West Texas Credit Union Is Hammered by Bad Indirect Loans

The $84 million West Texas Credit Union recorded extreme changes in its financials since June 2008, back when it reported a healthy 12.00% net worth. The El Paso, Texas-based credit union has been hit by at least one major blow somewhere on the balance sheet each quarter since, leaving it with 0.12% net worth as of March 31.What happened? President/CEO Carol Beltran did not return requests for comment from Credit Union Times by press time.Beltran replaced retired President/CEO Rufino Carbajal, according to a credit union operator who didn’t know the exact date; however, the change is recent enough to not have been updated yet on WTCU’s NCUA call report. Archived documents on the credit union’s Web site (www.wtcu-ep.org) indicate Beltran was promoted from within.Texas Credit Union Commissioner Harold Feeney confirmed the credit union’s state charter but said he could not discuss specifics of financial institutions. He did say that if his agency took action against WTCU, it would offer “first right of refusal” to the NCUA.The credit union’s financials tell at least part of the story. The wheels fell off the wagon as of Dec. 31, 2008, when the credit union recorded an $8.9 million loss, fueled by an $8 million increase in loan-loss provisions. WTCU posted a $1.2 million net loss as of March 31, approximately half its own losses and half NCUSIF stabilization expense.Point-of-sale indirect loans experienced a steady rise in delinquencies; the vast majority of WTCU’s loan portfolio, $52.6 million worth of a total $67 million loan portfolio. The credit union held $7 million plus in repossessed auto loans as of Sept. 30, 2008, but unloaded the majority between year-end 2008 and March 31.As of March 2008, no indirect loans were more than 60 days past due, but the ratio of delinquent indirect loans to total indirect loans has grown to 2.8% as of March 2009. And, $4 million worth of indirect loans were charged off during first quarter 2009.Another significant balance sheet shift was a huge variation in the amount of cash the credit union had on deposit-from $3.3 million as of March 2008 to negative $397,000 as of September 2008, then back up to $10.7 million as of March 2009. However, at the same time, land and building assets surged from $2.7 million to $6.3 million between June 30 and Sept. 30, 2008.Meanwhile, WTCU experienced a decrease in repossessed autos by about $6 million between 2008 year-end and March 31.WTCU was also into member business lending but has backed off, with total business loans less unfunded commitments decreasing from $1.4 million in March 2008 to $976,000 as of March 2009. The credit union has not recorded any member business loan charge-offs.Loan delinquencies, once similar to its peers as recently as September 2007, have risen across the board. By December 2007, overall delinquent-to-total loans had nearly tripled from previous quarter to 2.7%. By September 2008, 6.3% of loans were delinquent, on top of a 1.24% charge-off ratio.As of March 31, 5.38% of WTCU credit cards were more than 60 days past due. March 2009′s mortgage delinquencies returned to 0%, thanks to charge offs that cleaned house after the Dec. 2.62% delinquency rate. However, trouble still brews on the horizon for WTCU, as $216,672 in first mortgages are 30 days past due, by far the credit union’s highest amount since reporting no past-due mortgages this time last year.–[email protected]