Arrowhead is latest credit union seized as regulators step up reviews
The federal seizure of one of the Inland Empire’s largest credit unions over the weekend was part of a stepped-up effort by regulators to shore up the financial institutions, which were battered along with banks by the mortgage meltdown and the real estate bust.
Regulators took over Arrowhead Credit Union on Saturday, citing its “declining financial condition.” The action was part of a nationwide move to increase vigilance that has included the hiring of 107 new examiners and more frequent reviews of credit unions’ financial health.
“We’re being more aggressive in our examination process,” said John J. McKechnie III, a spokesman for the National Credit Union Administration, which oversees the institutions. “We want members to be sure that their sure credit union operations are safe and sound.”
Regulatory officials decided to look more closely at the not-for-profit institutions out of concern that some had made loans that were too risky, McKechnie said.
Arrowhead is the second-largest retail credit union to be taken over by regulators. With $876 million in assets, Arrowhead has 24 branches, some of them inside Stater Bros. supermarkets. Last year, regulators seized Eastern Financial Florida Credit Union, an institution with $1.6 billion in assets that later was merged into Space Coast Credit Union.
For Arrowhead’s 152,000 members in the Inland Empire, operations will continue as normal Monday morning. The NCUA operates similar to how the Federal Deposit Insurance Corp. works for banks. Credit unions’ members are each federally insured for up to $250,000 in deposits.
Founded in 1949 to serve San Bernardino County employees, Arrowhead had expanded to allow membership by any resident of San Bernardino or Riverside counties. Its offerings to members had included car loans and home-equity lines of credit — products prone to losses in a region that has been among the hardest hit by the housing downturn and unemployment.
“California’s credit unions are particularly hard hit because of the state’s economy,” McKechnie said, pointing to California’s 12.4% unemployment rate.
McKechnie said Arrowhead is one of a handful of large California credit unions that have been struggling in the poor economy. Arrowhead reported $2.6 million in net income for the first quarter of this year. But it lost $47.1 million in 2009 and $28.6 million in 2008. In March, officials took over Tracy Federal Credit Union in Tracy.
“The recession has affected all financial institutions,” said Bill Cheney, president of the California and Nevada Credit Union Leagues. “Credit unions are not immune.”
