Partner Colorado Takes Another $9 Million Loss

A Denver-area credit union that spun off its cannabis CUSO a year ago lost another $9 million in the third quarter, raising its year-to-date losses to $59.8 million.

Partner Colorado Credit Union ($656.2 million in assets, 35,313 members) has attributed its losses this year to its September 2022 spinoff of its cannabis CUSO to a public company called Safe Harbor Financial (SHFS).

The credit union posted a gain of about $50 million on the sale in December. It then posted losses from Safe Harbor of $44.4 million in the first quarter (gains elsewhere reduced the first-quarter net loss to $41.5 million) and $9.3 million in the second quarter, which brought the deal’s net loss to about $3.7 million.

The credit union has not yet responded to a request from CU Times to explain the third quarter loss, and how much is attributable to Safe Harbor.

PCCU held $117.4 million in Safe Harbor stock after the sale in September 2022, but its stake was worth only about $12 million by June. However, the credit union did better with its Safe Harbor stock in the third quarter.

The credit unions’ 22.6 million shares increased in value by $5.9 million from June 30 to Sept. 30, when the stock closed at 79 cents per share. However, it has lost $1.4 million from Sept. 30 to Monday, when it closed at 73 cents per share.

The credit union’s losses have eroded its net worth, but they are still well above the NCUA’s 7% threshold for a “well capitalized” credit union.

PCCU’s net worth ratio stood at 13.02% on Sept. 30, down from 13.68% on June 30. Its Risk-Based Capital Ratio stood at 18.12% in September, down from 19.18% in June.

PCCU ‘s net losses of $59.8 million for January through September were an annualized -11.81% of average assets, compared with a net gain of $2.2 million in the first nine months of 2022, or 0.49% ROA.

Most of the loss came from a loss of $7.6 million under the NCUA’s “Other Operating Income” category.

A CU Times analysis of NCUA data showed that although PCCU ranked only 589th among the nation’s 4,887 credit unions by assets in June, it had the sixth highest net income in last year’s fourth quarter, and far and away led the nation in losses in the first and second quarters of this year.

The CU Times analysis of NCUA data also showed:

• PCCU’s $656.2 million in assets Sept. 30 was 3.1% higher than a year earlier but down by 4.9%, or $33.9 million, from $690.1 million on June 30 and down from its peak of $699.2 million March 31.
• Membership has been declining slowly for at least two years. The credit union had 35,313 members Sept. 30, down by 159 from June and down by 1,152 from September 2021.
• Total loans were $416.1 million on Sept. 30, up 6% from a year earlier and up slightly from $407 million in June.
• Commercial real estate loans, which includes cannabis-related loans, was $41.5 million on Sept. 30, more than double its year-ago level and up from $16.4 million in June.
• Commercial loans not backed by real estate stood at $16.4 million, up 16% from a year earlier and up about the same as in June.
• Loan originations overall were $44.7 million in the third quarter, down 26% from a year earlier and down slightly from $45.8 million in the second quarter.
• Commercial real estate production was $7.9 million in the third quarter, nearly double year-ago production and about half the $15.2 million closed in the second quarter.