NCUA Says Money Woes Easing at Texans Credit Union
A year after financial troubles led to its conservatorship, Texans Credit Union's fiscal health appears to be improving.
On April 23, the NCUA said the credit union in Richardson, Texas, posted year-to-date net income of $5.87 million and $1.48 billion in assets, up from $1.42 billion at year-end 2011. The agency said Texans’ net worth also improved by 35 basis points during the first three months of 2012, ending the first quarter at 1.42%.
“Our goal for 2012 is to continue efforts to transition Texans to a financially strong credit union,” said Keith Morton, NCUA region IV director and agent for the conservator, in a statement. “For the past year, we reduced expenses, streamlined operations, retooled infrastructure, and began the process of returning Texans to the core credit union business model. We see significant progress in all of these areas, and we are very encouraged by the credit union’s positive financial results for the first quarter of the year.”
Morton said by late 2012 Texans will unveil a new online banking and bill pay platform, a new website, and new financial products.
Earlier this year, it was reported that the credit union received $60 million in subordinated debt to keep it operating. According to Texans’ NCUA Call Report, the lifeline was received in December 2011.
At the time, the credit union’s total equity was negative $46.5 million. It appeared that if Texans had not received the $60 million, it would be declared insolvent with a net worth of minus $44.7 million. Texans has experienced significant losses in net income since 2008, going from negative $44 million to negative $51.5 million at the end of 2009. The downward spiral continued into 2010 with the credit union reporting a $39 million loss at the end of that year. As of December 2011, Texans had a negative $88 million loss in net income.
The NCUA placed Texans in conservatorship April 15, 2011. Much of its troubles stemmed from its commercial lending activity.
When Texans launched Texans Commercial Capital LLC in May 2004, the CUSO quickly took off, generating more than 200 loans totaling $214 million during its first year. Deals financed in the $10 million to $30 million range became the norm. In 2005, half of the $12.7 million profit earned by Texans came directly from the CUSO. Another 40% came from commercial loans purchased by the credit union from Texans Commercial.
Some of the commercial lending CUSO’s troubles may be traced back to early 2005 when three former executives with Texans Commercial filed a lawsuit with claims that included fraud and breach of contract after they were terminated. A Dallas jury eventually ruled in favor of the plaintiffs.
In late 2007, Texans sold its majority interest in Texans Commercial as a means to pursue capital. Texans retained a minority interest in the company and retained 100% ownership of the preexisting loans and the majority stake was sold to a real estate professional. In late 2007 the CUSO’s delinquency rate declined sharply as a result of its commercial and real estate loans. The CUSO eventually pulled back the reins on member business loans. It was later renamed Credit Union Liquidity Services LLC and over the past few years has been in and out of court involving failed commercial real estate transactions.
Besides its lending troubles, Texans had been embroiled in several lawsuits over the years from former credit union executives, mostly with claims of wrongful termination. The credit union has also been in court for suits involving several failed commercial real estate developments.