Navy Fed Sailing Toward New Ports

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VIENNA, Va. – Navy FCU is reviewing acquisitions of two troubled credit unions that could give it a foothold on the West Coast or the southern tip of the East Coast, home to two large naval bases.

The two potential acquisitions are USA FCU, a one-time $700 million San Diego credit union chartered to serve employees at the Naval Training Center there, and Keys FCU, a one-time $210 million credit union which serves the naval base in Key West, Fla., the southernmost tip of a 16-mile-long string of islands south of Miami.

Both credit unions are struggling with financial troubles. USA FCU lost $16.8 million in 2009 and $11.7 million for the first six months of 2010, while its net worth declined to 2.8%. Keys FCU lost $4.9 million in 2009, and $5.2 million for the first half of 2010, as its net worth fell to 3.3%.

Officials with Navy Fed declined to comment. But Mary Cunningham, president of USA FCU, confirmed the $41 billion credit union giant is one of the merger partners her credit union is considering. “We are in the process of a search for the right merger partner,” Cunningham said in an e-mail Friday afternoon. “A number of credit unions have been contacted with similar FOMs and experience in operating foreign branches and we expect we’ll have several interested parties due to our exclusive geographical franchise rights in Japan, Korea, and Naval Station San Diego.” She emphasized, however, that USA Fed operates more branches on Army posts than on naval installations, so a decision has not been made yet on a Navy Fed merger. “Several credit unions are solidly in the hunt,” she added.

Despite its strong financial condition, Navy Fed has not been among the handful of credit union giants that have responded to NCUA’s requests to absorb troubled institutions. Despite a $37.4 million second quarter charge for the corporate credit union bailout, Navy Fed reported a $214 million net for the first half of the year, an annualized return-on-average assets of almost 1.1%, and net worth over 9%.

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