ALEXANDRIA, Va.-If there was any doubt before, it became official last week: credit unions, like banks, are experiencing their worst crisis ever.
Hundreds of credit unions large and small were reporting record losses last week, many for the first time, as the recession spreads throughout the credit union movement. The biggest losses were concentrated in the four states hardest hit by the plunge in real estate values, California, Florida, Arizona and Nevada, but credit unions all over the country are awash in red ink.
Arizona FCU reported a massive $64.4 million loss for the fourth quarter, creating an annual loss of $115.9 million, the second biggest ever for a credit union. "Ninety-percent-plus is in auto loans, credit card loans and home equity," said Ronald Westad, president of the $1.7 billion credit union.
The spread of the problem loans is symbolic of the state's economy, which has gone from second in the nation for job creation, to 47th, noted Westad. "It's more indicative of the general economy here."
Westad said AFCU is attacking the losses by moving large sums into loan loss reserves, working out troubled loans with members, or charging them off when necessary. "We've got plans and financial projections through 2009," he said. "We certainly a viable entity, based on those plans.
The credit union has $170 million in total capital, but just 4.75% net worth, below the minimum required under NCUA's prompt corrective action rules.
In addition to the credit unions shown at right, smaller CUs in California are also reporting red ink for last year after profitable 2007s. Bay CU had a $3.5 million loss last year after a $2.2 million net in 2007; Priority One CU had a $690,652 loss last year after reporting a $683,589 2007 net; Bay Cities CU had a 2008 loss of $913,260 after a 2007 net of $22,207; Safeway Los Angeles FCU had a $310,958 loss after a $120,066 net in 2007; Santa Ana FCU a $1.5 million loss after a $124,686 net; Antelope Valley FCU a $199,859 loss after a $288,950 net; and State Center CU a $592,340 loss after a $215,061 net for 2007.
The recession isn't expected to fade soon in the Sunshine State, which reported a net outflow of jobs last year for the first time in memory. "I think it has stopped getting worse, and that's the first sign of a turnaround," said Bucky Sebastian, president of GTE FCU. But, with the region's unemployment rate quadrupling to 8% in the past three years, a recovery is still over the horizon, he suggested.
"We made good loans to good members in good conditions," said Sebastian. "Unfortunately, those conditions have changed." He said the poor economy and the layoffs have pushed his credit union's delinquency ratio and charge-off ratio to about 2%.
"We expect more losses in the first quarter and the second quarter," said Tom Dorety, president of Suncoast Schools FCU. "We hope southwest Florida bottoms out in 2009."
In southern California, where the national real estate crisis has been about the worst, the red ink continues to flow. North Island Financial CU, set aside another $31 million in loan loss reserves in the fourth quarter, creating a $32.5 million fourth quarter loss. Jack Lewis, chairman of the North Island board, said the credit union's losses were caused by the continuation of the region's real estate problems. "The numbers you're seeing are a reflection of the hard-hit real estate market in southern California," Lewis said.
The credit union has been aggressive in dealing with its problems, according Geri Dillingham, chief operating officer for the $1.6-billion institution. Besides setting aside new loan loss reserves, it cut expenses by about 21%, about $12 million, which included the reduction of 10% of its workforce, about 50 positions, she said. "I feel we're very well positioned for 2009," said Dillingham.
Losses were spread around the country, as well. Texans CU, in Richardson, Texas, had a $33.2 million loss for the year; Mountain America CU, in West Jordan, Utah, $22.5 million; Direct FCU, in Needham, Mass., $15.8 million; Sunmark FCU, in Schenectady, N.Y., $12.5 million; Cyprus CU, West Jordan, Utah, $10.2 million, and Centris FCU, Nebraska's largest CU, had a $6.6 million loss for 2008.
CALIFORNIA: Several large California credit unions reported their first losses ever last year. Arrowhead Central CU reported a $23 million loss for its fourth quarter, creating a $26 million loss for the year. Kinecta FCU, reported a 2008 loss of $44.3 million; Kern Schools CU, $24.3 million; California Coast CU, $23.8 million; Schools Financial CU, $2.8 million, and North Island Financial CU, $50.2 million.
ARIZONA: Desert Schools, the state's biggest credit union, had a $7.5 million loss; Arizona Central CU, $7.5 million; First CU, $11.7 million; Arizona State FCU, $5 million; Sunwest FCU, $4.9 million; TruWest FCU, $4.4 million; Altier FCU, $3.1 million; Tempe Schools FCU, $3.2 million; Tucson Old Pueblo FCU, $3 million, and Credit Union of the West, $2.6 million.
NEVADA: Community One FCU reported a $6 million loss; Greater Nevada FCU, $5.6 million; Clearstar FCU, $5.4 million; Ensign FCU, $4 million; Great Basin FCU, $2.3 million and Westar FCU, $6.4 million.
FLORIDA: Suncoast Schools FCU, the state's largest at $6 billion, reported a $76.7-million loss; Eastern Florida Financial CU reported a $40.2 million loss for the year; GTE FCU, $27.2 million; Jax FCU, $8 million; McCoy FCU, $4 million; Tropical Financial, $4.3 million; Community First CU, $3.4 million; Sarasota Coastal FCU, $2.7 million; First Florida, $1.9 million; Grow Financial CU, $2.8 million; Keys Financial FCU, $1.8 million; Insight Financial FCU, $1.1 million.
