Real Estate Loans, Economy Played Role in First American Takeover
Southern Wisconsin's poor economy and bad commercial real estate loans apparently figured in the Sept. 1 failure of the $137 million First American Credit Union of Beloit, Wis., which was taken over by a Kalamazoo, Mich., CU under the NCUA auspices.
The CU, located on the Wisconsin-Illinois state line and in the heart of a depressed auto manufacturing center, had been ailing for more than a year "and that's obvious when you look at the call reports," said Suzanne Cowan, director of the Wisconsin Office of Credit Unions.
Under an NCUA purchase and assumption transaction, the CU and its four branches were taken over by the $475 million First Community FCU of Parchment, Mich., which last January merged with another troubled CU in suburban Detroit, the $60 million Education CU of Southgate.
It is not known how many other CUs, whether in Wisconsin, Michigan or Illinois, might have submitted bids to the NCUA for First American, but industry officials noted the process remains a fluid and largely secretive.
First American, 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 this June.
Cheryl DeBoer, president/CEO of First Community in Michigan, said in a press release that "times of economic uncertainty in our region can create hardships for even well-performing credit unions."
First Community, which also has roots with 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 particularly by a large and downsized General Motors plant in Janesville. The Beloit area has the highest unemployment in Wisconsin at over 10%.
First American currently serves more than 78,500 members and operates from 16 branch offices, most in southwestern Michigan.
A First Community press release noted an "historic synergy of sorts among the two institutions, since First American Credit Union initially was formed in 1933 by employees of the Beloit Iron Works, a company which manufactured paper-making machinery. First American today operates four branches and is open to members living or working in Rock, Green and Walworth counties in Wisconsin and Winnebago County in Illinois."