More Hard Times Expected for California CUs

RANCHO CUCAMONGA, Calif. – (Thursday, January 31, 2008) Mounting losses among some of the Golden State’s largest credit unions are expected to grow even more, at least in the short-term, as the state’s economy continues to fall into recession.

“We expect to see more of what we saw in the fourth quarter, and probably a deepening of losses, increased loan loss reserves and charge-offs,” said Terrin Griffiths, an industry analyst in the California CU League’s research and information department.

She said unlike banks, which are reporting large losses on their mortgage portfolios, credit union members, many of them having trouble paying mortgages elsewhere, are having difficulties paying credit cards, car loans and other consumer loans. This has prompted many California credit unions to double and triple their loan loss reserves and fall into the red.

Many California credit unions are reporting huge losses for 2007, including: Wescom CU (a $33.2 million loss); Telesis Community CU ($6.7 million); USA FCU ($5.8 million); American First CU ($5.1 million); Sterlent CU ($4.8 million); Kaiperm FCU ($3.8 million) and Xerox FCU ($3.4 million).

Bill Hampel, chief economist for CUNA, said he sees similar problems in credit unions in other states that may already be considered to be in a recession, including Nevada, Florida and the Midwest states of Michigan, Ohio and Indiana, where job losses are adding to the devaluation in home prices to make it harder for credit union members. “A lot of credit unions are going to see their loan losses double and triple,” Hampel told The Credit Union Journal yesterday. (CU Journal)