SAN FRANCISCO - In one of the biggest fire sales ever in the credit union industry Patelco CU took control last week of two medium-size credit unions that have fallen victim to the area’s real estate crash, Cal State 9 CU and Sterlent CU.
In agreeing to purchase the remnants of the two failed credit unions, the $4-billion Patelco added eight new branches in its existing field of membership and 38,000 member accounts. In addition, many of the members of Sterlent, which was chartered to serve local telephone company workers, have long been eligible to join Patelco–originally chartered to serve the Pacific Telephone Co.
“We thought it was a great opportunity,” said Andrew Hunter, president of Patelco, noting that both credit unions are located in Patelco’s service area. “We think this is a good opportunity for their employees and their members; and it’s a good opportunity for our members who will have eight additional branches in our territory.”
Patelco will try to provide jobs for employees at the two failed credit unions. “There will not be mass lay-offs,” Hunter said.
As part of a regulatory purchase and assumption, NCUA assumed the distressed assets of the two credit union failues, mostly under water home equity loans. A portfolio of some $250 million worth of HELOCs held by Cal State 9 was already assumed by NCUA and sold off.
The two deals are unusual for Patelco, one of the most aggressive credit unions, in terms of growth, which hasn’t done a merger since 2000.
Cal State 9, which held almost $460 billion in assets up till two years ago, is one of the biggest credit union failures ever, and was whittled down to just $340 million by the time of the Patelco deal. The credit union reported a $61.6-million loss for fiscal 2007, and a huge $53.1-million loss for the first quarter of 2008, giving it negative equity of $76.7 million.
Sterlent had losses of $4.8 million for 2007, and of $5.5 million for the first quarter of 2008, erasing all of its equity. At the end of the first quarter Sterlent had negative equity of $292,000. A member run on Sterlent’s deposits cut the size of its assets for $125 million to just $95 million at the end.
NCUA is believed to have provided financial assistance to Patelco to induce it to acquire the two credit unions, both with negative equity, but Hunter would not say, as the credit union was required to sign a confidentiality agreement as part of the P&A deal.
In an unusual move, Patelco has been managing both troubled credit unions over the last month, as it completed the purchase and assumption with NCUA.
In a similar arrangement, Alliant CU of Chicago is currently operating Kaiperm FCU, a financially troubled Oakland, Calif., credit union, it plans to acquire soon.
Patelco is not actively shopping for other credit union megers but would be interested if another opportunity arose, said Hunter. “Right now, our plate is full,” he said.
Hunter, who plans to retire next June, said the integration of the two credit unions will not affect his plans. “It will all be done by then,” he said.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
