Download the 2010 OC CREDIT UNIONS List (pdf)
A sizeable acquisition helped the county’s largest credit unions grow assets, despite many seeing less loan demand.
The 31 largest credit unions operating here grew assets 3.6% to more than $14 billion for the 12 months through June, according to this week’s Business Journal list.
The increase in assets was better than a year ago, when growth hovered around 1%. But it’s still a far cry from the double-digit growth seen in the years before the financial crisis and real estate crash.
No. 1 Santa Ana-based SchoolsFirst Federal Credit Union dominates the list with $8.4 billion in assets, 60% of the list’s total.
By assets, SchoolsFirst is the largest financial institution of any type based in Orange County.
Without SchoolsFirst in the mix, the 30 other credit unions on the list grew assets by 1.2% to $5.7 billion for the 12 months through June.
The list ranks credit unions by assets including loans, cash, real estate and investments.
Financial information comes from the National Credit Union Administration.
Credit unions are not-for-profits that provide banking services to members who share a common bond, whether it’s place of employment, profession, religion, ethnicity or another affiliation.
Acquisitions boosted membership at the credit unions on the list by nearly 2% to 839,299 in the past year.
Employment at the credit unions fell about 1% to 2,243 people in the past year.
The pace of asset growth at credit unions reflects lower demand for loans, as many members lost jobs in the past few years, saw home values depreciate and became more frugal with personal finances.
Like other banks in the county, credit unions made fewer loans and set aside more cash to protect against potential bad loans in the past year.
While many credit unions avoided the riskiest loans during the 2000s boom, they’re still vulnerable to problem loans, funding shortages and tempered borrowing since they primarily rely on individual customers, rather than businesses.
Unlike banks, they can’t raise money through investors, a major source of contention in the industry.
Signs of Turnaround
Despite all these challenges, credit unions still are showing signs of a turnaround.
Collective net income topped $17.8 million for the six months through June, a 2,018% jump from a year earlier when 25 of the 31 credit unions reported losses.
On this year’s list, 17 credit unions posted profits through the first six month of the year. Fourteen reported losses.
Fourteen credit unions showed gains in assets for the 12 months through June, while 17 posted declines.
SchoolsFirst, one of the largest credit unions in the country, led the asset growth with a 5% gain.
But that increase did not translate into a higher profit, as net income dipped nearly 19% to $20 million for the six months through June.
SchoolsFirst, formerly Orange County Teachers Federal Credit Union, added 37,757 members in the past year for a total of 448,391.
No. 2 Evangelical Christian Credit Union in Brea reported a 3.9% drop in assets to $1.2 billion.
The credit union, which serves churches and other religious groups, saw net income plummet nearly 79% to $1.3 million.
Evangelical Christian provides real estate loans, helps ministries acquire properties, funds expansion and construction improvements and does refinancing.
High unemployment and real estate depreciation have hurt the credit union’s bottom line, according to Chief Executive Mark Holbrook.
“Those have the biggest impact,” he said. “Ministries have cut back on programs and expenses. They have not been spared the impact of our economic environment.”
Many churches have drawn down on cash reserves, he said. That has led to far less lending than in previous years.
Evangelical Christian’s membership grew 2.3% to 11,628.
Huntington Beach-based NuVision Federal Credit Union moved up one spot on the list to No. 3, thanks to a big acquisition and a smaller one late last year.
In September, NuVision acquired Costa Mesa Federal Credit Union, which had about 3,000 members who live or work in the city.
In October, NuVision acquired Monterey Park-based E1 Financial Credit Union, which controlled more than $375 million in assets and counted more than 25,000 members across the San Gabriel Valley.
The Costa Mesa deal helped extend NuVision’s presence south of Huntington Beach, while the E1 acquisition set the stage for growth in Los Angeles County, said LJ Tarman, NuVision’s vice president of marketing and public relations.
The acquisitions boosted assets to $1.2 billion, up 38.5%. That was the highest percentage increase of any credit union on the list.
NuVision, which provides checking and savings accounts, loans, credit cards, mortgages, home equity lines of credit and investment services, now serves about 75,000 members in Southern California.
It was founded in 1935 to serve employees of Douglas Aircraft Co. and has evolved to serve employees from Boeing Co., Sempra Energy and other Southern California residents.
NuVision lost $1.2 million in the six months through June, which was better than the $1.5 million loss a year earlier.
The credit union paid higher fees to the National Credit Union Administration because of its size, as well as acquisition expenses, Tarman said. That, coupled with lower loan demand, cut into profits, she said.
“We’re looking for the economies of scale to start kicking in next year,” Tarman said.
NuVision has 250 employees in OC, a 25% increase from a year ago. The acquisitions accounted for some of the increase.
Another Deal
In June, NuVision announced plans to combine with Manhattan Beach-based Kinecta Federal Credit Union, which would create a $4.7 billion credit union.
NuVision expects to conclude its due diligence on the deal this month and send an application to regulators in December.
It’s expected to take six months before approval, Tarman said.
“We’re still in the beginning stages,” she said.
No. 7 Pacific Community Credit Union held on to its ranking, despite seeing assets drop 27% to $184.7 million. That was the biggest percentage drop on the list.
A big write-off and a $50 million loan from the NCUA for investments paid off in the last year was a major contributor to the decrease, according to Kevin Pendergraft, chief executive of Pacific Community.
The credit union’s members, who live and work in OC, Riverside and parts of Los Angeles and San Bernardino counties, have been hit hard in the recession.
Many of its 14,400 members, down 3.6% from a year earlier, have lost jobs in the construction and housing industries. Those in the Inland Empire fared the worst.
That has caused lending problems, particularly on auto loans and mortgages.
“When that construction dried up so did their livelihood,” Pendergraft said. “Our loan demand is very weak right now.”
Daniel Penrod, senior industry analyst at the California Credit Union League in Ontario, said OC-based credit unions have fared better than their competitors around the state.
Local credit unions have a capitalization rate of nearly 9.5%. Anything above 7% is considered well capitalized by regulators.
“Credit unions in the area have a good amount of cash set aside—they’re strong,” Penrod said.
The problem is loan demand.
“Consumers right now are skittish. They’re much more hesitant to make long-term commitments,” he said.
