CONCORD, Calif. - Members continued to draw their funds out of ailing Cal State 9 CU at an increasing rate in the first quarter, while losses at the one-time $465-million institution, another victim of the mortgage crisis, continued to grow.
Cal State 9 Credit Union lost another 10% of its deposits, almost $29 million, in the first quarter. This comes after members had drained almost 30%, or more than $100 million, during 2007, according to NCUA.
The regulator is attempting to sell the remnants of the credit union, based in this San Francisco suburb.
First quarter losses were a staggering $53.1 million, after Cal State 9 had a $61.6-million loss for 2007, while delinquencies in the credit union’s home equity loan portfolio rose 38% from the end of the year.
NCUA, which has been running the credit union since last November, said it is negotiating with potential credit union acquirers of Cal State 9 CU, but any deal will require NCUA to assume all of the troubled loans, a liability estimated at more than $100 million.
But some of the prospective buyers have been faced with their own losses, trimming the number of eligible purchasers for the troubled institution.
“NCUA is seeking a resolution partner through an acquisition,” John McKechnie, the agency’s chief spokesman told Credit Union Journal. “We are using the region’s normal purchase and assumption processes to resolve the situation.”
He declined to say how many credit unions have submitted bids for Cal State 9. No timetable has been set for the sale, said McKechnie.
Under a purchase and assumption, reserved for troubled credit unions, a healthy credit union purchases the solvent assets–such as branches, headquarters and member accounts–while NCUA assumes the insolvent assets.
Sometimes NCUA gives the acquiring credit union a cash inducement to make the purchase, as is expected for Cal State 9 Credit Union.
Cal State 9 is one of two troubled credit unions to receive a Section 208 emergency loan from NCUA over the past few weeks, a $100 million assistance package.
