For One California CU, 2nd Half Projected To Be Strong As Attention To Auto Loans Is Paying Off

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SACRAMENTO, Calif.-The Golden 1 Credit Union is one of the great turnaround stories in California, having posted five consecutive profitable quarters after enduring huge losses in 2008-09.

Its CEO expects the second half of 2011 to be a good one.

Donna Bland, president and CEO of the $7.8-billion Golden 1, told Credit Union Journal she is seeing signs of economic stabilization in The Golden 1's service area as the latter half of 2011 approaches.

"We are seeing positives in credit quality, but not a significant recovery," she assessed. "Consumers are very hesitant to buy luxury items. They are holding on to savings. There are not a lot of new auto sales, but there is an increase in used auto sales. We are aggressively out there in the marketplace trying to get as many loans as we can and increase our market share in auto loans in the second half of this year."

In 2008 The Golden 1 lost $22.6 million, with $76.5 million placed in allowance for loan losses. In 2009 it booked a $23-million loss, including a $1.5-million NCUSIF expense and $126.2 million going to ALL.

In 2010 it turned things around as ALL was reduced to $42.5 million. It recorded $91.6 million in income before assessments. After paying $7.5 million to the NCUSIF and $8.3 million to the corporate stabilization fund, it had $76.1 million in net income.

Through April, Bland reported, The Golden 1 has $34 million in net income for 2011 and ROA of 1.34%.

"We are not accruing for premium assessments based on the latest news from NCUA that premium assessments for NCUSIF will be less or possible nothing. Of course there will be an assessment for the corporates. Relative to any economy having an ROA of 1.34 is strong, especially when we are providing good value to our members."

In 2008-09 The Golden 1 was forced to implement a number of expense controls, and Bland said it has not abandoned that tack "during what continues to be a challenging environment." Delinquencies and charge-offs are coming down, so the amount placed into provision for loan losses has been less, she noted.

"We've only set aside $9 million in the first four months," offered Bland. "But we are operating on small margins. We want to be competitive for loans because there is not a lot of borrowing right now. Consumers do not have equity in their homes-30% are underwater in our area. We operate in a lot of markets and each has its own challenging circumstances and we have to be responsive to all those different changes."

The Golden 1's management recognizes the need to invest in its future, Bland continued, so it is looking at innovations to provide its members with convenience. It is investing in technology in its branches, implementing a new mortgage system and improving its operational efficiencies, she said.

The goal? "We still need to attract and retain members. Membership numbers are flat at credit unions nationwide. Consumers are no longer spreading out their relationships among several institutions. With interest rates lower, people are not spreading out their hot money to different places."

Auto Loans, Auto Loans, Auto Loans

The Golden 1 is lending more than it has in the past. Bland said it is competing for auto loans through competitive rates and by building relationships with dealers. The local housing market has seen "slight declines" in prices in recent months, but she said the situation is, "Nothing like what we saw in 2008 and 2009. Values have gone down a little. It is a great market for first-time home buyers, but there are a lot of cash buyers out there so not as many mortgages."

Asked what loan promotions The Golden 1 would be implementing in the second half of 2011, she replied, "Auto loans, auto loans, auto loans."

"We expect to be profitable in the second half, absent any unusual changes or tanking of the economy," Bland said. "In April we made $9 million, so absent a crisis or large assessments, I expect us to be profitable. We had to hunker down for a while there, but the experience has made us stronger."

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