Everybody wants to diversify, but why would Alaska's biggest credit union buy a tanking Southern California credit union?
"We're not taking all the assets as you see them on the books," said Dan McCue, senior vice president of Alaska USA. The credit union announced the deal Friday.
When Alaska USA takes over July 1, it plans to avoid the real estate loans that took down High Desert Federal Credit Union, based in Apple Valley, Calif.
For more than 20 years, High Desert specialized in home construction loans. But by the end of last year, one third of those loans were at least two months delinquent - more than 20 times the average delinquency rate for California credit unions at the time, according to the local newspaper, the Victorville Daily Press.
It's not alone. U.S. credit union profits in 2008 dropped to $2.44 billion from $4.65 billion the year before, because of loan delinquencies and mortgage-backed securities, according to the National Credit Union Administration.
High Desert stopped issuing those home construction loans in May 2008 to avoid more losses, according to the local paper. Its federal regulator, the NCUA, took control of the credit union in October.
"We're focusing on the consumer loans, which have lower delinquency rates," McCue said.
They're for things like cars and ATVs. But Alaska USA will look more deeply into High Desert's finances before it pins down how much of High Desert it will buy.
"That's the part of the dance that's still happening," McCue said.
Alaska USA on Friday reported High Desert's worth at $102 million. That's 70 percent of the $145 million it was worth in October, and down from $190 million in 2006.
About half of High Desert's assets, $54 million, are real estate loans, according to the company's March financial statement. Loans for businesses, homes and home construction made up nearly all of the company's 86 delinquent loans worth $23 million.
Alaska USA is a Alaska-based credit union with $3.9 billion in assets. Of its 350,000 members, 5,400 are in California. McCue said the acquisition wouldn't affect Alaska USA members' banking.
High Desert's 11,000 members are people who "live, work and worship" in San Bernadino County, Calif., according to its Web site. The members' assets are federally insured up to $250,000. They'll be able to do business continuously during the transition, a High Desert acting director assured them in a letter.
Contact reporter Kate Golden at 523-2276 or email@example.com.
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