as a division of Vons Employees; 15 Certified staff members were hired by Vons Employees to run the operation.
