CONCORD, Calif. -
The regulatory action came as losses at the 60-year-old credit union mounted to $45.9 million at the end of the third quarter, from $9.1 million at mid-year.
Located in a suburb of San Francisco, Cal State 9 is the fourth mortgage-related credit union failure in recent months, with more troubles expected to be revealed after NCUA reports third quarter financials for all credit unions in the coming days.
"The credit union," said Carol Chesbrough, the state's interim commissioner of financial institutions, in announcing the takeover, "had impaired capital and had become insolvent."
As is typical with most credit union conservatorships, NCUA removed the CEO of Cal State 9, Jackie Wing, and appointed an interim president, Judith Hurst. Hurst said in a letter to members that her top priority during the conservatosorhip is to protect member assets and restore financial stability.
At the end of the third quarter, loan delinquencies, most of them in the real estate portfolio, soared to $26.1 million, or 7.3%, while loan charge-offs surged to $23.8 million, or 8.9%.
As a result, the credit union's net worth plummeted to just 2%, well below federal limits.
Most of the losses were centered around the credit union's real estate loans, mostly a home equity line of credit program, that was developed about a year ago. Last month, Cal State 9's chief financial officer, Richard Headrick, who developed the program, was terminated, just as the credit union was being cited in a cease and desist order for its real estate lending by state regulators.
The regulators would not discuss the details of the program last week.
The failure follows recent real estate-related failures of $340-million Norlarco CU, and $320-million Huron River Area CU. Another failed credit union, New Horizons Community FCU, also had a large real estate portfolio. All three credit unions were exposed to speculative real estate developments in southwest Florida.
Cal State 9 Credit Union began in 1948 when five University of California employees initially deposited $5 each and were granted the ninth charter for a California state Employees credit union. At one point, the credit union had more than $400 million in assets and more than 28,000 members.
