Could the scourge of failing credit unions in the sand states beat last on the wane?
Maybe, say those CEOs who've been in the trenches all year watchingtheir brethren in Nevada, Arizona, Florida and California succumbto in-state and out-of-state takeovers engineered by the NCUA orstate regulators.
“Look, when you have WesCorp and all those charge-offs all year,you have to be concerned about more failures but I think sinceEnsign everyone is getting things under control,” observed WilliamFerrence, president/CEO of the $515 million Boulder Dam CU. BoulderDam is one of the largest Nevada CUs and is faring well aboveaverage with 9% capital and a lid on loan losses.
Ferrence was making reference to the NCUA's corporate assessmentand the agency's Nov. 14 conservatorship of $98 million Ensign FCU.Like three other Nevada failures, capping the state's grim year, anout-of-state suitor, the $772 million EDS CU of Plano, Texassubmitted the winning bid to take over Ensign in a NCUApurchase/assumption deal.
“You have to remember that we have been building reserves for 70years for something like this but who could ever have imagined thesituation could get so serious,” said Ferrence who considered hisCU, on the outskirts of Las Vegas, fortunate. “We sit fat and happyout here in Boulder City.”
Brad Beal, president/CEO of the $783 million Nevada FCU, secondlargest, echoes Ferrence of Boulder Dam that perhaps “we may bebouncing along the bottom” of the cycle now while the Nevadaeconomy “continues to languish.”
The troubled CUs particularly in the Las Vegas market continued todraw sharp regulatory and public scrutiny. For one, the state'slargest, the $883 million Silver State Schools CU, this month wasreporting capital of 4.29% considered well below NCUA standardswith the CU losing $36 million over the first nine months.
The Silver State management has been steadfastly mum all year aboutdiscussing its financial condition, making only briefacknowledgements of loan losses with published reports showingdelinquencies now reaching 6.69% of the total portfolio. Thepresident/CEO of Silver State, David Rhamy, is a past chairman ofWesCorp and the Nevada Credit Union League.
Nevada FCU's Beal added, “Our own delinquencies, foreclosures andloan losses have stabilized over the last few months albeit at highlevels….At least the economic 'free fall' seems to have leveledout.”
And so the lessons learned by CUs for 2009 “are essentially finance101 revisited: capital, liquidity and sound risk management arekeys to survival,” and while banks and CUs suffered “those whostrayed from those principles are suffering most,” maintainedBeal.
The Nevada FCU CEO professed no interest in switching to privateinsurance, though some of the largest CUs in Las Vegas are withAmerican Share Insurance of Dublin, Ohio. Among ASI clients isSilver State.
“There is no substitute for federal deposit insurance,” arguedBeal. He added, “Given that we are surrounded by economicuncertainty, the certainty provided by the full faith and credit ofthe United States government is vital to our members.”
But ASI backers point out there was no run following the Oct. 24purchase and assumption of $147 million Cumorah CU, an ASI clientthat was taken over by another ASI member, the $575 million CreditUnion 1 of Rantoul, Ill.
ASI management in Ohio stated that the transition has gonesmoothly, and there has been no need to increase assessments forany financial or “cosmetic” reason though this was the first majorloss of its kind in years and a jolt to the system.
ASI will post a loss for the year forecast President/CEO DennisAdams. In comparing the firm's plight to the NCUSIF's state, henoted that ASI's equity ratio remains at 1.42% as reported earlierthis month and after accounting for the Cumorah failure.
In addition, on Sept. 25 the $940 million United FCU of St. Joseph,Mich. wound up the successful NCUA bidder for the failed $144million Clearstar Financial CU of Reno, which got into serioustrouble on faulty indirect loans.
That was preceded by the first Nevada out-of-state takeover inAugust by America First FCU of Utah assuming control of CommunityFCU of Las Vegas.
The Nevada failures came about the same time the out-of-state trendwas picking up more sand state steam with the $4.1 billion AlaskaUSA FCU of Anchorage completing a Sept. 29 merger with the failed$85 million Members' Own FCU of Victorville, Calif. That CU waslocated 10 miles from High Desert CU of Apple Valley, Calif., alsoa NCUA takeover deal by Alaska USA in June, each aiding the bid bythe Anchorage CU to expand its reach into the lower 48.
The situation in Arizona, particularly hard-hit Phoenix, wasequally dire for many CUs closing branches and laying offemployees, as they moved one step ahead of regulators.
So far NCUA or industry insiders have not revealed any regulatoryshopping under way by out of-state suitors in Arizona. But therehave been a number of troubled CUs in Arizona with the $1.5 billionArizona FCU capturing the December headlines with its $42 millionloss for the first nine months and the planned closing Jan. 30 ofeight metro Phoenix branches.
The retrenchment underscored Arizona FCU's campaign to fix itsbalance sheet and also signaled the CU's exit from in-storebranching, which once was held as a primary member-growtharea.
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