Faulty real estate loans and southern Wisconsin's high unemployment were key factors in the failure Wednesday of the $137 million First American CU and its subsequent FCU takeover, the state's top regulator said Thursday.
The Beloit Wisconsin CU was taken over after the failure by First Community FCU headquartered in Parchment, Mich.
Located on the border between Illinois and Wisconsin, First American had been on the NCUA and state watch list of troubled CUs for years "and that's obvious when you look at the call reports," said Sue Cowan, director of the Wisconsin Office of Credit Unions.
The CU, chartered in 1933, had a member base tied to a paper manufacturing firm. It lost $5.6 million in 2009 and $1.1 million in the first six months of this year. Its net worth ratio had dropped from 6.09% in June 2009 to 3.87% by June.
Last January First Community, under NCUA auspices, had merged another troubled CU in suburban Detroit, the $60 million Education CU of Southgate. It was unknown how many other large or medium sized CUs, whether in Wisconsin, Michigan or Illinois, might have submitted bids to NCUA on First American but industry officials noted the process remains a fluid one.
For its part, Cheryl DeBoer, CEO of First Community, noted in a press release that "times of economic uncertainty in our region can create hardships for even well performing credit unions."
First Community, whose roots also date to a paper manufacturing sponsor, said the merger would "bring regional strength, while preserving local service to the current 17,500 members of First American Credit Union."
The CU maintains branches in Beloit and Janesville, Wis. and another in Rockton, Ill., all areas which have seen huge layoffs among automotive plants. The Beloit area now is understood to have the highest unemployment in Wisconsin at over 10%.
First Community currently serves more than 78,500 members and operates from 16 branch offices, most in southwestern Michigan.