Lower Losses Cant Disguise Dire Capital Position At Silver State Schools CU
LAS VEGAS – Silver State Schools CU, the nation’s largest privately insured credit union, said yesterday while it continued to lose money in the fourth quarter, the rate of losses slowed, allowing it to cut red ink from $50.9 million for 2009 to $21.4 million for 2010.
The net loss for the fourth quarter of 2010 was $4.5 million compared to a net loss of $10 million in the same quarter of 2009, while assets of the one-time $1 billion credit union declined to $718.5 million.
Still, the credit union, which is operating with the assistance of a $22 million capital infusion from ASI, reports continued dark signs. Other Real Estate Owned took a huge jump from September 2010 to December 2010, going from $2.4 million to $9.9 million. And net worth, at just 2.4% a year ago, continues to decline – it would be just under 2% without counting the ASI capital note.
“Silver State Schools Credit Union is on the road to recovery, even during these difficult economic times,” said David Rhamy, president of Nevada’s largest credit union, whose deposits are insured by ASI Inc. “The quarterly trend of rate of loss has steadily improved over the past six quarters since mid-2009. In fact, for the first two months of 2011, the credit union is showing marginal profitability.”
ASI’s exposure to the credit union is enormous, as losses associated with Silver State and the October 2009 failure of Cumorah CU, also in Las Vegas, forced the Ohio-based deposit insurer to charge its 150 credit union members a premium for the first time, for both 2009 and 2010, to replenish it reserves. Several other large ASI-insured credit unions also reported losses for 2009 and 2010.
Silver State, which is under a strict supervisory agreement with state regulators, targeted cost-cutting last year. “With little room to grow in a difficult economy, the credit union focused this past year on curtailing costs and reducing operating expenses by $5 million from the year prior,” Rhamy said. Six underperforming branches were closed, four in Las Vegas and two in Reno. The credit union has renegotiated contracts with vendors and reduced staff to 228, from 262 in 2009.
“While pleased with the continued positive trends,” said Rhamy, “the credit union is cautiously optimistic as the Nevada and national economies are still fragile and a new wave of unemployment and/or budget cuts could potentially slow the recovery.”