MIAMI – Red ink continued to spill throughout the credit union industry in the second quarter, especially in the hard-hit markets of Florida, California and Michigan, according to second quarter data being reported to NCUA.
Eastern Financial Florida CU, which reported a record $70 million loss last year, had a $16.8 million mid-year loss – including an $11.3 million loss for the second quarter. Bay Gulf CU, in Tampa, which had a $3.1 million 2007 loss, reported a mid-year loss of $1.4 million. Sarasota Coastal CU, which had a slight $117,000 loss last year, reported a $1.1 million loss at mid-year.
“It’s all real estate,” said Thomas Randle, president of Sarasota Coastal, a $240 million credit union. He said property values have plunged by 50% in his market, Florida’s Gulf Coast, prompting many borrowers to simply walk away from their mortgages. “Jingle mail,” is what he called members who leave the keys to their homes at the credit union and walk away.
“I don’t think there’s a profitable credit union or bank in southwest Florida, at least that’s what the press is reporting,” Randle told The Credit Union Journal yesterday.
William DeMare, president of Bay Gulf CU, located nearby Sarasota Coastal, said his credit union’s problems began last year with an ill-fated indirect auto loan program, and have been exacerbated this year by the plummeting real estate market. “In my gut I think we’ve hit bottom, but I think it’s going to be some time before we’re able to climb out,” he said.
Credit unions in pockets around the country are reporting dismal mid-year numbers.
In California: Kinecta FCU reported a $7.5 million second quarter loss and a $10.6 million mid-year loss; Wescom CU had a $3 million second quarter loss, pushing mid-year losses to $10.9 million; Kern Schools CU had a $5.6 million mid-year loss, following an $800,000 loss for the second quarter; and, AltaOne CU in Ridgecrest had an $892,000 mid-year loss.
In other states: Texans CU of Richardson, Texas, reported a $7.7 million second quarter loss and an $8.8 million mid-year loss; Allegacy FCU in Winston-Salem, N.C., which had a $7.4 million loss last year, reported a $3.8 million loss for the second quarter, after a $1.2 million profit for the first quarter; and, Pocatello Railroad CU, in Pocatello, Idaho, followed up a $911,000 loss for 2007, with a $432,00 loss for the first half of the year.
Many more credit unions are expected to report losses in the coming days and months.
Matt Davis, chief marketing officer for Texans CU, said most of its red ink was caused by member business loans made for commercial real estate. He said the saving grace is most of the losses came outside the $2.2 billion credit union’s core Dallas market, and it is hoping to recover some of those losses when those markets rebound. “The good news is that delinquencies have actually gone down from the first quarter to the second quarter. And we’re very confident that will continue.”
Bob Doby, chief financial officer for Allegacy FCU, said a large portion of its losses come from charge-offs and high loan loss provisions on a pool of home equity lines of credit of about $53 million, representing 6.8% of the $1.2 billion credit union’s total loan portfolio. “We consider the loss at this time to be very manageable since the majority of our loans are located in North Carolina – a state that thus far has not seen dramatic increases in mortgage delinquencies,” he told The Credit Union Journal.
