Regulators Seize California CU Giant Weighed Down By MBLs

Credit Union Journal Daily Briefing | Friday, March 23, 2012 - By Ed Roberts

CHATSWORTH, Calif. -- The California Department of Financial Institutions took over Telesis Community CU, the one-time $625 million credit union with one of the biggest member business loan portfolios in the country, Friday night and appointed NCUA as conservator.

The takeover is bound to cause problems for credit unions on Capitol Hill where Congress is contemplating doubling the MBLs limit and bankers are arguing that it could invite new financial difficulties because credit unions are not sophisticated enough to increase business lending. In fact, Telesis Community is one of 120 credit unions specializing in business lending with a special exemption from NCUA allowing them to exceed the current 12.27% of assets limit on member business loans.

Telesis Community has lost money for five straight years—a total of more than $50 million—and had its net worth decline to 5.4% at year-end 2011. The now $318 million credit union reported $5.7 million in MBL charge-offs and $4.2 million in loan participation charge-offs for 2011.

The credit union has been involved in several large MBL bankruptcies across the country in the past few years; of a California resort project; a Memphis historic development; an Orlando, Fla., shopping mall; and a downtown Portland redevelopment, among others.

Telesis Community is the second credit union giant seized by regulators because of big MBL problems, with NCUA running Texans CU, a former $2.2 billion Texas credit union, under conservatorship for the past year.

Telesis Community was chartered in 1965 and serves, among others, various employer groups and individuals in the San Fernando and Santa Clarita valleys or in Ventura County.

Earlier Friday night NCUA also liquidated Saguache County CU of Moffat, Colo., a one-time $25 million credit union, and assigned its remnants, the year’s third credit union failure, to Aventa CU, a $135 million Colorado Springs, credit union. Saguache County CU has been run under conservatorship by NCUA since last July.