Leaders of the $246 millionSan Diego Metropolitan Credit Union were not thrilled with aconsent order handed down from the California Department ofBusiness Oversight, but CEO Stan Abrams told CU Times hewas nonetheless relieved to have finally received it.

“You need to understand, there were other consent ordersbefore this one. Orders that we fulfilled, every single one ofthem,” said Abrams, CEO of the San Diego-based credit union. “We startedout with a very big one that we worked to resolve and as weresolved it, it was replaced by smaller ones as we dug ourselvesout.”

The four-point, May 13 order required the credit union to develop, adopt and implementa plan to materially reduce the risk in its troubled debtrestructures portfolio, and fully document and support that themember has the ability to repay on future TDRs. The

The order also required the 16,000-member credit union tocontinue working to reduce the concentration in its mortgagerelated loans and investments.

San Diego Metropolitan also had to retain leadership theregulator considered qualified to take these actions and commit tomonthly reports to the regulator on its progress, according to theorder.

Abrams said the credit union had already taken action to reducethe risk in the TDR portfolio and had continued to reduce itsconcentration in mortgage loans.

Abrams, who took on the CEO job in 2010, explained the housingfinance crisis and Great Recession hit San Diego Metropolitanespecially hard. The now community chartered credit union had beenoriginally chartered in 1934 for the employees of San Diego cityand county governments.

Current employees, retirees and their families remained the coreof the credit union's membership and had been hit hard when cityand county government had cut retiree benefits and laid-offemployees in the wake of the housing crisis, Abrams said.

San Diego Metropolitan's heavy concentration in mortgages andmortgage related loans also imperiled the credit union as thehousing market tanked, Abrams explained. The credit union sold itscredit card portfolio to an agent issuing bank before the economiccrisis hit and also exited what had been a fairly active indirectauto lending program. Those two actions left San DiegoMetropolitan, at one point, with up to 80% of its assets inmortgages and mortgage related loans, Abrams said, right about thetime the bubble burst in the housing market.

San Diego Metropolitan has been fighting its way into a betterfinancial situation ever since, Abrams said. Broadening the assetbase has been high on the list, he said, adding the credit unionhad restarted its indirect auto lending in 2010, shortly before hearrived. The credit union has also started offering a credit cardas well. San Diego Metropolitan has also been steadilyselling off its mortgage loan assets, he said.

“We have been working hard for quite a few years now and wethink we are turning the corner,' Abrams said, and the creditunion's call report numbers support that statement.

Even though the credit union's net worth at one very bad pointdropped to 5.9%, Abrams said, when NCUA posts the June 30 data,Abrams said it will show the credit union's net worth at 8.73%,using the total asset election method.

San Diego Metropolitan crossed back into well-capitalizedterritory in June 2013, reporting 7.16% net worth according tofinancial performance reports posted on the NCUA's website. As ofMarch 2014, net worth was 8.14%, with a slightly higher 8.39%reported using the total assets election.

In addition, the March 2014 call report reflected San DiegoMetropolitan's slow sale of real estate loans. In March 2013, thecredit union had $118.7 million in mortgage loans but only $110.3million on its books as of March 2014. The March 2014 call reportalso showed the credit union had more than 2,500 credit card loanson the books with balances of almost $4 million.

And San Diego Metropolitan is making money.

The credit union closed 2013 reporting a $2.58 million netprofit and as of March 2014 reported a $1.3 million net profityear-to-date.

Other March numbers suggest the credit union has almost entirelyovercome its previous problems. San Diego Metropolitan's delinquentloans to total loans ratio was below its peer group (.75% comparedto .86%). Its net loans charged off to total loan ratio is a thirdof its peers (.15% compared to .45 percent) and its March return onaverage asset ratio came in at a whopping 2.15%, though Abrams saidthat number would drop to 1.94% when NCUA posts the June data.

Abrams said the credit union was especially proud of its Junenet worth figure, because San Diego Metropolitan earned it despitetaking a deposit of $10 million from one member in March.

“This was a member who sold a business and trusts us a greatdeal,” Abrams said. “We asked him to work with our chief financialofficer and offered to help him invest some of it with some of ourinvestment partners, but he just wanted it in one place for awhile. He added that the credit union would have had a net worthnumber a few points higher if it had not been for the deposit.

San Diego Metropolitan celebrates its 8oth birthday this year,Abrams said, and he said he feels particularly proud the creditunion has maintained its relationship with its members and itscommunity. He noted the credit union makes loans every year to thecadets at San Diego's police academy who are expected to pay fortheir own uniforms.