Long, Winding Road to Recovery
At the close of 2011’s second quarter, a handful of credit unions located in the sand states, where a teetering economy has made it most difficult for financial institutions to thrive, shared hopeful bits of news: net worth ratio improvements, net income increases, loan loss reductions and operating expense cutbacks.
But there’s still a long road to recovery ahead for CUs in the sand states of California, Nevada, Arizona and Florida, say several credit union CEOs based in those regions. And another state, Utah, has become the newest member of the sand state club. In February 2010, Utah League of Credit Unions President/CEO Scott Simpson declared Utah a sand state, stating it had caught up with the bankruptcies and foreclosures the original four states had suffered.
Another California credit union, the Riverside-based, $693.6 million Altura Credit Union, shared a second-quarter success story: a net gain of $3.1 million following a first-quarter net loss of $1.6 million, plus a net worth ratio of 6.26%, an increase from the second quarter of 2010’s net worth ratio of 5.23%. Altura CU previously suffered a net loss of $4.1 million in the second quarter of 2010 and a number of layoffs and branch closings, the CU said.
According to Penrod, credit unions in the Golden State, where unemployment is at 12%, “appear to be headed back to sustainable profitability.” He cites a 50% decrease in provisions for loan losses from the second quarter of 2010 to the second quarter of 2011, which led to a 160% improvement in net income. Additionally, delinquencies dropped by 37 basis points to 2.04% and charge-offs by 46 basis points to 1.38%. Total membership has fallen, however, and the state’s CUs experienced loan losses of more than $3.2 billion.