Struggling credit union changes hands in sale
BELOIT — State officials have closed a struggling credit union that has a branch office in Janesville, but members are not expected to see any interruptions in their service.
The Wisconsin Office of Credit Unions on Tuesday closed the Beloit-based First American Credit Union. The National Credit Union Administration was appointed liquidating agent and quickly signed an agreement with First Community Federal Credit Union of Parchment, Mich., to buy First American.
In a news release, the NCUA said First American Credit Union’s declining financial condition led to its closure and subsequent purchase. At closure, First American had $136.9 million in assets and served more than 17,447 members.
NCUA records indicate that First American lost almost $1.2 million through the first half of 2010 after losing nearly $5.6 million in 2009. More than 13 percent of its loans were delinquent, compared with the average of 1.6 percent among peer credit unions.
NCUA is the independent federal agency that regulates, charters, and supervises federal credit unions.
First American, formed in 1933 by a group of Beloit Iron Works employees, is the 15th federally insured credit union liquidation in 2010. It has two branches in Beloit and one each in Janesville and Rockton, Ill. It will continue to operate under its current name.
First American CEO Tracy Blaske said a tighter lending climate and provisions for potential loan losses created hardship for First American.
“In the coming months of the transition, we’re certain that our members will experience little to no changes to the types of programs and account access that they’ve enjoyed in the past,” Blaske said. “Our ability to compete in products and pricing will grow, and our members will continue to see familiar faces here to serve them.”
First Community President and CEO Cheryl A. DeBoer said First American’s members will continue to be served locally.
“Combining of forces provides renewed ability to serve the financial needs of area residents and small business owners within the state line area,” she said. “Times of economic uncertainty in our region can create hardships for even well performing credit unions.
“We’re excited to be able to bring regional strength, while preserving local service to the current 17,500 members of First American Credit Union.”
Sep 5, 2010 at 11:37 a.m.
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Actually, we should have seen this coming. We stopped getting the letters from the CEO with our statements. I believe that their new rating as of the new quarter was zero. That is why the state stepped in.
Sep 4, 2010 at 1:41 p.m.
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Thanks Janesvillean you wizard you!
Sep 4, 2010 at 12:31 p.m.
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TJ, just like individuals, too much debt and not enough income is the crux of the issue. Right now, a lot of banks and CUs have money in real estate (lending money through mortgages is effectively the same as investing in real estate) and like the property owners they lent to are now holding many loans that are in default or held against underwater collateral. This puts them in danger of having too little liquidity to meet the daily needs of depositors. The FDIC and other banking agencies have confidential measures of how bad an institution is getting and almost always act before it becomes an actual problem in terms of cash. Other private measures of "problem banks" or "troubled credit unions" exist so you can research the health of your institution. e.g.
http://www.bankrate.com/rates/safe-sound...
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On the Bankrate.com results, First American was given one star (out of five possible). Anchor, the Wisconsin chain that's faced regulatory scrutiny, is also a one-star institution. Unfortunately, what a bank needs to solve its problems is investors and/or depositors, and having a low rating makes that hard to do. In fact, they often face a depositor departure rate that over time equals a bank run.
Sep 4, 2010 at 12:12 p.m.
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Did they give loans to anybody despite whether they qualified or not? How does one credit union fail while the others do so well? Just curious.
Sep 4, 2010 at 11:15 a.m.
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From personal experience the downfall of the credit union and the service aspect of it started when it was expanded from the fourth street location years ago.
Sep 4, 2010 at 10:10 a.m.
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I believe in cases like this every depositor/borrower will receive paperwork in due course. But as noted, these takeovers a) must be secret to avoid a run on the bank's liquidity, and b) by intention affect the customers as little as possible.
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Here's a 60 minutes piece where they were given extraordinary access during an FDIC takeover. The First American closure was by a Wisconsin state agency, but the principle is similar.
Sep 4, 2010 at 12:41 a.m.
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Umm -- Bobwood, they can't. No financial institution knows for sure when it's going to get taken over before the feds walk in at the close of business one day and do it. That's to prevent a run on the bank (everybody taking there money out) or shredding documents, etc.
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