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Credit unions operating in LV lose cash in quarter

All 14 credit unions operating in Southern Nevada lost money in the first quarter as the area’s economy slipped further into the abyss.

"These are horrible numbers," Chief Financial Officer Roy Holstrom of Clark County Credit Union said. "As a CFO, every nerve fiber I have is screaming about this."

Holstrom’s Clark County Credit Union remains relatively strong, with net worth equal to 8 percent of total assets.

But, Community One Federal Credit Union, a $161.9 million asset institution, ended the quarter in critical condition with net worth of less than 2 percent of assets.

"We’re a community-based credit union," said Jerrold Rosen, vice president of marketing. "Unemployment is at a 20-year high. That’s going to negatively impact our (loan) delinquencies. These are tough times right now."

Community One has gone through hard times before, he said.

"We’re optimistic that we’re going to get through it again," he said.

Rosen acknowledged that Community One has several options, including a possible merger with another credit union.

David Rhamy, chief executive officer of Silver State Credit Union, said he would not be surprised to see two or three credit unions merged out of existence in 12 to 18 months although he did not mention any credit unions by name.

Although a merger would affect Community One employees, its members’ savings and checking accounts are fully covered up to $250,000 in federal deposit insurance from the National Credit Union Administration.

However, five Southern Nevada credit unions rely on American Share Insurance, an unrated insurance company based in Dublin, Ohio. Eric Estes, executive vice president of Boulder Dam Credit Union and former chairman of the mutual insurance company, said it is not rated because it is the only private deposit insurer in the country and rating firms have no peers for comparison to American Share Insurance. The insurance company dates from 1974.

Nevada’s largest credit union, Silver State Schools Credit Union, also is the biggest credit union in the country insured by American Share Insurance. It counts almost $1 billion in assets and 80,000 members including many teachers and their families.

Silver State recorded a $9.6 million loss for the first quarter. During the quarter, the credit union doubled its loan loss provision to $14.2 million from $6.2 million at year’s end.

Like many credit unions, Silver State relied on Western Corporate Federal Credit Union for financial services and lost money when federal regulators seized Wescorp. It will charge off $3 million for that loss in the second quarter, Rhamy said.

The credit union’s loan quality has rapidly deteriorated in the last couple of years. Total loans delinquent for two months or more increased to $42.4 million on March 31 from $6.9 million at the end of 2007.

The credit union repossessed about 1,000 cars over the last 12 months and has about 400 vehicles in inventory.

Rhamy said the institution has about 100 first residential mortgages that are delinquent, out of 2,500 such loans.

Silver State has offered to modify the rates and maturities of mortgages to make it easier for members to avoid foreclosure. In one case, the credit union temporarily slashed the interest rate to 2 percent for a home loan.

Homeowners are not always satisfied, but Rhamy said he is limited in how much he can do. Silver State will not knock off $50,000 from the balance owed for a house.

"We’re see seeing some that are becoming a little bit more pushy. Probably some of that is related to increased desperation," Rhamy said. "We’re getting more and more folks saying, ‘I hired an attorney.’"

Silver State offered to modify 55 home mortgages in April but only seven borrowers agreed, he said.

Rhamy’s strategy is to keep loan rates low and deposit rates high to help financially strapped members. He doesn’t expect to bolster the financial position of Silver State at the expense of members.

Cumorah Credit Union, a privately insured credit union that serves members of the Church of Jesus Christ of Latter-day Saints, also has a 7 percent net worth ratio. The total of loans delinquent more than two months grew to $6 million from $1.4 million at year-end 2007. It holds $4.7 million in foreclosed real estate, up from $289,000 at the end of 2007.

Delinquent loans are 4.3 percent of total loans at Cumorah.

Ensign Federal Credit Union, a Henderson-based federally insured credit union for LDS church members, reported twice the percentage of bad loans as Cumorah did for the first quarter. Delinquent loans represented 10.2 percent of total loans at Ensign. Net worth at Ensign dropped to 4.7 percent from 9.3 percent a year ago.

By contrast, Nevada Federal Credit Union, the largest of the federally insured credit unions in Southern Nevada, has a net worth at 11.5 percent of total assets.

"Unfortunately, the decline in the real estate market and the decline in employment stability in our area has resulted in pretty substantial losses for us," said Brad Beal, chief executive officer of Nevada Federal Credit Union. "Nevada Federal had a very strong quarter for operations, better than last year. Our core financial accounts are up."

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

 

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