Business loans aren’t for everybody, according to the top regulator of Texas credit unions.
The collapse two weeks ago of the $1.6 billion Texans Credit Union tied to faulty, CUSO-linked commercial lending shows that “business loans are not for everyone and that no matter how much advance planning, the risk of making mistakes” can be costly, said Harold Feeney, commission of the Texas Credit Union Department.
Commenting on NCUA’s April 15 conservatorship of the suburban Dallas CU, Feeney said Monday that “mistakes are made when corners are cut” and that apparently figured in Texans’ failure.
Feeney said the credit union’s future lies either in a workout rehabilitation under the NCUA management team or a purchase/assumption deal but that Texans remains a “good franchise” worth saving.
In assessing where Texans went wrong, the state’s chief CU regulator said the Richardson CU had been lending on numerous commercial and real estate ventures and “no matter how good they looked” initially, the underwriting standards were lacking.
Business lending is very “labor intensive and is something that to stay profitable needs management expertise” to stay on top of changing economic conditions, said Feeney.
So far, officials of the Texas Credit Union League said they’ve seen no serious negative fallout from the Texans failure on industry safety/soundness.
“We’ve all known about Texans for a long time and so we considered it an anomaly as compared to the rest of the industry,” said one executive who asked for anonymity.
Some state lawmakers and the Dallas public, may have been “a little more surprised than we were when the actual NCUA conservatorship took place and have asked us questions about what happened,” said the official.
For his part, Feeney said the NCUA team led by Kay Woods, the interim CEO and the former appointed workout head for the $700 million Arrowhead Central CU in San Bernardino, Calif., appears to be on right track in restoring Texans’ financial health.
“But that’s all up to them how long this process might take,” Feeney concluded.