The $1.3 billion Premier America Credit Union has contracted with the NCUA to manage the assets of the seized $318 million Telesis Community Credit Union. Both credit unions are based in Chatsworth, Calif.
The federally insured, state-regulated Telesis was seized March 23 by the California Department of Financial Institutions, which then passed conservatorship authority to the NCUA. The conservatorship put a damper on industry efforts to lobby Congress to lift the credit union member business lending cap, as Telesis failed due in part due to bad business loans. Banking lobbyists jumped at the opportunity to hold Telesis and the previously seized Texans Credit Union, which counts $60 million in subordinated debt as its only form of net worth, as examples of why business lending is too risky for credit unions.
Telesis has been bleeding since it ended 2007 with a $7.7 million net loss, according to financial performance reports posted online by the NCUA. At the time, the credit union had more than $600 million in total assets and 9.61% capital, but a 144% loan-to-share ratio, combined with a 2.37% loan quality index showed signs of trouble ahead. Net worth dropped each year, plunging to 5.51% by year-end 2010. Delinquent loans represented 11.34% of total loans as of December 31, 2010, and increased to 12.25% by year end 2011.
In comparison, NCUA reports show Premier America posted an $11.6 million net loss in 2008, a year in which most California credit unions posted red ink due to Western Corporate FCU’s failure. However, Premier America bounced back, reporting a $2.5 million loss in 2009, but ending both 2010 and 2011 with healthy profits. Premier America has its own delinquency issues – as of December 2011 it reported a 4.38% delinquency ratio, much higher than its peer average of 1.51%. However, it also carries 9% net worth, safely in the well-capitalized category.
It is unclear which Telesis assets Premier America will assume after regulators complete their on-site duties. Telesis was part owner of auto-buying CUSO Autoland, and business lending CUSO Business Partners, both of which the NCUA has said will remain in operation for the time being.