This article first appeared in Sunday's Wisconsin State Journal.
Credit unions in south-central Wisconsin are in a little better shape than they were a year ago — at least that's the indication from ratings services that keep an eye on those organizations.
Credit unions never did reach the depths of some banks, but a number of them were seen by the ratings companies as having difficulties, based on Dec. 31, 2009, reports to federal regulators. Fewer are on this year's problem lists, drawn from their March 31, 2011, finances.
Bankrate.com identified 11 local credit unions as "below normal" or worse last year, giving them only one or two stars out of a possible five. This year, six credit unions earned two stars and none was below two.
Bauer Financial last year pegged one credit union as subpar with no stars. This year, none was below the three-star (adequate) level.
Statewide, about 20 credit unions are still being closely monitored, said Ginger Larson, director of the Office of Credit unions in the Wisconsin Department of Financial Institutions.
Overall, she said, Wisconsin credit unions are "very sound," even though they are still having some problems with delinquent loans and loan losses. "There hasn't been any deterioration. I think we're seeing some slight improvements," Larson said.
Lowest ranked on both lists a year ago was First American Credit Union, Beloit. It was closed last August and taken over by First Community Federal Credit Union of Parchment, Mich.
First American's chief executive had said the credit union had a long history of providing loans to locally owned small businesses and during the recession, factory closings and staff cuts took a heavy toll on those businesses and they couldn't make loan payments.
To combat weak reserves
Weiss Ratings gives 11 credit unions - about 30 percent of the 36 in south-central Wisconsin - a "D" grade, identifying them as "weak."
Weiss, whose credit union ratings were not available last year, gave its lowest ranking in the area, a D minus, to Parker Community Credit Union in Janesville. Started in 1934 by Parker Pen employees, the credit union has $98.7 million in assets and two locations in Janesville. It is open to anyone who lives or works in Rock County. As of March 31, the organization reported a net loss of $314,000.
"We do have some delinquencies, a little bit higher than our peer rating, but I don't think that's unexpected for an area that's had several plant closings. We've been very conservative in making sure there is enough reserve in allowance for loan and lease losses," said Christine Dawe, interim chief executive officer.
Dawe was appointed in April after the departure of longtime president Jerry Bohne. Two weeks later, in an unrelated development, an employee was arrested on tentative embezzlement charges.
Dawe said she does not know if that case was factored into the Weiss rating. Parker received two stars from Bankrate.com and three stars from Bauer Financial.
Doing what they're good at
On the other end of the spectrum, First Community Credit Union of Beloit received some of the highest scores, with an A-minus (excellent) from Weiss, five stars (superior) from Bauer Financial and four stars (sound) from Bankrate.com.
"We do the things we're good at," said Jack Gill, president. First Community's focus is on late-model used-car loans and home mortgages. Most of the home loans are sold into secondary markets, "so the risk for us is pretty minimal," he said.
The credit union has 13,500 members and $75.3 million in assets as of March 31, with four locations in southern Wisconsin and northern Illinois.
Even with that area's economic problems, First Community's loan delinquency rate, as of the end of June, was 0.3 percent, well below the national average for its peers of 1.35 percent. One reason is that the credit union does not make commercial loans, Gill said; another is that over the past few years, its membership has expanded so it no longer serves only a few manufacturing plants.
In Madison, Webcrafters Employees Credit Union was among the highest rated. Started in 1931, the small credit union has about 500 members, all current or former employees of the printing company or their relatives, with assets of $1.9 million as of March 31.
"Our delinquency list is extremely low and because we have a sponsor company, that helps to minimize expenses," credit union president Don Woestman said.
Merger opportunities
The largest Madison credit union, Summit Credit Union, grew in the past year with two mergers. State Central and Dings Employees, both of Milwaukee, merged into Summit. State Central, the bigger of the two, had $68 million in assets and four locations in Milwaukee and West Bend.
"What we're interested in is merger opportunities that are in areas that we are interested in growing," Summit CEO Kim Sponem said. "From an asset perspective, it was not a big impact but for location and presence in Milwaukee, it certainly was," she said.
With $1.6 billion in assets, Summit earned three stars from Bankrate.com, four from Bauer Financial and a B-minus grade from Weiss Ratings.
UW Credit Union, the second-largest locally with $1.3 billion in assets, drew similar marks: three stars from Bankrate.com, five stars from Bauer Financial and a B from Weiss Ratings. UW Credit Union opened two new branches in the past year, in Wauwatosa and at UW-Oshkosh.
"We've seen the best six months we've ever had, and member satisfaction is the best we've ever had," said president and CEO Paul Kundert.
There were 12 credit union mergers statewide in 2010. In south-central Wisconsin, the others were: Jones Dairy Farm Employees into Fort Community, both in Fort Atkinson; United into Dodge Central, both in Beaver Dam; and Madison News into Dane County Credit Union, both in Madison.
So far in 2011, five credit unions have merged, including Sauk County Employees Union into Summit and AB into Heritage, both in Madison.
Brett Thompson, president and CEO of the Wisconsin Credit Union League, said statewide, loan delinquency is up slightly and the loan-to-savings ratio has decreased a bit, but capital ratios are strong, at 9.8 percent.
"As we look at the first quarter of 2011, I think it shows that credit unions are continuing to do well in what is a very, very tough environment," Thompson said.
