MANHATTAN BEACH, Calif. – The real estate bust may be in full-force here but new troubles are emerging in other areas, including auto and credit card loans.
"People in southern California are struggling right now," said Simone Lagomarsino, president of Kinecta FCU, in explaining her credit union’s $44.3 million loss for 2008, one of the biggest in the country. That compares to net income of $11.9 million for 2007. The $4.2 billion credit union charged–off $36 million of loans in 2008, most of it auto and credit card loans, a collateral effect of the region’s recession, said Lagomarsino.
"You’ve got several things going on," she said of struggling members. "In many cases their income level has gone down; at the same time you’ve got home values dropping, in some cases 50-to-60%; then you’ve got unemployment rising."
The credit union’s turn-around plan includes cutting costs by reducing workers and closing branches, or reducing their operations, where feasible. One branch has been closed in Irvine and three other branches are now cashless, reducing staffing needs.
The losses have not deterred the credit union from pursuing its underserved expansion plans through most of Los Angeles through its 2007 acquisition of the city’s biggest check cashing chain, Nix. The Nix chain and its 53 outlets have been a net gain for Kinecta, according to Lagomarsino, who sees the Nix operation as a major source of the credit union’s growth plans.
How fast the credit union giant is able to erase the red ink will depend on a recovery of the southern California market, noted Lagomarsino. Top executives project the credit union to break even by mid-year.
