By Michael J. Sorba Staff Writer
Created: 12/31/2010 10:25:56 PM PST
A federal regulator has set no timetable in the new year for when a government takeover of Arrowhead Credit Union will end.
But new legislation could prompt renewed interest in the institution and ultimately a willing business to take it off the government’s hands.
In June, the National Credit Union Administration placed struggling San Bernardiono-based Arrowhead into conservatorship, assuming direct control by removing the board of directors. The NCUA’s three-member board, which is appointed by the president, now acts in its place. Arrowhead’s CEO Larry Sharp was also fired.
NCUA is the federal agency that regulates and supervises credit unions.
The agency is working to restore Arrowhead to financial health and there’s no estimate of when the conservatorship will end, NCUA spokesman John McKechnie said.
“The conservatorship is continuing,” McKechnie said. “No decisions have been made by (NCUA’s) board and there’s no timetable for when those decisions will be made.”
He added that members can continue to expect a “full range” of service.
The past year was a rough one for Arrowhead Credit Union as federal regulators seized the struggling institution, citing a “declining financial condition” as the reason for the takeover.
Citing the need to revamp the institution’s position, Arrowhead officials announced in November that Arrowhead Credit Union planned to close eight branches as of Friday, the majority of them inside Stater Bros. markets. It also meant that 37 employees were laid off.
While the national board has made no decisions on a timeline for the credit union’s future, more change could come if legislation approved by Congress is signed into law making the sale of troubled financial institutions more marketable to healthier ones.
The legislation, S. 4036, sponsored by Sen. Chris Dodd, D-Conn., is awaiting the signature of President Barack Obama.
It would allow the NCUA to provide capital assistance to a troubled credit union, thus encouraging mergers with healthy credit unions, an NCUA statement says.
Keith Leggert, senior economist with the Washington, D.C.-based American Bankers Association, said the legislation permits any kind of emergency capital or loan from the NCUA to be counted as capital of the institution.
This improves its financial standing, making it a more attractive acquisition for a healthy credit union, Leggert said.
As it stands, Arrowhead’s condition detracts potential buyers because it would lower the buyer’s net worth, he said. But if NCUA assistance bolsters Arrowhead, it could be enough to attract a better-performing institution looking to expand into the Inland Empire.
Before NCUA took over, Arrowhead had plans to sell five branches in Victorville, Apple Valley, Barstow, Hesperia and Big Bear Lake to Alaska USA Federal Credit Union.
NCUA objected to the sale of all five branches. It allowed some to be turned over to Alaska USA, McKechnie said.
But Inland Empire economist John Husing said conservatorship wasn’t necessary in the first place, adding that the NCUA has destroyed one of the most important businesses and financial institutions in the Inland Empire.
“They’re improving it so much that (Arrowhead’s) deposits are going down,” Husing said. “People are answering with their feet. You had very major corporations that were doing business with the local credit union yank their accounts out because they’re disgusted.”
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