TAMPA, Fla. – For Suncoast Schools FCU, coming off a $76.7 million loss for 2008, an additional charge of $30.6 million for the corporate credit union bailout was unwelcome, especially as it cut net capital for Florida’s biggest credit union to just 6.05%, barely above the so-called well-capitalized mark.
The special charge for the corporate bailout helped push the $5.8 billion into the red to the tune of $53.6 million for the first quarter. Even without the special charge, Suncoast School’s first quarter loss would have been $23 million, not much better than the fourth quarter’s $24.8 million loss.
The 6% mark–under which NCUA requires credit unions to develop a capital restoration plan–prompted the credit union giant to delay reporting additional losses of $9 million on its capital in WesCorp FCU, which would have caused it to breach the 6% capital mark, according to Tom Dorety, president of Suncoast Schools. He plans to report the WesCorp charge in the second quarter.
Dorety, who is battling one of the worst real estate markets in the country–Florida’s Gulf Coast–said his capital plans include continuing to shrink the credit union’s assets, which maxed out at $6.2 billion last June. The reduction in assets helps maintain the credit union’s capital ratio. Suncoast Schools has been doing that by paying off loans with the Central Liquidity Facility and the Federal Home Loan Bank of Atlanta, and by shrinking deposits. Over the last year the credit union has allowed $250 million in deposits to run off–$50 million in the last month alone, according to Dorety.
"We fight that, though," he said. "We don’t want to run it all off. It’s a reputation risk–it’s a balancing act."
Dorety downplayed the likelihood his credit union will fall below the 6% capital mark. "I don’t believe it’s the end of the world," he told The Credit Union Journal. "You’re going to see a lot of people fall below 6%."
He attributed his credit union’s problems to the continuing travails in the region’s real estate market, and other consumer loans, prompting him to continue to put new sums aside for loan losses allowance–$18 million in March.
"It’s the same thing that’s been going on. Nothing new for us. All consumer debt," said Dorety. He said they hope they have seen signs of the local real estate market bottoming out, but was reluctant to make that call.
