Kern Schools' $26M quarterly loss blamed on failed credit unions
| Thursday, Apr 23 2009 06:06 PM
Last Updated Thursday, Apr 23 2009 06:06 PM
Kern Schools Federal Credit Union posted a $26 million loss in the first three months of this year largely because of its exposure to two financial institutions taken over by regulators last month.
Chief Financial Officer Norman Rinallo said the credit union lost about $7.7 million when on March 20 the National Credit Union Administration took over San Dimas-based Western Corporate Federal Credit Union. He said it lost another $15 million when on the same day the regulatory body took over Lenexa, Kan.-based U.S. Central Federal Credit Union.
Both were what is known as corporate credit unions, institutions that act like federal reserve banks in that they provide overnight loans and other services to local credit unions.
Because many credit unions had money wrapped up in those failed institutions, Rinallo said they, too, will be forced to declare losses, although the amounts will vary. Kern Schools chose to declare its share of losses in the first quarter rather than declare them retroactively or wait to assess the damage going forward, as other credit unions have chosen to do, he said.
Rinallo said the remaining loss of more than $2 million at Kern Schools relates to second mortgages it extended to local borrowers who went into foreclosure, as well as car loans to people who have since lost their jobs and could not continue to make payments.
The credit union lost a total of about $24 million last year.
Rinallo said the institution appears positioned to break even during the second and third quarters of this year, and that it may be able to declare a profit in the fourth quarter.
He said there is little reason to fear the credit union cannot weather the difficult times.
"We have adequate equity," he said. "We have decent capital and everything, so I'm not overly concerned about that."
