Bad loans and a sharp drop in net capital to negative 4% figured in the failure last week of the privately insured, $38 million USA One Credit Union in Matteson, Ill., it was reported Monday.

The $681 million Credit Union 1 of Rantoul, Ill., took over USA One in a purchase-assumption deal arranged through American Share Insurance Inc., the private carrier named as liquidating agent by the state regulatory agency.

“At one point USA One did have 10% net worth but over the last three to five months they have had consumer loan issues and found it difficult to recover,” said Dennis Adams, president/CEO of ASI in the Columbus, Ohio, suburb of Dublin.

It was the first ASI failure in nearly a year following a similar transaction in California in which the former Sacramento District Postal CU was taken over by Southern California Postal CU.

On USA One, an ASI press release noted that Credit Union 1 had purchased “all of USA One's loans and other assets and assumed all of its share deposit account liabilities effective May 31.” USA One, with 8,000 members, serves a market base in Matteson, a south Chicago suburb.

Credit Union 1 also has member penetration in the Chicago area, said Adams. The downstate credit union has been involved in other credit union takeovers, including Elgin City Employees in Illinois and Cumorah CU of Las Vegas.

In its press release, ASI said the Illinois regulator ordered USA One closed “due to inadequate capital.”

Adams said USA One's allowance for loan losses had sharply lowered its capital ratios in recent months forcing the P/A transaction.

“In this kind of economy, loan losses continue to be problem for any number of small credit unions” Adams said, adding that includes NCUA- and ASI-insured institutions.

The Credit Union 1/USA One deal came just a day before the NCUA on Friday said the $2.3 billion Premier America CU of Chatsworth, Calif., would buy the liquidated assets of the conserved Telesis Community CU, also of Chatsworth.

Instant Insights /

USA One Credit Union Liquidated in Suburban Chicago

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