Mission Federal Credit Union has had to implement layoffs and other organizational changes in recent months, but the reason for those changes are not what are being alleged in an anonymous letter being sent to media outlets.
Rather, the credit union said the sharp decline in net income it has seen is the result of the same factors affecting the bottom line at other credit unions and is not the result of deeper balance-sheet problems.
An anonymous letter sent to The Credit Union Journal, which appears to be from a disgruntled employee or former employee of Mission FCU, began with the question: "Have you heard that Mission Fed is tanking?" The letter alleges, "Over $11 million dollars of losses due to Centrix and student loans," a "massive staff reduction of 45 people," that "top executive VPs are out on the street with no one running the place," "10 managers have quit in protest," and "now, they are planning to take away our pension too."
"And here is the latest we have heard: a $2 million dollar ATM loss over the past five years. No one caught it," the letter-writer charged.
When apprised of the allegations made in the letter, Michelle Brega, community relations manager for Mission FCU, acknowledged the veracity of parts of what was written, but said most of the contentions were untrue or exaggerated.
"We did have a reduction, but it was 45 positions, many of which were unfilled. Only 14 people were laid off," she said. "It is not true no one is running the place. Ron Martin is still our CEO. He has been here 10 years and will be here for the foreseeable future. All of our senior vice presidents are still here. Two executive vice president positions were eliminated, so two people were laid off."
"No managers have quit in protest," Brega continued. "Some people are leaving because they are retiring. A lot of changes are being made, and some people will decide to stay with Mission Fed, some will decide to move on. We had single-digit growth last year after double-digit growth the year before, so we are taking a look at operations from a business standpoint. But that is not unusual for any credit union. We have plenty of cash in reserve-more than NCUA requires-and we are very financially sound."
As part of its reorganization, Mission FCU will be closing two branches, but it also will be opening two branches in the coming months, Brega said. No changes to the employee pension plan are being contemplated, she insisted.
The ATM loss is an old story, she suggested, and it is not correct to say that no one caught it. "This did occur. A vendor's employee was embezzling, and he made cash pickups at Mission Federal ATMs. This person was caught, found guilty and is serving time."
Mission FCU has had "issues" with indirect loans that were part of the subprime program administered by Centrix, Brega acknowledged, but she said NCUA has asked all credit unions that are involved in the Centrix program to "take a step back" and reconsider their ratios.
An examination of Mission Fed's 5300 Call Reports for December 2004 and December 2005 show the credit union's net income dropped to $12.9 million at year-end 2005 from $22.2 million in 2004. Jim Miller, Mission FCU's CFO, said the primary reason for this decline was the increase in cost of funds.
"Like most credit unions, we are being squeezed on the margins," he said. "Also, we opened two new branches last year, and that requires an investment. This is reflected in net income."
Miller said the allegation that $11 million in loan losses were recorded is incorrect; the figure reflects the allowance for loan losses, and all of those funds were not needed. He said Mission Fed entered sub-prime lending about three years ago, which is the reason the allowance for losses has been raised in recent years. "Our portfolio remains profitable," he declared. "Our delinquencies went up when we got into sub-prime, but not as much as we forecast. And the robust yield has more than paid for it. We had issues with our student loan provider, but have resolved most of those."
"We've taken a specific, strategic look at our operations," Miller continued. "We had one of the highest expense-to-asset ratios of any credit union in the country. Most of our peers are at 250 to 275 basis points; ours has been well over 300 for many years. This is how we improve our efficiency. We are making organizational changes, and people react in different ways. I'm very positive about our future."
