MANHATTAN BEACH, Calif. – Kinecta FCU, a one-time $4.4-billion credit union giant that returned to the black last year after two miserable years and $126 million in losses, fell back into the red in 2011 to the tune of $30.6 million, slowing plans for its combination with nearby NuVision FCU.
The Kinecta losses have revised the time frame for one of the biggest ever credit union mergers, according to Roger Ballard, the CEO of NuVision, who has been running Kinecta as well for the past year. “In all candor, we want to see some improvement in our financial performance,” Ballard told Credit Union Journal. He expressed confidence the merger, first announced in June 2010, will go through, but probably not until 2013.
The proposed combination will create a new credit union giant of about $4.4 billion and 300,000 members, bearing the Kinecta name and headed by Ballard. It would be the second-largest credit union merger, behind only last year’s combination of California’s Addison Avenue FCU and Oregon’s First Tech CU to create a $5.1-billion credit union.
The return to the red for Kinecta follows a healthy $14.6 million net for 2010, after losses of $71.3 million for 2009, and losses of $54.7 million for 2008.
The major reason for the decline in Kinecta’s performance, according to Ballard, was the performance of the credit union’s 35-state wholesale mortgage business, for which the credit union wrote down the value of its mortgage servicing rights by $19 million. Ballard hopes Kinecta can recapture some of the lost value over time, maybe as much as $10 million, as the mortgage market improves going forward. Lower mortgage originations among its wholesale partners also ate into Kinecta loan revenues.
NuVision, a $1.2-billion Huntington Beach credit union, broke back into the black for 2011 to the tune of $2.7 million, after three years of losses. Ballard said he is confident NuVision will maintain its momentum and profitability in 2012.
Ballard, who noted that net worth for both credit unions remains at healthy levels – 10.6% for NuVision and 7.1% for Kinecta – said his staff is working on collaborative efforts between both credit unions and is working with NCUA to further the merger bid.
