SACRAMENTO, Calif. – The $2 billion charge for the failure of WesCorp FCU that is trickling through credit unions in California and Nevada couldn’t have come at a worse time, as the economy in these two hard-hit Sand States continues to decline.
"It’s safe to say it has not bottomed-out yet, if anything, it’s fair to say it’s getting worse and will continue to get worse for the foreseeable future," said Terrin Griffiths, an economist for the California CU League.
Buffered by the state’s deep recession and the extra cost to write–down their WesCorp capital credit unions through the two states continued to report large losses in the first quarter.
North Island CU, a $59 million loss; Kinecta FCU a $51.3 million loss; Wescom Central CU a $41.5 million loss; Star One CU a $32.4 million loss; Kern Schools FCUa $26.4 million loss; California CU a $25.3 million loss; High Desert FCU a $12.9 million loss and Contra Costa FCU an $8.7 million loss for the first quarter.
Also, Redwood CU a $10.6 million loss; Arrowhead Central CU a $9.8 million loss; SchoolsFirst FCU a $9.5 million loss; CoastHills FCU an $8.9 million loss; Kern FCU an $8.7 million loss; Xceed FCU an $8.3 million loss; Patelco CU a loss of $7 million; Premier America CU a $7.1 million loss; Mission FCU a $4.2 million loss and Alliance CU a $4.8 million loss.
A staggering 97% of all federally insured credit unions in California and Nevada are expected to lose money for 2009, according to the California CU League.
And things are expected to get worse, as pressure shifts from the air going out of the real estate bubble to rising joblessness, according to the California league’s Griffiths. "Really, in 2009 the key is job losses; that will be the driving force," she told The Credit Union Journal.
The unemployment rate in California, she noted, rose from 8.7% at year-end 2008 all the way to 11.2% in March. The trend has severely hampered loan demand for all except first mortgage refis.
"What’s most concerning about the job climate is that so many credit unions are based on an employee relationship," noted Griffiths.
Delinquency and charge-off ratios have yet to20level off, signaling still increasing stress on credit unions’ bottom line. And foreclosures are still increasing, according to Griffiths.
The lower loan demand is resulting in a higher savings rate, she added.
