Nevada credit unions were girding for more bad news this fall as regulators began to clamp down on balance sheet calamities in both Reno and Las Vegas and as managers sought to deal with shuttered branches, staff cutbacks and rising delinquencies.
The latest evidence of continuing troubles for CUs as well as banks came from the Nevada Division of Financial Institutions, which acknowledged last week it has been issuing more "letters of understanding and informal desist orders" to halt unsafe practices and forestall conservatorships.
Declining to name the number or location of any of the troubled CUs, George Burns, commissioner and head of the division, reiterated views shared by many that the depressed economy is negatively affecting CUs as the state undergoes a continued high rate of foreclosures, falling home prices and 13% unemployment.
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"We are ground zero in the nation for the highest number of mortgage foreclosures, and now we're seeing commercial lending take a nosedive," Burns said.
With the closure of so many General Motors and Chrysler dealerships, indirect lending has taken a big hit, he said, with some CUs showing "a 50% to 75% drop in CUDL over the last four to five months," a reference to activity in the California-based Credit Union Direct Lending Corp., a CU-owned network that services such loans in California and across the West.
The dealer problems are just one factor that has played havoc with CUs, many of which are now severely challenged by economic conditions, he said. Through the letters of understanding and desist orders, his office is trying to give credit unions a road map to follow to restore balance sheet performance, he said.
"I think you can say without understatement that 2009 is brutally ugly," declared Wayne Tew, president/CEO of the $597 million Clark County CU of Las Vegas, one of a handful of Nevada CUs that managed a profit in the second quarter. The CU recorded $2 million second-quarter net income, rebounding from a $14.2 million loss in the first quarter.
One other Las Vegas CU, the $190 million Cumorah, reportedly has laid off 42 of its 101 employees over the last 18 months and has closed four of its eight branches.
"We're doing everything we can to improve financial results," Tony Mook, president/CEO of Cumorah told The Las Vegas Review Journal.
The chairman of the Nevada Credit Union League, Wally Murray, president/CEO of the $520 million Greater Nevada CU of Carson City, which last May closed two branches, laid off 27 employees after a $6 million loss in 2008, said management of the issues has been difficult, but a favorable factor "is how credit unions continue to work together so well to help one another solve our problems."
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