Despite suffering a $46 million loss in 2008, Texans Credit Union said it is ready to travel the road to recovery.
The credit union ended the year with a net loss from operations of $36 million combined with a one-time deposit insurance fund write-down and assessment totaling $10 million, said Mike Sauer, interim CEO and board member at Texans. Still, Texans maintained a "well-capitalized" net worth ratio of 7.90%. Sauer took the helm earlier this year when David Addison resigned as president/CEO.
"Capitalization is the best indicator of financial soundness," Sauer said. He added, "Texans Credit Union's strong capital position, ample liquidity and conservative underwriting guidelines will allow Texans to weather the current economic cycle."
According to December 2008 NCUA Call Report data, the Richardson, Texas-based credit union had nearly $358 million in member business loans and $216.7 million in construction and development loans. Delinquent loans totaled $68.5 million with charge-offs at $15.4 million.
On top of losses to its commercial loan business, Texans was mired in several lawsuits from several executives with Texans Commercial Capital, now known as Credit Union Liquidity Services LLC, and Texans Insurance Group. The latest legal snafu involved Dallas-based Realty America LLC for alleged claims of a breach of contract on a piece of property in Illinois.
Meanwhile, the $1.7 billion Texans said it and all other federally insured credit unions, learned that a loss to the NCUSIF will require an assessment on credit unions in order to restore the insurance fund to its minimum operating level. The write-down and assessment were the result of actions taken by the NCUA to bolster the corporate credit union system. As a result, Texans "must share in the cost of these actions on a proportional basis in the same manner that banks share in the funding of the banking system's deposit insurance fund."
"The additional loss to Texans attributable to the deposit insurance fund assessment was certainly a surprise and is not related to Texans' operations," said Sauer. "Other credit unions across the country are similarly impacted, and in some cases, experiencing significantly higher assessments than Texans."
A significant factor driving the economic downturn has been attributed to losses experienced in the subprime lending market, according to Texans. Although the credit union said it had no direct exposure to subprime loans, the credit union has taken a direct hit by the economic recession, which has adversely affected its commercial loan portfolio. The most significant factor contributing to Texans' 2008 operating loss was related to increasing its commercial loan loss reserves, the credit union said.
The move now is to increase operating efficiencies and reduce operating expenses. Texans' efforts could be hampered by dire market conditions, which are expected to remain for some time. This year's plans include continuing to originate business and consumer loans, opening two branches, introducing a high rate checking account and further rollout of its image-enabled ATMs.
Sauer said the credit union industry fared better than other financial institutions.
"When the federal government provided relief to United States banks under the TARP plan, credit unions received no federal assistance. In fact, credit unions, unlike other financial institutions, have never received any federal bailout aid and have handled their deposit insurance needs internally within the industry."
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