RIVERSIDE, Calif. — Mark Hawkins, president and CEO of Altura Credit Union, believes the Inland Empire region of Southern California has made a small turnaround.
"I would have to say the worst is likely over, but to talk about recovery in any meaningful way is premature," he said. "It has been a real challenging time. It is great to see politicos across the country talk about things getting better. But as long as things are not getting worse, that is OK with us."
Altura closed Q3 with $889.7 million in assets, with "significant improvement in its bottom line results" compared to the same period last year. Net income was up substantially during the period, totaling $1.8 million. Capital ratio improved to 7.42% in Q3 over Q2. While still reporting a net loss from operations through the first nine months of the year, management characterized the results for Q3 as encouraging.
With that said, Hawkins said he does not expect any improvement this year. "Looking forward to 2010, I think the first quarter will be slow, as first quarters are always slow. Then we will get an unknown cost [from] the NCUSIF. Part that is unknown; we don't know what is going to happen with the corporates. There is a lot of potential liability out there. For the first six months of next year, we don't see it getting better."
Where Hawkins begins to find optimism is in the summer, which he expects to be its best since 2007. "Summertime is our best time of the year. If it comes to fruition, it would be a nice change. We have been hunkered down for better than 24 months, and we expect to see a bit of a thaw by then," he said. "National unemployment is supposed to top out by then. We came into this earlier than the rest of the country, so hopefully we will get out a little early. Consumers have been pretty battered and people are afraid to stick their necks out. The real turnaround probably won't come until 2011."
Altura's market has been significantly impaired by housing prices that "just plummeted." The good news, Hawkins reported, is prices have moderated and sales have increased a little.
"But that might be artificial because prices are so low. Some buyers are paying cash, so buyers that want to finance their loan are being beaten to the punch. When there are 20, 30, 40 offers on a home, the person with cash wins. These are investors. It creates a real challenge. It helps to take inventory out of the market, and ultimately that is a good thing by holding prices steady. But it is the first-time homebuyer that is going to truly stabilize the market."
The Inland Empire - east of Los Angeles County - experienced a significant amount of construction earlier this decade, both residential and commercial. When demand fell off it was a domino effect. Hawkins said there is some construction uptick in Northern California and Oregon in the last month or two, "so hopefully that will start to trickle down to Southern California."
Altura managed to post improving numbers in Q3 through a variety of tools, Hawkins recalled. The credit union pulled back on operations costs "a lot," as it entered into workout loans with its members. The CU has dealt with loan losses of $1.5 million to $2 million each month, in contrast to a historical average of $400,000 in losses per month. "But we still are able to make money, incrementally, as long as we can keep our loan losses under $1.5 million," Hawkins said, adding he expects loan losses in 2010 to be almost identical to 2009.
"But we do have our fingers crossed that the summertime will bring some more activity. If you are not producing loans, you are not making money. We cannot keep watching expenses and cutting costs forever. Right now, the consumer is just too afraid in this marketplace."
