SAN DIEGO – Many large credit unions recording enormous year-end losses managed to keep their capital ratios comparatively high.
The $4.2 billion Kinecta Federal Credit Union ended the year with a 7.64% capital ratio, not far off the institution's 8% ideal, despite recording a historic $44 million net loss and setting aside nearly $83 million in loan loss provisions.
CFO Karen Christensen said she reduced assets by $190 million during the year to alleviate capital pressure, selling off some existing loans and cutting back on new loan production.
"Going into 09, our cost structure will be about $9 million less than in 08," she said. "Our 09 plan is based around our loan loss reserves, and even given the current economy, we think we'll be profitable in 09, and should get back to an 8% capital ratio by mid-year."
Keith Pipes, executive vice president of finance and financial services for the $3.2 billion Wescom Credit Union, said he shed some assets on his balance sheet the credit union had previously leveraged for growth, ALM and credit risk. Wescom ended the year with a capital ratio just above 7% despite taking a $53 million net loss for 2008, and setting aside nearly $83 million in loan loss provisions.
"Thankfully, we weren't forced into a fire sale situation to manage the balance sheet," Pipes said.
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