The NCUA said it has begun the process of assessing the adequacy of conserved Texans Credit Union's Allowance for Loan and Lease Losses account.
Texans' NCUA March 31 Call Report showed its ALLL decreased from $47 million to $41 million. Based on the loans reviewed so far, the management team hired by the NCUA to oversee Texans has recommended additional funding.
However, significant charge-offs of $21 million reduced the balance, said David Small, NCUA assistant director of public affairs. The net effect was a decrease in the March 31 balance.
"The financial statement reflects known and reasonably estimable losses, but more losses may be recognized over the next few months as we work through assessing all the assets," Small said.
Texans' net worth dropped from 2.75% to 2.00%, according to NCUA data.
Small said Texans recognized a significant increase in the Provision for Loan and Lease Losses account which affected the net income number and subsequently decreased net worth.
"This is to be expected as further evaluation of the loans continues through the normal operational scrub that comes with a conservatorship," Small said.
The NCUA placed the $1.6 billion Texans in conservatorship April 15. The agency said the management team is addressing the operational and balance sheet deficiencies that led to the conservatorship.
"While disappointing at first glance, the first quarter results for Texans Credit Union confirm the reasons why the National Credit Union Administration placed the institution into conservatorship, said C. Keith Morton, the agent for conservator and NCUA regional director, region IV in Austin, Texas.
"In working to fix the issues that led to conservatorship, NCUA's ultimate goal is to return Texans Credit Union to its members," Morton said.
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