Defying Market Odds

California-based Altura Credit Union has stabilized in one of the most difficult economic regions in the United States thanks to some savvy cost-cutting.

 
 

Riverside, CA, may be one of the most difficult regions in the country for a credit union to survive. The county had 212,764 new foreclosures in July 2011 alone, according to RealtyTrac, a real estate data company based in Irving, CA. And unemployment in the region has remained above 10% since December of 2008, soaring to 15.1 % in July, according to the U.S. Bureau of Labor Statistics.

Riverside-based Altura Credit Union ($693M), which lost more than $12 million in the fourth quarter of 2008, has followed its members’ examples and pared back spending and stuck to a painfully conservative budget to reach financial stability.

“Members are shedding debt and cutting costs and so are we,” says Mark Hawkins, CEO of Altura. The credit union has cut in half its physical operations, closing eight of 16 retail locations and one of two corporate locations. It also has reduced staff and marketing budgets.

“Our costs are down and our loan reserves are declining,” Hawkins says. “The second quarter went very well. … We have not taken a negative charge, and we’re in no hurry to do that. But as members are getting their lives back to normal, it’s being reflected in our financial statements.”

The credit union reported $3.2 million in profit second quarter, which is a significant increase from the $1.6 million loss of second quarter 2010, according to Callahan & Associates’ Peer-to-Peer data. And its checking product that targets Gen Y, called iChecking, has steadily grown throughout the economic difficulties. Hawkins describes the account as having a “viral effect.”

The cooperative looks for small successes to celebrate because it is not in an ideal financial situation, Hawkins admits. Altura’s 12-month share growth declined more than 17% in the second quarter and its 12-month loan growth slid 19%. Still the credit union has survived substantial economic turmoil and expects to continue improving the rest of the year.

“It [reducing expenses] hasn’t been easy, nor has it been fun,” Hawkins says. “But [the cutbacks] have been necessary. It’s helped us find our way back to profitability. We’re definitely on the mend.”

Altura Credit Union's net income trends:

Click on graph to view larger image.  |  Source: Callahan & Associates' Peer-to-Peer software

 

 

 

Sept. 12, 2011


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