The California Department of Financial Institutions liquidated the $301 million Telesis Community Credit Union of Chatsworth, Calif., June 1 and appointed the NCUA as liquidating agent. The $1.3 billion Premier America Credit Union of Chatsworth, Calif., which had been managing Telesis since mid-April, purchased and assumed Telesis’ members, deposits, core facilities and consumer loans from the regulator.
The NCUA retained Telesis’ CUSO shares, Public Affairs Specialist John Zimmerman told Credit Union Times. Zimmerman said he did not know what plans the agency has for the seized assets.
In a release, the California DFI said it made the decision to liquidate Telesis and discontinue its operations after determining the credit union was insolvent and had no prospect for restoring viable operations on its own. The DFI placed Telesis into conservatorship March 23. Telesis is the fifth federally insured credit union liquidation in 2012.
According to NCUA financial performance reports posted online, Telesis recorded a $13.6 million net loss during first-quarter 2012, fueled by more than $8 million in nonoperating expense and a $6 million provision for loan losses. Charge-offs increased from 2.50% of average loans in Dec. 2011 to 10.58% as of March 31. The loan quality ratio for the first quarter was a whopping 20.67%.
Those expenses decimated Telesis’ capital, completely eliminating more than $6 million in retained earnings and dropping regular reserves from $8.3 million to $3.8 million. The credit union’s resulting net worth fell to 1.27% and ROA was negative 17.70 as of March 31.
In contrast, Premier America improved its net worth during the first quarter 2012 to 9.35%. However, loan delinquencies continue to hamper the credit union, as delinquencies are slightly above 4% and charge-offs for the first quarter numbered 1.87% of average loans. Both numbers are significantly higher than peer averages. Premier America also reported lower-than-peer ROA for the first quarter, at 0.71%. However, the credit union reported a healthy $2.3 million net profit for the first quarter.
Premier America President/CEO John Merlo did not respond to calls requesting comment.
In CUSO business, Telesis had a nearly $4 million investment in CU Vehicles LLC, known as Autoland, which it purchased in 2007 with two other CUs. Telesis also had an aggregate cash outlay of $12.5 million and a $2.3 million loan to Autoland.
Telesis was one of 17 credit union owners of CU Business Partners LLC, a business lending CUSO. As of March 31, Telesis had a $4.5 million investment in that organization. Telesis had also invested in CO-OP Financial Services, Credit Union Direct Lending, Madison Development Corporation and Marketing Partners Inc.
Originally chartered in 1965, Telesis’ field of membership at the time of liquidation included various employer groups and individuals who live, work, worship or go to school in the San Fernando and Santa Clarita Valleys or in Ventura County.
Premier America, which was established in 1957 as Litton Employees Federal Credit Union, had nearly 64,000 members before the purchase. Its field of membership includes multiple SEGs, as well as a community FOM that mirrors Telesis.