COLORADO SPRINGS, Colo. -- Ent Credit Union here is awaiting approval from the NCUA of its merger with US Alliance CU of Denver after its members adopted the board and management's recommendation by a 9-to-1 margin.
Only 600 members out of the almost 7,000 membership voted on the merger, which was tabulated and formally announced at a special membership meeting on April 3 at the credit union.
US Alliance's financial condition at year-end 2007 showed a weakening state, with a return on assets ratio of negative 5.45% and a dollar loss of $3.5 million, according to NCUA data. Delinquencies as of December 2007 was 13.45% and net worth fell from 12.63% in 2006 to 7.67% in 12 months. Of $7.5 million in delinquent loans, $7.2 million was in real estate.
The first quarter of 2008 indicated a further slide in the financial condition of the credit union.
Net worth dropped to 0.82%, ROA was negative 1.60% and the loss for the quarter was $236,000.
Delinquencies stands at 14.26%.
Assets are $59.2 million, but the allowance for loan and leases losses is $8.1 million.
The CU has steadily put aside more for potential losses each quarter, having set aside $758,051 in March 2007, then just over $1 million in June 2007 (a 43% spike), $1.5 million in Sept. 2007 (a 34% spike) and $8 million at year-end (a 454.5% increase).
But Ent CU Senior Vice President of Communications Jim Moore told Credit Union Times that US Alliance's operating philosophy is close to theirs, just not the losing money part, and its two downtown Denver branches are valuable locations.
"We've wanted good branch locations there for a long while," said Moore, "and we made a few passes, but found the cost of buying the real estate and opening our own too high." Moore said that US Alliance has a strong, if small, membership base. "With our strength we can help them with added services and benefits," he said.
Moore said that the losses suffered by US Alliance were not a big deterrent and would not have a severe impact on its own bottom line. No carve out of bad loans or other accommodation from regulators entered into the negotiations, he said.
He called the merger a very friendly one, with initial conversations starting in late 2007. "It's pretty much a straight-up merger and we hope to hear it's been approved very soon," said Moore.
Calls to US Alliance CEO Yun Hui Kehoe were not returned.
--cburger@cutimes.com
