Leaders of the $246 million San Diego Metropolitan Credit Union were not thrilled with a consent order handed down from the California Department of Business Oversight, but CEO Stan Abrams told CU Times he was nonetheless relieved to have finally received it.

 “You need to understand, there were other consent orders before this one. Orders that we fulfilled, every single one of them,” said Abrams, CEO of the San Diego-based credit union. “We started out with a very big one that we worked to resolve and as we resolved it, it was replaced by smaller ones as we dug ourselves out.”

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

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

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

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

Abrams, who took on the CEO job in 2010, explained the housing finance crisis and Great Recession hit San Diego Metropolitan especially hard. The now community chartered credit union had been originally chartered in 1934 for the employees of San Diego city and county governments.

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

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

San Diego Metropolitan has been fighting its way into a better financial situation ever since, Abrams said. Broadening the asset base has been high on the list, he said, adding the credit union had restarted its indirect auto lending in 2010, shortly before he arrived. The credit union has also started offering a credit card as well.  San Diego Metropolitan has also been steadily selling off its mortgage loan assets, he said.

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

Even though the credit union's net worth at one very bad point dropped 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-capitalized territory in June 2013, reporting 7.16% net worth according to financial performance reports posted on the NCUA's website. As of March 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 Diego Metropolitan's slow sale of real estate loans. In March 2013, the credit union had $118.7 million in mortgage loans but only $110.3 million on its books as of March 2014. The March 2014 call report also showed the credit union had more than 2,500 credit card loans on 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 net profit and as of March 2014 reported a $1.3 million net profit year-to-date.

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

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

“This was a member who sold a business and trusts us a great deal,” Abrams said. “We asked him to work with our chief financial officer and offered to help him invest some of it with some of our investment partners, but he just wanted it in one place for a while. He added that the credit union would have had a net worth number 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 credit union has maintained its relationship with its members and its community. He noted the credit union makes loans every year to the cadets at San Diego's police academy who are expected to pay for their own uniforms.