Stressing that “not all credit unions are suffering,” a group ofLos Angeles CUs did media damage control after an article in alocal business journal highlighted poor credit unionperformance.

The CU effort was unusual considering that so much of themainstream and viral media this year has put CUs in a favorablelight compared to banks.

The article that got a rise out of the credit unions appeared inthe Aug. 16 Los Angeles Business Journal and was titled“Credit Unions Come Up Short.”

In one rebuttal, Robert Ballard, CEO of the $3.5 billion KinectaFCU of Manhattan Beach, acknowledged that the industry is hardlyimmune to the recession's impact. But he contended that the NCUAassessment and the corporate crisis distorted a positive CUpicture.

“Were it not for these actions, Kinecta would be considered'well capitalized' under National Credit Union Administrationdefinitions,” Ballard wrote in a letter to the editor of thebusiness journal.

Echoing Ballard, Nader Moghaddam, president/CEO of the $710million Financial Partners CU of Downey, said the assessments haveput a damper on capital and earnings. However, he said, barring “adouble dip recession we see income improvement though 2010.”

Moghaddam's CU has already recorded $1.1 million in first halfincome and has sharply reduced delinquency ratios, he said.

There's no doubt that California CUs have been “on a roughjourney,” but Financial Partners “was early in and early out” whenit comes to the bad loans, Moghaddam said.

Like other CEOs, Moghaddam took issue with the way the articlepainted all CUs with the same negative brush as overextendedcommunity charter CUs. “I think you have to go behind the headlinesto see a realistic picture,” he said.

In the article, consultant Tom Glatt Jr., a CU adviser and theson of the former president/CEO of Realtors FCU, was quoted assaying that many California CUs “[got] into markets that theydidn't immediately understand, and that led to some poordecisions.”

Gary Perez, CEO of the $345 million USC Credit Union, calledGlatt's observation an “overstatement” considering the successfulcommunity charter operations throughout the state.

USC concentrates on serving its college base and lost heavilywhen the government pulled the plug on its student loan program.The CU retains a community charter but has kept it on the shelf forstrategic reasons, Perez said.

“We did not feel we had the expertise and the capital to pursuecommunity charter expansion but we do reserve the right toimplement and exploit it if one day we find it useful,” hesaid.

In discussing CU financial woes, the Los Angeles BusinessJournal article mentioned the case of Arrowhead Central CU. Thecredit union collapsed on June 25 and was seized by the NCUA, andtop executives were charged with reporting inaccurate financialdata.

The article also recounted Kinecta's $71 million loss in 2009and its capital ratio at 6.83%. “They went out of their way to tryto serve the broad population of L.A. County,” Glatt said of thecredit union. “Their exposure, when the downturn came, probably hitthem a lot harder than it did most institutions.”

The article noted that Kinecta's capital ratio “is set to jumppast 10%” once it completes a merger with NuVision FCU later thisyear.

In his letter to the editor, Ballard, the CEO of Kinecta, toutedthe CU's recent improvement, with year-to-date profit reaching $3million.

“The number of individual credit unions may continue to decreaselocally and across the country,” Ballard wrote. “However, throughstrategic mergers and sustained positive credit union performance,consumers and businesses will enjoy even greater access to qualityfinancial services.”

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