North Island Counts On Tippets

The troubled $1.45 billion North Island Financial of San Diego moved to help restore financial health by bringing veteran industry figure, former American Airlines FCU CEO John Tippets out of retirement to become its new president/CEO.The appointment of the 68-year-old Tippets, a well-regarded CU leader who has served in numerous industry posts and as head of the Dallas CU for 17 years, was made effective immediately and apparently had the blessing of the NCUA and other regulators.North Island, with a 4.16% capital ratio has been drowning in red ink for months. It lost $36 million during the first three quarters of this year.Tippets, who retired from the $5.1 billion American Airlines FCU in June 2008 and began his day on the job at North Island on Nov. 5, told Credit Union Times he had no illusions about the challenge in bringing the San Diego CU out from under NCUA scrutiny and back to profitability.But he said he would have not assumed the North Island helm if he did not think his own experience might lend a hand. Besides, he said, he missed the opportunity of leading a CU “with a great history and loyal membership.” He added, “I love credit unions and this industry.”Despite the dismal financial picture at North Island, which lost $50 million in 2008 tied to California’s housing bust and at March 31 had one of the nation’s lowest capital ratios of 2.16%, Tippets cautioned against reading too much into those statistics based on recent earnings improvements and other factors.“Let’s not get hung up on two, three or four since those are not absolute numbers and don’t tell the real story of what is happening here,” said Tippets referring to those capital ratios well below NCUA requirements.In taking the North Island job, the Texas CEO succeeds Michael Maslak, who retired from the credit union in January and was replaced by an interim duo, Geri Dillingham, chief operating officer, and Kim Reedy, chief financial officer.Dillingham, noting recent positive signs in the balance sheet, including monthly income gains of $1 million, said the current North Island management “welcomes John to sunny San Diego” and looks forward to working with him.Describing recent cost cutting undertaken by North Island, Tippets said the credit union has closed four branches during the year and has pared its payroll by 20% to 351, a drop of 120. The credit union currently has 13 branches and 98,000 members.“I think the current management has done a very good job in controlling expenses,” said Tippets. The ex-American Airlines CEO noted also he was recruited for the job through D. Hilton Associates and will be taking an apartment residence in San Diego and his wife, Bonnie, and family will retain their Dallas home.In a formal press release announcing the Tippets selection, Jack Lewis, North Island chairman, noted that the retired Dallas CEO “has a distinguished credit union career, including leading one of the country’s largest credit unions for 17 years, which makes him an excellent choice,”In another accolade, Bill Cheney, president/CEO of the California/Nevada Credit Union League, said, “North Island Financial Credit Union has long been recognized for its strength and innovation in providing high quality financial services” to consumers and businesses in San Diego, and “John Tippets will continue that tradition.”The press statement also mentioned Tippets’ ties to San Diego.“My dad was in the U.S. Navy in the 1930s, he trained at San Diego and served on board the USS Saratoga and subsequently on the USS San Francisco,” said Tippets. “I have personally done business in San Diego on many occasions over the years, have friends here, and I really look forward to living here.”Loan losses have long been at the root of North Island’s problems, and despite balance sheet improvement, the credit union’s combined delinquency and net charge-off ratio hasn’t stopped climbing. As of Sept. 30, the credit union reported a loan-quality ratio of 7.35%, up from almost 5% as of March 31.The credit union has been charging off a fairly steady 2% of average loans during the first three quarters of this year. Bankruptcies are responsible for 12% of North Island’s charge-offs as of Sept. 30. Second mortgages and home equity lines of credit are being charged off at a 4.35% rate, followed by indirect loans at 4% and other loans at 2.56%.Nearly $4 million worth of first mortgages have been charged off so far this year, a little more than 1% of average first mortgages.Despite the NCUA’s well-documented concern over the quality of California business loans, North Island’s business lending program appears to be in good shape, with just 0.01% of MBL more than 60 days past due on a $150 million portfolio.–[email protected]