Until recently, the future looked bright for Wescom Credit Union.
The Pasadena financial institution, the county's second largest credit union with assets in excess of $3.2 billion, was building up its mortgage business by gobbling up smaller lenders around Southern California. At the same time, Wescom vastly expanded its membership, adding nearly 40,000 members in 2007 alone.
But as the housing market imploded and the economic recession set in, the institution has taken a beating.
Wescom has closed more than a dozen branches since the beginning of last year and has announced plans to eliminate more than 200 positions. What's more, the credit union lost $53 million last year, more than any other credit union in Los Angeles.
The credit union didn't want to talk about its problems, but other industry veterans acknowledge these are unprecedented times.
"I don't remember ever going through a crisis like this before," said Jeff Napper, chief executive of LBS Financial Credit Union in Long Beach, which lost nearly $12 million in 2008 the institution's first annual loss in at least three decades.
"We are suffering collateral damage. There are probably very few financial institutions that are not suffering from the downturn in the economy."
There are nearly 200 credit unions in Los Angeles County with around 3 million members and total assets of about $35 billion. More than one-third lost money in 2008, some for the first time ever, and many have resorted to employee layoffs alarming for an industry that historically avoided staff reductions at all costs.
The not-for-profit cooperatives, owned and controlled by depositors, have been historically among the most conservative lenders. They generally avoided subprime mortgages during the real estate boom and most remain financially sound. But many institutions strayed from core product lines, offering services such as home equity lines of credit that turned out to be a bad bet.
What's more, with rising job losses, falling home prices and declining household income, many credit union members are finding it difficult to keep up with payments on even the most basic debt, such as auto loans or first mortgages.
Now, the rising loan losses are becoming a significant problem at credit unions, which depend on their owners-depositors to help keep the institution financially viable.
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