The president/CEO of Chartway Federal Credit Union in Virginia said its New Year's Eve acquisition of a troubled Utah CU underscores the difficulties many CUs have in venturing into big-ticket business lending projects.
The fact is, maintained Ronald Burniske, head of the $1.5 billion Virginia Beach CU, any number of CUs, unlike banking counterparts, lack internal expertise to handle large scale real estate or commercial development endeavors, factors that undid the $311 million HeritageWest FCU of Tooele, Utah.
In a liquidation/acquisition proceeding approved weeks ago by the NCUA, Chartway took over HeritageWest on Thursday after it had recorded $15.9 million in losses for the first nine months with a 2% capital ratio.
Small business lending "for the dentist adding to his practice or the marketing firm wanting to expand" is a natural for CUs like Chartway and others but the risks are too great for "the hanging fruit" or the large real estate deals, the purview of large banks, said Burniske.
In the purchase deal, which was preceded by a Chartway management agreement in effect the last month, the Virginia Beach CU is taking over the five branches of HeritageWest and its 40,000 member base.
The branches are in Salt Lake City, Tooele and nearby counties. Chartway said HeritageWest will operate under its current name, and its CEO, Bruce Bryan, will serve as Regional President of the CU.