BOULDER CITY, Nev. — There is not much of a recovery to speak of yet in this town located 20 miles from Las Vegas. But the credit union here is hopeful of the future.
Bill Ferrence, manager of $500-million Boulder Dam CU, said in Nevada there are few who could pick out signs of a significant recovery so far, despite reports the recessio has ended.
"We see change, we see a little better numbers in certain areas, but they are not things that are going to get anybody excited," he said. "Southern Nevada and California, we are still at the head of the class when it comes to delinquencies and foreclosures."
Still, Ferrence quickly added, he does believe the worst is over. He said those financial institutions that have survived have a plan and have reserved for losses they can foresee.
"We don't know if another shoe is going to fall, and I can't speak for the banks, but the credit unions I am aware of have taken huge steps so they can go into 2010 with a clean slate and some pretty positive potential," he said. "Loan-loss allowances have been killing everybody. If you look at our financial statement it shows we lost $1 million, but we put $4.5 million in loan loss reserves."
Boulder Dam CU is a community credit union for a city of 15,000, and nine of 10 residents are members of the credit union ("That's why we are $500 million credit union in a small town"). It ended October with just short of a 9% capital ratio, which Ferrence was proud of considering the environment.
"We had the worst year in the credit union's history, and we are fine. We have $47 million in reserve. We believe we have addressed potential losses we are aware of by transferring money to the loss account. We don't see anything in 2010 that is like 2009, where things jumped all over everyone without warning. I can't say for certainty that 2010 will be better, and I don't have a crystal ball to predict the future, but I do not believe it will be worse. There are still a lot of foreclosures in the pipeline, and how much that affects prices and the real estate market will dictate what the future holds for us."
Housing prices are the biggest problem in Southern Nevada, Ferrence insisted. He said if property values had dropped 10%, the state would not have the recessionary situation it has now. Instead, prices dropped 30%, 40%, 50% or more in Vegas and Boulder City, which caused extreme pain among consumers. "Homes that were sold for $800,000 are worth half that now, and credit unions are really wishing they hadn't made that loan."
In 2008, CUs could not have foreseen 2009, Ferrence argued, but in 2009, they have better plans in place for 2010. He said management at Boulder Dam CU has looked into the future and estimated what loans it has that are likely to fall into lower value than loan balance, and have already reserved for that. "I'm hoping a lot of them don't get to that point, but we are taking a very proactive stance. Regulators are encouraging institutions to provide for that allowance for loan losses, and if things don't get worse no one gets upset."
Because of a proactive loan loss allowance stance, Ferrence said there are credit unions "that don't look good on paper today, but their future looks strong."
