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Wednesday, May 28, 2008

Another hard quarter at OnPoint

In the spirit of shining light where it doesn't always shine, here is an update of the financial information we posted earlier this year about OnPoint Community Credit Union, which had just quietly pulled the plug on its budding relationship with the Countrywide mortgage folks. The latest data, from the National Credit Union Administration, is as of March 31 of this year.

As ever, we disavow any expertise in interpreting these figures, but it looks to our untrained eye that OnPoint's investments rebounded during the most recent quarter while the volume of delinquent loans it's holding from its members has continued to rise substantially. By our rough calculations, the delinquent loans held by OnPoint more than doubled between last September 30 and March 31:

Item9/30/0712/31/073/31/08Q'ly increase (decrease)6-mo. increase (decrease)
Total investments$239,660,803$209,617,805$266,999,20227.4%11.4%
Federal agency securities$97,766,028$66,299,032$99,580,42950.2%1.9%
Total reportable delinquency - total delinquent loans$3,525,641$5,472,354$7,289,74933.2%106.8%
Total reportable delinquency - indirect lending$1,659,211$2,592,869$3,141,88521.2%89.4%
Total outstanding loan balances subject to bankruptcies$4,595,702$6,466,112$2,047,768(68.3%)(55.4%)
Ratio of delinquent loans to total loans0.170.250.34    
Ratio of total delinquent loans to net worth1.562.353.05   

Comments (14)

Problem - the ratio of delinq loans to total loans is 34% from 25% in one quarter which is a 35% increase.

Bankruptcy loans have decreased but that may mean they wrote off or sold about $4.4M of bad debt. The increase in delinq loans may mean more bankruptcies coming.

I don't know OnPoint, but who is there customer base?

Steve, I think you have your decimal point off a little. I believe .34% is about 1/3rd of 1%.

Steve - OnPoint used to be Portland Teachers Credit Union.

My mom is a nurse and has been a member for 10+ years.

Years ago, I believe there were some restrictions on who could be a member, but it's open to everyone now.

Steve, OnPoint absorbed Portland Teachers Credit Union a couple of years ago. In the beginning, PTCU's clientele was restricted to Portland educators and their families but that opened up long ago to any and everyone. Having come from a family of teachers, I've always had a soft spot for, and a loyalty to, PTCU, a local business. Not so with OnPoint which we are considering leaving. The latest bump in the road is the recently-installed instant tellers that are anything but instant. The old machines worked just fine. I'm not sure why OnPoint felt it had to inflict these mechanical nightmares on us.

OnPoint was originally Portland Teachers Credit Union...almost anyone involved in education in Clackamas, Multnomah, Yamhill, Washington, and Columbia counties was eligible for membership. The charter was changed to a community based membership and the name changed six months after I'd left the CU (after 7 years of employment) The other big change at that time was the CEO for my entire time there retired (with a scandalously high salary for a non profit) and the leadership changed by a lot.

I think though, what is really sinking OnPoint is that they went from a senior management staff that had history in credit unions, and really believed in that model (with the ideas of transparency and being there for the members) to a management team that was from the traditional banking sector, with the associated focus on growth and profits for someone other than the members.

"I think you have your decimal point off a little. I believe .34% is about 1/3rd of 1%."

I'd have to re-examine, but if they state ratio, I am assuming a raw number. I know bank's net worth is low (since they should be lending a lot of their deposits out to earn income), but if ratio of total delinquent loans to net worth = 3.05 and it states ratio of delinq/total loans = .34, I'd have to take it as real.

Either case, it is 35% higher in one quarter.

I guess it depends on how they state a delinquency (late 30 days, unpaid bal more than 30 days, etc.)

On the other hand a ratio of delinquent loans to total loans of .34 is quite low in both the banking and CU industries.

Greg C
(On the Board of a competing CU)

"a ratio of delinquent loans to total loans of .34 is quite low"

What qualifies as delinquent on a loan - one missed payment?

The number seems high, but I don't know banking.

Usually they aren't counted until 60-90 days w/out payment. The CU's policies on all of that, and the annual report with full financial statements should be available on request to any member. The number can be confusing because it has to include people who are in work-out programs and aren't really a loss.

What I would want to see is the size of the delinquencies vs the reserve for loan losses.

Board members are democratically elected by the members who show up to the annual meeting. The fact that these jokers made a deal with Countrywide should have all of them, board, supervisory committee and management, shaking in their boots. If membership doesn't rise up and cut the people who thought this was a good idea loose at the next annual meeting, then membership has nobody to blame for additional future shenanigans but themselves. Free eats and door prizes at those meetings are usually pretty good.

"The number seems high, but I don't know banking."

Another way to look at it is that out of every 1,000 loans 34 are not paying on time. As 'another" pointed out these may include loans where the borrower has filed for bankruptcy but is still making some sort of payment to the CU (the Work Out). Additionally CU's are required to have money set aside to cover loan losses. So long as that is adequate then this is ok.

As for anothers last comment, there are many ways to have CU elections. I have heard of at least one CU where the only people who showed up at the last annual meeting was the Board and the CU management.

Greg C

the real question is how do their Tier 1,2 and 3 capital requiements hold up?

I believe the "total delinquent loan" numbers are loans that are delinquent by two months or more.

Much information is available in the spreadsheets linked in the post.

Fact is, OnPoint is one of the best managed financial institutions on the west coast. And I can't think of a better place to keep my money.

Are these number something to celebrate? No. But compare them to other banks and credit unions and you'll see... these results are far superior to 95% financial institutions nationwide (big or small).

Montogmery Parker, I'd like to clarify something. You said, "OnPoint absorbed Portland Teachers Credit Union a couple of years ago." That's simply incorrect. PTCU changed it's name to OnPoint. That's it. Same place.

"the real question is how do their Tier 1,2 and 3 capital requiements hold up?"

Well the short answer is as a CU I don't believe they are subject to Basel II or for that matter any other bank regulations. Consequently they probably don't do the analysis. And in fact probably don't have 1/2 the financial instruments to be measured in the analysis.

It's important to remember that CU's are plain Jane retail financial institutions who are restricted by law as to who they can lend to. Consequently CU's do very little to no "business" lending and don't get involved in the kind of lending that gets Banks in trouble. Just boring car loans, mortgage loans, and personal loans. As a CU OnPoint is regulated by the NCUA.

By the way since no one pointed it out I will note that I mistyped a number above. I typed the default rate as 34 out 1,000 loans. I believe that should have been 34 out of 10,000 loans.


Greg C

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