AEA reports second-quarter profit

AEA Federal Credit Union reported continued improved financial results for the quarter ending June 30.

However, its most recent call report just posted with the National Credit Union Administration shows the Yuma financial institution still has a lot of bad debt on its books.

AEA Federal Credit Union, which operates under the conservatorship of the NCUA, posted year-to-date net income of $2.2 million. Total assets at the end of the second quarter were $229 million.

Elizabeth Whitehead, NCUA Region V director, cited streamlined operations, improved facility management practices and positive progress in business loan delinquency and recoveries as primary contributors to AEA's financial recovery, according to a news release Tuesday.

The call report, however, suggests there is a ways to go for AEA to recover from the plunge in its net worth ratio to minus 7.63 percent in late 2010, brought about primarily by bad business loans, that resulted in NCUA placing the institution in conservatorship in December.

Currently, AEA's net worth ratio is a minus 7.74 percent, according to its newest call report, which states that the local credit union is “critically undercapitalized.”

The report shows the institution has charged off $19.2 million in bad debt, the vast majority of its business loans for the quarter.

In the 15 months that included all of 2010 and the first quarter of this year, AEA charged off $31.8 million — $17 million in the first quarter of 2011 alone.

In its latest call report, AEA reports it still has an allowance of $27.8 million for loan and lease losses. The report shows that AEA currently has 258 delinquent loans totaling $32.64 million on its books. Of that total, $27.75 million in loans are 12 months or more past due. Nearly all them are business-related.

In addition, the call report lists foreclosed and repossessed assets held by AEA at $2.98 million.

Millions of dollars were lost in a tangled web of loans that led to a trail of bankruptcies and criminal charges against AEA's former business loan officer and the businessman who was the principal beneficiary of his largesse.

That businessman, Frank Ruiz, recently pleaded guilty to transactional money laundering and conspiracy for his role in the misuse of AEA funds. He is scheduled to be sentenced in October.

Ruiz could receive a lighter sentence in exchange for cooperating in the investigation into his co-defendants, William and Rhonda Liddle. As AEA's former loan officer, William Liddle allegedly approved $22 million in fraudulent business loans to Ruiz in a kickback scheme.

In AEA's struggle to recover, Whitehead noted in Tuesday's news release that positive changes have been made in the institution's financial status since it was placed in conservatorship.

Year-to-date results reflect significant improvements over the same period in 2010 with total expenses down 41 percent, provision for loan losses expenses down 68 percent, occupancy expenses down 30 percent, miscellaneous operating expenses down 56 percent, compensation expenses down 33 percent and operating fees down 19 percent, she said.

Whitehead also noted that net income has risen by $3.6 million in 2011.

“Since December 2010, NCUA, the interim management team and AEA's employees have worked to dramatically improve the credit union's financial condition and maintain services for the credit union's 44,000 members,” Whitehead said.

NCUA officials previously had said that it typically takes 18 to 24 months to complete a workout situation.

In the meantime, AEA members' accounts are insured up to $250,000 each through NCUA's National Credit Union Share Insurance Fund.

Joyce Lobeck can be reached at jlobeck@yumasun.com or 539-6853.