Ent FCU Absorbs US Alliance, but Loan Losses Will Likely Be Charged Off
COLORADO SPRINGS, Colo. -- Ent Federal Credit Union here has now finalized its merger with Denver's troubled US Alliance Credit Union following US Alliance members' approval of the merger by vote at a special meeting in early April. The merger had already won the stamp of approval from both CU boards, the Colorado Division of Financial Services and the National Credit Union Administration.
Jim Moore, senior vice president of Ent told Credit Union Times that, "we're taking the portfolio as it exists. There's been no separate deal, and nothing is going to NCUA." Moore was referring to the sale of home equity loans prior to the purchase and acquisition of Cal State 9 Credit Union in Concord, Calif., by San Francisco-based Patelco Credit Union, where a portfolio of delinquent HELOC loans was sold before the deal was consummated.
"They [US Alliance] reserved significant amounts in their loan loss reserves at year-end," allowed Moore. According to NCUA filings, US Alliance then had assets of just over $59 million and reserved $8 million for losses, a 454.5% change from the previous quarter, when the CU set aside only $1.45 million. For the quarter recently ended in March, the loan loss reserve was a tad higher at $8,10 million. US Alliance had a net income loss of $236,680 at the end of March, but as Moore indicated, the bulk of losses were taken at year-end, when US Alliance posted a net income loss of $7.7 million.
The CU has had a negative return on average assets as far back as March 2007, and its total of delinquent loans (all types) grew steadily throughout the year, starting at just over $1 million in March, $5.5 million in June, $7.4 million in Sept., and closing the year at $7.57 million. The March 2008 quarter loss was posted as $7.75 million.
The bulk of those loan losses are first mortgage fixed-rate and hybrid balloons of greater than five years' term. But they appear to be from participation loans, as the amount posted for delinquency in that category at year-end was $7.22 million and for March 2008 was $6.87 million. US Alliance's net income for the first quarter of this year was negative $236,680 and its undivided earnings are negative $3.27 million.
Ent President/CEO Charles Emmer said, "US Alliance has a long history of exceptional member service and community support and we look forward to partnering with them to continue this tradition of excellence."
Ent has a community charter and is the largest credit union in Colorado and provides a full range of financial services through 24 service centers, online and telephone banking, a call center, business banking and a mortgage loan center. Ent is free to serve residents of El Paso, Teller, Denver and Pueblo Counties as well as portions of Adams and Arapahoe Counties east of Denver.
"We fully assessed the financials and feel we have the strength to see it out," said Moore. "Our track record is very good and we believe there is significant potential for growth here."