OAKLAND, Calif. — Kaiperm Federal Credit Union here has lost $2.1 million in the first quarter of 2008 and has a return on assets of close to negative 9%, making for a troubled outlook for recovery in a down economy and slumping housing market. But Credit Union Times has learned that Alliant Credit Union, headquartered in Chicago, has offered a proposal to merge with Kaiperm.

The $96 million assets Kaiperm has 18,000 members, primarily employees of Kaiser Permanente, their family members and health plan members, some twenty or so select employee groups and several community groups. Alliant Credit Union is the eighth largest CU in the country with assets of $5.5 billion and 212,000 members.

Kaiperm charged off $3.2 million in loans at year-end 2007 and $1.4 million in the first quarter of 2008, $1 million of which were indirect loans. KFCU set aside $3.4 million for loan and leases losses for the first quarter.

Last year, the CU lost $3.8 million for a return on assets of negative 3.78%. Kaiperm's delinquency for all loan types in the two to six months category is $3.2 million. Of that amount, about $1.9 million is in real estate (first-lien adjustables, HELOCs and real estate other).

The delinquency ratio is 3.54% and the charge-off ratio is high at 6.42%. Kaiperm charged off real estate loans and lines of credit at year-end 2007 of $980,529 and in the first quarter wrote off another $942,011. It began to write off loans in Sept. 2007, starting with $75,000, after posting zero write-offs in the first two quarters of the year.

The credit union has a large amount of indirect outsourced loans, which begs comparison with the ailing Cal State 9 and Sterlent credit unions. Of the $90.6 million in loans outstanding, $28.1 million come from indirects, making for 31% of its total outstanding loans. That category grew substantially from year-end 2007, as it went from $16.7 million to more than $28.1 million, a 69% leap.

First-quarter figures indicate that despite charging its members particularly high rates on auto loans–the new-car rate is 11.33% on 830 loans, for a value of $17.2 million, and the used-car rate is 11.53% on 1,142 loans, for a value of $16.5 million. While delinquencies remain high, Kaiperm wrote nearly $13 million in new- and used-car loans in the first quarter.

Alliant Credit Union serves employees and retirees of United Airlines and select business affiliates, employee groups, qualifying communities, family members and domestic partners. It regularly provides high dividend payouts and low loan rates. Alliant's 2007 annual report cites an analysis conducted by the NCUA's Economics and Statistics Department that found benefits are equivalent to $803 per member, or $1,526 per member household, for doing business with Alliant. Its member satisfaction reached a high of 97.1% for the year, improving on the 2006 level of 96.4%. It paid share dividends exceeding $172 million and maintained an average dividend of 4.85% APY throughout the year.

Joe McGowean, director of marketing and member communications for Alliant Credit Union told Credit Union Times that prospects for a merger were being considered and were still subject to further due diligence and discovery. “We are hopeful for a consummation of this deal because it will benefit both the members of Kaiperm and Alliant,” said McGowean. He added that he was not able to discuss further details but said that Alliant already has a considerable presence in the San Francisco area and in Colorado and Virginia as well.

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