Reversal Of Fortune: Problem CUs Move Back Into The Black

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PASADENA, Calif. – In what poses at good news for both its members and the credit union movement as a whole which pays to resolve failed credit unions, Wescom CU reported net income for 2010 today of $2.7 million, its first profit since 2006.
Wescom, which wracked up $198 million of losses in 2007-2009, is one of several large problem credit unions that are reporting profitable years for 2010 or big declines in losses, as massive charge-offs over the past three years have squeezed much of the bad loans out of the system. 
San Diego’s North Island Financial CU, which had a $52.4 million loss for 2009, also broke out of the red last year to the tune of an $11.5 million net. So did Schools Financial CU, which reported a $9.2 million 2009 loss, had a slim $1.1 million net for 2010. AltaOne FCU reported a $3.4 million net last year, after an $8.8 million loss for 2009. 
The improved financial performance by these California credit unions comes as an improving economy has allowed them to vastly reduce their loan loss provisions. Wescom CU, for example, cut its loan loss provisions in half to $47.5 million at year-end 2010.
“I think in some sense they’re making the turn,” said Tun Wai, chief economist for NAFCU, who also cautioned that many barriers to profitability remain for credit unions heading into 2011, including anemic loan demand and the certainty of a NCUA assessments for both the corporate credit union bailout and a National CU Share Insurance Fund premium.
Still, the early numbers coming out of some of the Sand States credit unions are promising.
Desert Schools FCU, the Phoenix credit union giant that had an $81.3 million loss for 2009, trimmed its loan loss provisions by $56 million, helping cut losses to $18.9 million for 2010.

Kern Schools FCU in Bakersfield, Calif., cut its losses from $406 million for 2008 to $12.8 million for 2010, after cutting its loan loss reserves in half to $27.5 million. 

PASADENA, Calif. – In what poses at good news for both its members and the credit union movement as a whole which pays to resolve failed credit unions, Wescom Central CU reported net income for 2010 today of $2.7 million, its first profit since 2006.

Wescom, the one-time $4 billion credit union which wracked up $198 million of losses in 2007-2009, is one of several large problem credit unions that are reporting profitable years for 2010 or big declines in losses, as massive charge-offs over the past three years have squeezed much of the bad loans out of the system. 

San Diego’s North Island Financial CU, which had a $52.4 million loss for 2009, also broke out of the red last year to the tune of an $11.5 million net. So did Schools Financial CU, which reported a $9.2 million 2009 loss, had a slim $1.1 million net for 2010. AltaOne FCU reported a $3.4 million net last year, after an $8.8 million loss for 2009. 

The improved financial performance by these California credit unions comes as an improving economy has allowed them to vastly reduce their loan loss provisions. Wescom CU, for example, cut its loan loss provisions in half to $47.5 million at year-end 2010.

“I think in some sense they’re making the turn,” said Tun Wai, chief economist for NAFCU, who also cautioned that many barriers to profitability remain for credit unions heading into 2011, including anemic loan demand and the certainty of a NCUA assessments for both the corporate credit union bailout and a National CU Share Insurance Fund premium.

Still, the early numbers coming out of some of the Sand States credit unions are promising.

Desert Schools FCU, the Phoenix credit union giant that had an $81.3 million loss for 2009, trimmed its loan loss provisions by $56 million, helping cut losses to $18.9 million for 2010.

Kern Schools FCU in Bakersfield, Calif., cut its losses from $406 million for 2008 to $12.8 million for 2010, after cutting its loan loss reserves in half to $27.5 million.

 

 

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