After delay, credit union results revealed

Credit union managers, bankers and analysts had been wondering what happened to the fourth-quarter financial results for Silver State Schools Credit Union, the nation's largest privately insured credit union.

At midweek, they finally got their answer.

The Las Vegas Review-Journal asked about the delay Wednesday, and the financial results appeared that night on the website of American Share Insurance, the Ohio company that backs deposits at Silver State and other privately insured credit unions.

Silver State Schools Credit Union, which serves 65,000 educators around Nevada, lost $21.5 million last year, including $4.5 million in the fourth quarter, according to the report.

Other Southern Nevada credit unions and banks were required to post their financial results by Jan. 30.

Silver State Schools filed its fourth-quarter results on time, Chief Executive Officer Dave Rhamy said in an e-mail. However, the deposit insurance company and Nevada Financial Institutions examined the books and records separately over several weeks during February, delaying the public posting of the financial results. The financial results were adjusted to increase reserves for loan losses.

"In other words, we took a more conservative position and bolstered our loan loss reserves," Rhamy said in an e-mail.

American Share CEO Dennis Adams said, "The statement was being adjusted to more properly reflect allowances for loan losses, which resulted in more losses, not less losses."

A trade publication, Credit Union Journal, said Silver State has been "under a strict regulatory agreement with state regulators," and Silver State poses difficulties for American Share.

The private deposit insurance company's "exposure to the credit union is enormous," the publication said. American Share was forced to charge 150 credit unions a premium for the first time for both 2009 and 2010 to restore the insurance company's reserves because of losses at failed Cumorah Credit Union, also of Las Vegas, and Silver State.

In February last year, American Share made a $22 million subordinated loan to Silver State. Silver State has been counting the loan as part of its net worth although critics question treating the loan as net worth.

Even so, Silver State continues to have the lowest net worth ratio of any Southern Nevada credit union at 4.3 percent of total assets. Without American Share's bailout, Silver State's net worth would be less than 2 percent.

Over the last year, the credit union has burned through most of the $22 million loan, given losses of $21.5 million.

Rhamy said Silver State negotiated with American Share for a lower interest rate, which was not disclosed. The insurer extended the maturity to 2015. The loan originally was due in August . The credit union hasn't repaid any of the insurance company loan, Rhamy said.

However, Silver State cut its annual losses to $21.5 million last year from
$50 million in the previous year. It closed six branches during 2010 and made other moves to curtail costs.

"Silver State Schools Credit Union is on the road to recovery, even during these difficult economic times," Rhamy said in a statement. He said the credit union posted "marginal profitability" in this year's first two months.

Delinquent loans decreased to
$46 million from $54.5 million at the end of the third quarter. The credit union's reserves for loan losses were boosted to 54 percent of delinquent loans, up from 47 percent of delinquent loans three months earlier.

Nevada Federal Credit Union lowered its loss to $594,000 in the fourth quarter, from a loss $831,000 in the third quarter.

"We're pleased to see continued improvement in our operating results as the economy remains stable," Nevada Federal Credit Union Chief Executive Officer Brad Beal said.

"The credit union's net worth of nearly 10 percent assures the future stability of the organization," he said.

Of 11 credit unions serving Southern Nevada, three made a profit in the last quarter -- WestStar Credit Union, Sonepco, and Las Vegas UP.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.