Rebecca U. Cho, Staff Writer
Posted: 06/28/2010 05:29:14 PM PDT

An interim chief executive officer has taken the helm at Arrowhead Credit Union as part of the federal government’s takeover of one of the Inland Empire’s largest credit unions over the weekend.

Kay Woods stepped in to temporarily head the San Bernardino-based credit union. Woods is “an experienced conservatorship manager,” said a spokesman with the National Credit Union Administration, the federal regulatory body that took over Arrowhead.

Woods was formerly a CEO of Las Vegas-based Weststar Credit Union and left years ago to become a consultant, credit union sources said.

Also, in order to conduct an ongoing review of Arrowhead’s operations, regulators put senior management on paid administrative leave.

“The NCUA Board is conducting a thorough review of Arrowhead’s operations and will make a determination about the future of the institution when that review is completed,” said John McKechnie, of the National Credit Union Administration, in an e-mail.

Officers put on leave include CEO Larry Sharp; Daniel Marciante, chief financial officer; Gene Shabinaw, senior vice president of lending; and Ray Messler, senior vice president of strategic development.

The most likely scenario facing Arrowhead next in the conservatorship is a sale to another union, said Dana Warren, director of the Business Law Practicum at Loyola Law School. It would go the way of other Inland Empire credit unions who were seized by the government, including The Members’ Own Credit Union, based in Victorville, which was taken over and then brokered to Alaska USA Federal Credit Union in September.

Another scenario in a conservatorship is that the government will bring the credit union back to health before returning it to the control of its members.

But that is unlikely, Warren said.

“The government doesn’t want to run these institutions. It wants to sell them to someone who wants to run them,” Warren said.

The takeover came as Arrowhead prepared for the sale this past weekend of four branches to Alaska USA Federal Credit Union. The deal was designed to bring the ailing credit union back to health.

But income derived from the sale of branches to Alaska USA was not enough to remedy Arrowhead’s poor financial condition, the NCUA’s McKechnie said. He said losses were continuing, including the deterioration of Arrowhead’s loan portfolio.

“The credit union was not reversing negative trends and was not on a trajectory to return to profitability,” McKechnie said.

Arrowhead reported losses of $47.1 million last year and $28.6 million in 2008.

But in recent months, the credit union’s financial condition seemed to be on the rise with the nonprofit reporting a net income of $3.7 million in April. Fourth quarter profits were reported as $1.7 million.

“It’s just a shame,” said Jeff York, the president of the California Credit Union League. “It looked like they were making money and trying to shrink their assets to shore up the balance sheet. They were doing all the things they needed to do to come out of the economic firestorm successfully. I don’t know what they could’ve done at this point.”

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