For One Las Vegas CU, Improved First Two Quarters Lead To Optimism For Remainder of 2011
LAS VEGAS-The economy in southern Nevada is slowly improving after a dismal stretch, and Brad Beal expects $695-million Nevada Federal Credit Union to break even in 2011.
That's a big step forward for a credit union serving a city and residents who have been hit hard by the recession.
Beal, president and CEO of Nevada Federal, said he is seeing "some slight and gradual improvement in the local economy, which is being reflected in our financial statements in slightly lower delinquencies. We are seeing two steps forward and one step back. The recovery is going in fits and starts. If our delinquency numbers keep going down, that would be good. In the second half we expect to see continued gradual improvement. Visitor numbers are supposed to be going up. We expect to end the year breaking even."
Breaking even is an improvement in the Silver State. In 2010 Nevada Fed posted a loss of $2.5 million excluding assessments, and a loss of $4.2 million after paying $761,689 to the NCUSIF and $877,424 to the corporate stabilization fund. The CU took a $32-million loss in 2009.
Nevada Fed eked out net income of $607,670 in the first quarter of 2011, but had to put aside $450,000 to its NCUSIF expense, leaving it with net income of $157,670. Beal told Credit Union Journal 2011 has been up and down so far.
"We make a little money some months and lose a little in some months," he said. "Tourists are coming to Las Vegas, but they still are not spending as much as they used to. That hopefully will improve as the national economy improves and people get a little more confident."
One wild card is government employment. With the state running a budget deficit, the Clark County School District might have to implement layoffs, which Beal said "could impact" the Nevada economy. "So we are watching that situation very closely. The state budget is due this week."
Loan demand, with the exception of first mortgage loans, continues to be "very, very weak," Beal assessed, with automobile lending being "particularly weak."
"Consumers here are reluctant to make purchases," he said. "We have growth in our auto portfolio, but that is through our efforts to refinance auto loans from other borrowers. It has been good for our members because it has reduced their car payments and saved them some money."
One bright spot: first mortgages are doing "reasonably well," considering the overall market. First mortgages are off 20% from this time last year, but Beal said originations are "still strong." Through May, Nevada Fed originated nearly $40 million in first mortgages. All mortgage lending is down 20% because there are a large number of cash buyers coming into the local marketplace in the last three months, he explained.
"Investors are stepping in and buying homes. Anything that helps soak up the excess housing inventory is good in the long run. It is moving the rat through the snake. The snake is digesting the rat slowly."
'A Game of Inches'
Beal and Nevada Fed's management team watch unemployment and gaming revenue most closely. He said there has been some positive job creation in the last few months, residential property values have trailed off.
"We are still bouncing along the bottom, with nothing dramatic either way," he said. "We have a long haul ahead of us and a game of inches. Our two keys to success are capital and liquidity. We have ample capital to withstand anything unexpected and 40% of our assets are highly liquid. That gives us a lot of flexibility to deal with uncertainty. Our net worth is up to about 9.5%."