Bidding Procedure Starts on Cal State 9
TEMPE, Ariz. -- NCUA's bidding process to find a buyer for the failed $339 million Cal State 9 Credit Union of Concord, Calif. was to start in earnest here last week as three Northern California CUs confirmed their possible interest in acquiring the agency-run CU.
Cal State 9, which was placed into conservatorship last November after it got into serious financial trouble with faulty real estate loans, was officially put on the auction block two weeks ago by NCUA as part of a purchase-assumption transaction.
Potential bidders were invited to a meeting in this Phoenix suburb March 12 following notification by NCUA's Region V Director Melinda Love, who posted a letter to Cal State 9 members assuring them that "prospective purchase-and-assumption credit unions have sound financial management and are federally insured" by NCUA.
The three CUs that planned to send reps to the March 12 bidder's conference included $6.7 billion The Golden 1 CU of Sacramento, $4.1 billion Patelco CU of San Francisco and the $1.7 billion Travis CU of Vacaville.
Following past policy similar to the most recent purchase-assumption deal for Norlarco CU of Fort Collins, Colo. bought by Public Service CU of Denver last month, NCUA declined to discuss bidding procedures or identify possible suitors for CS9, as it has become known.
However, California CU officials last week were publicly acknowledging their desire to at least examine the books of CS9 before submitting a formal bid to NCUA.
Based on a preliminary examination, Teresa Halleck, president/CEO of The Golden 1, said Cal State could be a good fit with her Sacramento CU though a staffer dispatched to Phoenix "will be looking at such areas as the CS9's remaining core deposits, cost of funds, interest margin and remaining loan portfolio performance excluding the home equity loans."
Before being taken over by NCUA in November following regulatory action by the California Depart-ment of Financial Institutions, CS9 was running up loan losses and delinquencies, with year-end losses estimated to top $60 million.
Halleck said The Golden 1, with 74 California branches and 670,000 members, could conceivably find CS9's Concord-area branches an attractive expansion move.
Similarly, Patelco said it has potential interest in CS9 and was sending a staffer to Phoenix "though we really don't know if we're interested until we see what's there."
"At this point, anybody participating is there simply to get the information, and our further involvement will depend on what's in the package," said Anita Macias, vice president of corporate planning and communications.
Halleck said she hopes that California banks do not attempt to submit a bid for CS9 as this is a matter being properly, rightfully and routinely handled by NCUA.
"This is a credit union matter and banks don't belong there," declared Halleck. "There are plenty of large credit unions in my state that have the financial capability to take over CS9 and so there's no need for a bank to be making a bid."
In January, an unidentified Colorado bank was reportedly rebuffed by NCUA in possibly submitting a bid to acquire the good assets of Norlarco, which also failed last year following bad loans to Florida real estate developers.
NCUA officials declined any comment about any Colorado bank offers but the president/CEO of the Colorado Bankers Association, Donald Childears, claimed the agency rejected inquiries by the bank though the trade group also demurred on naming the institution. "They just don't want to be identified right now," said Childears.
The question may be moot in California since no bank has suggested interest in submitting an NCUA bid for CS9.
CU Times Correspondent-at-Large Heather Anderson contributed to this story.