ANN ARBOR, Mich. — Once its serious loan problems became known, regulators wasted little time last month in putting this city's largest credit union, the $362 million Huron River Area Credit Union, into NCUA conservatorship, it was disclosed last week.
Still, Huron River had traditionally been a well performing CU "but apparently took on more risk than it could handle," commented David Adams, the president/CEO of the Michigan Credit Union League, forecasting the CU's financial condition could take months to improve before "the situation is resolved."
Adams said also that while a number of Michigan credit unions are enduring "earnings stress" amidst a poorly performing state economy, the problems at Huron River are by no means symptomatic of wider CU difficulties.
In appointing the NCUA as conservator Feb. 16, Michigan CU Commissioner Linda Watters found Huron River operating "in an unsafe and unsound manner" with reports that it had a large volume of faulty real estate loans. In an article covering the conservatorship, the Ann Arbor News noted that while Huron River had been profitable in 2006, "its total loan portfolio jumped more than 55 percent in one year."
In instituting a conservatorship, the first for a Michigan CU in 20 years, NCUA brought in new management and replaced the directors. Ousted were the president/CEO, Gerald Gillikin, who had been with Huron River 21 years, and another senior executive who was not identified.
The swift takeover of Huron River by the state was a surprise to the CU community.
"We really had no clue this was coming," said the executive of one Detroit area CU who asked for anonymity. "We understand NCUA intends to continue a conservatorship here for months, maybe a year's time but I haven't heard about any plans now to merge it."
Huron River has a membership of 39,000 members and 1,000 employer groups.
The last major conservatorship still in place involves New Horizons Community Credit Union in Denver. The $180 million New Horizons, once the 10th largest CU in Colorado, went into NCUA conservatorship a year ago, but last month state regulators said its problems had worsened enough requiring a forced merger.
A buyer for New Horizons is expected to be selected in the coming weeks, state regulators have said. New Horizons fell victim to faulty construction loans as well as major problems in its Centrix Financial subprime portfolio. –jrubenscut@aol.com
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.