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Monday, May 11, 2009

More on OnPoint Credit Union's fourth quarter

Last week we noted with some surprise that OnPoint Community Credit Union, our barometer of the Portland economy, had suddenly changed its fourth quarter 2008 operating results from a profit to a loss. Thanks to our readers, we learned that this was as a result of some toxic assets in other, larger credit unions in the insurance pool with OnPoint, but that explained only part of the newly disclosed losses. Then we learned that OnPoint has hired a new chief financial officer, with no kind words said for its former officer in that position, who had been there for many years.

Prowling around on the internet for new information about this, we found another document that adds to the puzzle. This is the glossy annual report that OnPoint hands out to the world. Dated in March, this document disclosed the hit that was taken due to the insurance pool loss, but it still showed a profit for the year. This confirms our hypothesis that its auditors found other things, running into the millions, that had to be fixed before the final annual figures were set.

The glossy report disclosed in a footnote "the $16.9 million impact of member insurance and NCUSIF impairment costs that resulted in 2008 from National Credit Union Administration (NCUA) regulatory actions, and related impacts." But sanitizing that out, the "pro forma" income statement that the OnPoint brass reported showed the same $22,569,000 annual profit revealed in its "call" report in January.

Something else changed since March, because even subtracting out a $16.9 million insurance "impact," OnPoint would have shown a profit of $5,669,000 for the year. Indeed, no doubt embarrassingly in retrospect, the top brass at OnPoint included the following brag statement in the glossy report:

Although OnPoint, along with the rest of the nation's 8,300 credit unions, paid an assessment as part of the NCUA's Corporate Stabilization Program, due to our outstanding performance and sound management/business practices, our net income still showed a sizeable profit.
Not. The numbers submitted in April to the NCUA -- presumably, audited numbers -- showed a loss for the year of $2,871,665. That's an $8.5 million change, beyond the "$16.9 million impact" discussed in the managers' narrative.

Looking at the two quarterly reports filed with the regulators, the changes on the income statement were as follows: The provision for loan and lease losses was increased by $1,200,000; gain and loss on investments changed from a gain of $979,626 to a loss of $3,367,886; and member insurance expense went up from $93,709 to $19,986,634 -- a change of nearly $19.9 million, not $16.9 million.

Whatever's been going on among the bean counters at OnPoint the last few months, it hasn't been a mellow time. Members can only hope that things calm down a bit going forward.

Comments (7)

The increase in the provision for loan loss is just that, an expectation that loan losses are going up.

Increased losses on investments probably means that they either owned a piece of WESCORP, now worthless, and/or had a piece of WESCORP's investment portfolio.

Finally the NCUA raised insurance rates on all CU's to refill the insurance fund after paying out part of the fund on part of the losses from the two corporate CU's collapse.

Like many CU's (and banks) OnPoint is not having a good year. Still the March call report shows them with $234 million in reserves so ....

Anybody have an idea how Rivermark CU is faring? So far I've been really pleased with their rates and service, but I still worry...

They are also being hurt by the continued loss of deposits from which they can loan. We have moved several hundred thousand in savings in various accounts to other financial institutions that pay better interest rates. For those of us who save rather than borrow, the economy is pretty dismal right now. We won't keep our money in a place that pays less than 1% when there are dozens of insured institutions that can do much better. We are getting at least twice OnPoint's rate at three different institutions with solid balance sheets.

The migration of capital from OnPoint can't be helping their bottom line. For awhile OnPoint was paying competitive rates for their "Market Rate" savings. Then about 18 months ago, the rate collapsed precipitously, while the loan rates did not go down correspondingly.

I suspect that many people have done the same thing so OnPoint has to borrow more money to loan rather than financing loans from existing members' savings.

So where did you move your money to?

"They are also being hurt by the continued loss of deposits from which they can loan."

Well the smart money may be moving elsewhere. I really haven't compared OnPoints rates to other CU's. However the March call reports how their total deposits actually increased by $130 million over December 2008. That often happens when the market goes down as it did the first three months of this year.

The biggest problem CU's face right now isn't typically taking in cash. It's lending it out in ways that keep the loans on the books. Refi's are hot but in a very low rate environment you want to sell those to Fannie Mae etc as fast as you make them. Car sales are down so car loans are down. Federal Law prohibits CU's from lending more than 11% of their assetts to small businesses so that's out too.

I'm a member of OnPoint, but I have to agree their rates are not competitive. Advantis has a Fusion Checking account with low minimum balance requirement, is currently paying 3.0% interest, and has great benefits like refunded ATM fees. I think Rivermark also has a competitive interest rate. Why can't OnPoint keep up? Until they can, my money is elsewhere.

As an employee of a commercial bank, I will note that I hope you are depositing only, and not looking for a loan. We have many enquiries from businesses that bank with other institutions, but are unable to obtain credit. They then come to us for a loan. But my asnwer is "why should I lend you money when your deposits are elsewhere?" My money goes first to those who bank with us; if you hope to get 50 basis points from another institution, look for them to loan you money.

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