SAN DIEGO — It appears that losses related to a portfolio of loans purchased from Centrix played a role in steep losses that the $1.9 billion Mission Federal Credit Union experienced in the second quarter of 2006.
According to NCUA's second quarter numbers, some of which the credit union was disputing as of press time, the CU saw its Return on Average Assets drop to zero in the second quarter, even as its total delinquent loan balances dropped from over $21 million in the first quarter to $18.6 million in the second. Even more significant, the CU's balance of loans 12 months or more delinquent jumped from over $560,000 as of Mar. 30 to $2.8 million as of June 30.
Michelle Brega, spokesman for Mission, confirmed that the CU had purchased "several subprime indirect auto loan pools from Centrix in the past" and that delinquencies related to the Centrix portfolio had led the CU to increase its allowance for loan losses from $7.2 million as of Mar. 30 to $14.4 million as of June 30.
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Anna Mendez, the CU's senior vice president for lending said that the delinquencies the CU had experienced were from its Centrix portfolio and that the losses came from the sale of assets, both investments and loans, at a loss because of the change in interest rates.
The losses dropped the CU's income from $3.2 million as of March 30 to just over $27,000 as of June 30. NCUA records show the CU's investment portfolio on June 30 was $30 million (almost $330 million) less than it had been on Mar. 30 ($360 million).
Mendez said that the asset sales were not the result of liquidity needs, but were from "a desire to reallocate those resources to core loan products."
"After a thorough review of organizational strengths and market growth potential, the credit union has sold certain non-strategic assets within its loan and investment portfolios," the CU said in a prepared statement. "These decisions were made in order to reposition certain lines of business while maintaining the credit union's strategic focus on long-term member growth opportunities in consumer and business lending." The NCUA records show the CU lost $8.8 million on "available for sale" securities and listed a loss of almost $5 million in the category "other comprehensive income." Mendez denied that Centrix had done anything to leave the CU holding the bag for the loans, but said that the delinquencies the CU experienced came from the Centrix portfolio. Centrix has been slipping steadily deeper in financial trouble and a columnist for the Denver Post has suggested that the firm my declare bankruptcy in the near future. The firm has denied this.
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