CHICAGO -- Officials at $5.5 billion Alliant Credit Union say they're not worried about absorbing the loan losses of Oakland-based Kaiperm Federal Credit Union if their proposed merger goes through, because the seemingly odd couple makes a good match.
Alliant, which counted on United Airlines as its single sponsor until expanding to serve SEGs in 2000, is headquartered in Chicago, home to United Airlines. However, the credit union's largest concentration of members is actually in California's Bay Area, said Frank Weidner, senior vice president of member services.
San Francisco International Airport is a major United hub, and the airline's maintenance operations are also located there.
"Year-to-date, Alliant has grown $650 million in assets, so this isn't about growth for us, just a good fit and a win for both groups of members going forward," Weidner said about the $95 million Kaiperm.
Kaiperm's employer-based membership was attractive to Alliant, which chose health care as a target select employee group industry back when it expanded its field of membership.
"We'd been approached by different credit unions looking for a merger partner, and we did look at Cal State 9, but what we like about Kaiperm compared to the others is that it allowed us to strengthen our position to serve multiple SEGs," Weidner said, adding, "some of the other merger opportunities out there are a better fit for community based credit unions."
Kaiperm's financial standing sank quickly during the second half of 2007 and first quarter of 2008. The $95 million credit union wrote off $3.2 million in loans in 2007 and another $1.4 million during first quarter 2008. Indirect outsourced loans were to blame, accounting for $1 million worth of first quarter write-offs and one-third of Kaiperm's loan portfolio.
The credit union has also suffered from delinquent real estate loans.
Rudy Pereira, Alliant's senior vice president for operations and technology, said his credit union determined during the due diligence process that "the majority of [Kaiperm's] loan portfolio is in a manageable condition."
Pereira said Alliant has already signed a management agreement with Kaiperm, and Pereira himself has temporarily relocated to Oakland to fill the interim CEO position; however, Alliant has not provided any monetary support to Kaiperm.
Alliant officials said they hope to have the merger approved and completed by the end of September. The Alliant executive team has never completed an interstate merger before, but Pereira said he doesn't expect the process to take longer than it does in-state. Approval must come from both the NCUA and Illinois Department of Financial and Professional Regulation.