Stressing that “not all credit unions are suffering,” a group of Los Angeles CUs did media damage control after an article in a local business journal highlighted poor credit union performance.

The CU effort was unusual considering that so much of the mainstream and viral media this year has put CUs in a favorable light compared to banks.

The article that got a rise out of the credit unions appeared in the Aug. 16 Los Angeles Business Journal and was titled “Credit Unions Come Up Short.”

In one rebuttal, Robert Ballard, CEO of the $3.5 billion Kinecta FCU of Manhattan Beach, acknowledged that the industry is hardly immune to the recession's impact. But he contended that the NCUA assessment and the corporate crisis distorted a positive CU picture.

“Were it not for these actions, Kinecta would be considered 'well capitalized' under National Credit Union Administration definitions,” Ballard wrote in a letter to the editor of the business journal.

Echoing Ballard, Nader Moghaddam, president/CEO of the $710 million Financial Partners CU of Downey, said the assessments have put a damper on capital and earnings. However, he said, barring “a double dip recession we see income improvement though 2010.”

Moghaddam's CU has already recorded $1.1 million in first half income and has sharply reduced delinquency ratios, he said.

There's no doubt that California CUs have been “on a rough journey,” but Financial Partners “was early in and early out” when it comes to the bad loans, Moghaddam said.

Like other CEOs, Moghaddam took issue with the way the article painted all CUs with the same negative brush as overextended community charter CUs. “I think you have to go behind the headlines to see a realistic picture,” he said.

In the article, consultant Tom Glatt Jr., a CU adviser and the son of the former president/CEO of Realtors FCU, was quoted as saying that many California CUs “[got] into markets that they didn't immediately understand, and that led to some poor decisions.”

Gary Perez, CEO of the $345 million USC Credit Union, called Glatt's observation an “overstatement” considering the successful community charter operations throughout the state.

USC concentrates on serving its college base and lost heavily when the government pulled the plug on its student loan program. The CU retains a community charter but has kept it on the shelf for strategic reasons, Perez said.

“We did not feel we had the expertise and the capital to pursue community charter expansion but we do reserve the right to implement and exploit it if one day we find it useful,” he said.

In discussing CU financial woes, the Los Angeles Business Journal article mentioned the case of Arrowhead Central CU. The credit union collapsed on June 25 and was seized by the NCUA, and top executives were charged with reporting inaccurate financial data.

The article also recounted Kinecta's $71 million loss in 2009 and its capital ratio at 6.83%. “They went out of their way to try to serve the broad population of L.A. County,” Glatt said of the credit union. “Their exposure, when the downturn came, probably hit them a lot harder than it did most institutions.”

The article noted that Kinecta's capital ratio “is set to jump past 10%” once it completes a merger with NuVision FCU later this year.

In his letter to the editor, Ballard, the CEO of Kinecta, touted the CU's recent improvement, with year-to-date profit reaching $3 million.

“The number of individual credit unions may continue to decrease locally and across the country,” Ballard wrote. “However, through strategic mergers and sustained positive credit union performance, consumers and businesses will enjoy even greater access to quality financial services.”

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