APPLE VALLEY, Calif.-High Desert FCU, which was taken into conservatorship by NCUA in October, continues to post losses and capital has declined to nearly 2%, but management insists the credit union is not looking for a merger partner or a purchase and assumption agreement.
Andy Baumann, senior vice president for High Desert, told Credit Union Journal the CU's balance sheet was negative $15.4 million for 2008 year to date through November. Its assets were $140 million, with a capital ratio of just 2.3%.
According to Baumann, the biggest issue impacting High Desert is declining housing values, which in turn has caused the credit union to set aside $9.5 million in provision for loan losses.
"A lot of what happens in 2009 depends on the Southern California housing market," he said. "In Victorville and Apple Valley, there has been a declining market for the last two or three years. We are about 75 miles from Los Angeles, out in the desert, and property values have declined 20% per year for the last couple years."
But when asked if High Desert is looking for a merger partner, Baumann quickly and adamantly answered, "No."
"We are business as usual," he insisted. "We laid off some staff to effect some better economies of scale, but we have not closed any branches and we have not cut back member services. The primary issue was construction loans, and we have had a significant reduction in outstandings. But we are not actively seeking any partnerships."
A December layoff of 16 staff members, plus other steps to reduce expenses should help High Desert's capital ratio, Baumann said. "But in the long term, we have to control the loan loss number. The provision for loan losses hits the financial statement. It is $9.5 million, and is the reason for the operating loss year to date."
While 2008's precise loan loss figure has yet to be calculated, Baumann said based on the methodology used and the preliminary reports, it appears to be a "good number."
High Desert has placed copies of all correspondence from NCUA regarding the conservatorship on its website, Baumann reported, "and financial statements are posted in branches. We are trying to be as straightforward with members as we can."
High Desert FCU originally was chartered in 1951 and serves those who live, work or worship in San Bernardino County, Calif.
