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Arizona CUs see economic fallout in auto loans cards
TUCSON, Ariz. (11/4/08)--Auto loan and credit card delinquencies have caused losses at several larger Tucson-area credit unions, according to a recent report based on second-quarter earnings by a company that rates banks and credit unions for consumers. The decline of the housing market has spilled over into other parts of the economy such as auto loans--traditionally a major staple for credit unions (Arizona Daily Star Nov. 2). “Unfortunately, the economic downturn has had an impact on our members, which in turn affects our credit unions,” Scott Earl, president/CEO of the Arizona Credit Union League, told News Now. “In response to the recent losses, our credit unions have tightened their lending practices. "It is important to point out, however, that our credit unions have steered clear of subprime lending, are well capitalized at 11%, remain in an excellent ratings standard and are all insured by the National Credit Union Share Insurance Fund (NCUSIF) up to $250,000 per account,” he added. Tucson (Ariz.) Old Pueblo CU, a $151 million asset credit union, took some losses this year in its auto portfolio, but still is on sound financial footing, Joe Mirachi, president CEO, told News Now. The credit union retained its “excellent” rating of four stars, from Bauer Financial, even though it lost $634,000 this year through the end of June. Bauer Financial is based in Coral Cables, Fla. “We continue to be well-capitalized,” Mirachi, who started at the credit union in Sept., 22, said. “And we have adequate liquidity. Although I’m not familiar with the exact process Bauer uses to evaluate credit unions, those likely are the factors that kept us with good ratings. We’ve also steered clear of subprime real estate lending.” About 69% of Tucson Old Pueblo’s loans are for autos, and the rest are for first and second mortgages, Mirachi said. To counter the losses, the credit union is tightening its lending and is growing its residential mortgage lending, he added. Tucson (Ariz.) FCU, a $249 million asset credit union, also has seen losses--of about $326,000 in the second quarter, prompting Bauer to lower its rating from superior to excellent. “There are many different components to financials to see how credit unions are doing--such as the strategic plans and business plans in place at different credit unions, so it hard to get a complete picture of a credit union’s performance from one rating or number,” Matthew Gaspari, Tucson FCU chief operating officer, told News Now. Delinquencies are low, classified assets are low, and the credit union is back into profitability, he added. Also, Tucson FCU recently opened two branches, which led to more expenses. “We’ve grown into our expenses, Gaspari said. “We’re experiencing good loan growth and super membership growth.” About 60% to 65% of the credit union’s losses are in auto loans. The rest is mostly in credit card debt, he added. Large vehicles are harder to pay for because of higher gas costs to fill up and higher loan payments, so most of the vehicles going into default at the credit union--about 65%--are larger ones, Gaspari said. “We’re not directly impacted by mortgage loans, but indirectly impacted, because consumers with mortgage problems have to make decisions about what loans to pay,” Gaspari said. “If people are put in a difficult situation, they have to make hard choices.”
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