Credit union comeback?

The past decade has been a struggle for the California-based Evangelical Christian Credit Union, which provides financial banking services to churches, Christian organizations, missionaries, and consumers across the United States.

Last year the National Credit Union Administration (NCUA) downgraded the ECCU to “adequately capitalized” from the more desirable designation of “well capitalized” (defined as having a 7 percent or higher net worth ratio).

A spokesman for the NCUA would not comment on the ECCU’s condition, but data available from the federal agency shows how dire the ECCU’s situation has become.

At the end of 2016’s first quarter, almost all of the nation’s 5,954 federally insured credit unions— 5,823, or 97.8 percent—were classified as “well capitalized,” said John Fairbanks, the spokesman.

Falling beneath this status puts the ECCU in the lowest-performing 2.2 percent of federally insured credit unions in the nation. The 91 “adequately capitalized” credit unions account for 1.53 percent of the industry. Underneath this level are 33 “undercapitalized” credit unions (0.55 percent), five “significantly undercapitalized” (0.08 percent), and two “critically undercapitalized” (0.03 percent).

Abel Pomar, president of the ECCU since February, said it is moving aggressively to correct its course: It has sold off problematic loans, divested itself of unwanted real estate holdings, and adopted more conservative risk-management practices.

“We had a $14 million loss last year,” Pomar said, “but the difference between last year’s loss and prior years’ losses was that last year’s loss was planned.” He said the investment in corrective measures is making a difference: “For the first time in a very long time, our delinquency numbers have come down below 1 percent.”

The ECCU has reduced its balance of real estate owned (REO) from $21.3 million in 2014 to $8.2 million in 2015 to $4 million this year.

“We’re on an intentional path,” Pomar said. Coming to the ECCU from Bank of America, he has sought to guide the institution toward smarter practices while preserving what he described as Christ-centered goals.

Perc Pineda, a senior economist at the Credit Union National Association, an advocacy group for credit unions, said the ECCU is profitable so far this year and “is moving in the right direction. … ECCU’s asset quality has improved, and as of June 30, 2016, its net income was $2.6 million.”

A banking expert, professor Tony Plath from UNC Charlotte’s Belk College, said the steps described by Pomar sound “indicative of a financial institution that’s on the mend.”

ECCU’s reforms result in part from outside pressure. In 2014, the ECCU entered into a consent order with the California Department of Business Oversight in which it agreed to strengthen its management team and board of directors, improve cost controls, diversify its balance sheet, expand risk management practices, and reduce reliance on uninsured shares (deposits).

“At Bank of America, I came to appreciate a strong diversified business model,” Pomar said. “I learned many things while I was there, and one thing I brought to ECCU was a determination to move ECCU in a direction to where we are truly diversified.” He wants the ECCU to be a place where everyday believers—not just those in church leadership or missionary organizations—will do their banking.

The ECCU provided these statistics: Serves 1,700 or so churches and ministries and more than 3,800 missionaries. Provided $37 million in ministry and church loans last year. Since 1964 more than $1.5 billion in loans to more than 400 churches and ministries. Over the past decade $4.6 million in grants to ministries and missionaries.