Nearby Altura CU Surprised By Move; Sees Better Times

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RIVERSIDE, Calif.-The move by NCUA to take Arrowhead Credit Union into conservatorship on June 25 was surprising to many, but perhaps most startling to those running Altura CU, an $881-million institution that shares the "Inland Empire" region of Southern California with San Bernardino-based Arrowhead.

Mark Hawkins, Altura's president and CEO, told Credit Union Journal, "I think we were shocked from the perspective that we thought Arrowhead was beginning to show some improved profitability. We feel as though the last two months have been very good for us. We made about $1.1 million in May, and June will be about a half-million dollars. We are in the same market as Arrowhead, so we thought they could anticipate a slow improvement as well. We thought Arrowhead was going to make it."

Hawkins was quick to add that while he has direct knowledge about Altura's financial condition, he is not in a position to comment on Arrowhead's balance sheet.

"We know us, we don't know about anybody else. You never know what is under the hood, and NCUA is in a better position to judge."

Good News: Unemployment 13.9%!
Still, the green shoots in the local economy reported by Hawkins corroborate many of the assertions made last month to Credit Union Journal by Larry Sharp, Arrowhead's president and CEO for nearly three decades until he was removed by NCUA June 25. Hawkins said the two most important developments are both the employment picture and housing market have improved. Unemployment locally peaked at 15%, but in June it was down to 13.9%.

"That was reassuring and our results seem to support a turnaround," he said. "Home prices are not robust by any means, but there have been some small increases month to month."

Altura's delinquencies are off sharply from their peak, Hawkins continued. On the consumer side the CU was well over 2% at the end of 2009, but he said it has been "right about 1.6%" for the last four months, "so that stability is refreshing."

Altura said it generated approximately $2.2 million in net income during June before the provision expense, which will be $1.55 million. Hawkins said this is just part of the process, although "not the most fun part of the process." However, he continued, the prospect of making money again is "encouraging" based on what the CU has been through the last 24 months.

"We hope to get to a point where we can give the members a better return on investment and reinvigorate the credit union," he declared. "We will continue to be careful in what we do, keep costs down, keep dividends down and restrain growth in shares, but we need help from the economy in terms of employment gain. It doesn't have to happen in a hurry, it just has to happen regularly."

Total Capital Robust
In terms of total capital-net capital plus Allowance for Loan Losses-Altura's levels are higher then they have ever been, Hawkins reported.

"Those monies are still there, they've just been identified and set aside. In all probability some of that money will be lost, but we have been funding our Allowance for Loan Losses at such a level it is more than we would expect to use over a full, 12-month period. We have had bad months, but it ebbs and it flows. If trends continue into 2011, we hope to start repatriating some of that money."

Thanks to the most recent Corporate Stabilization assessment of 13.4 basis points, Altura booked a $1-million charge for June. Hawkins said he was pleased to read a CUNA white paper authored by Bill Hampel, CUNA's chief economist, estimating the NCUSIF premium expected to be announced in a few months will be in the range of six to 10 basis points of insured shares-significantly less than previous estimates (see related story).

"We now expect about a half-million dollars for the second assessment," said Hawkins. "We had budgeted $4 million for the year, so that is found money for us.

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