Overall, Penrod said, credit unions are maintaining solid capital cushions against loss. The credit union administration says an institution's capital ratio -- net worth divided by loans and other assets -- should be above 7% for it to be considered well capitalized, but many credit unions are in the 9% to 10% range.
But adding to reserves reduces capital. Wescom made a one-time addition of $12 million to its loan-loss provisions, which gave it a capital ratio of 7.2% at the end of June, just above the "well capitalized" benchmark.
Kinecta, which increased its loan-loss provisions to $32 million from $20 million over the first six months of the year, had a capital ratio of 8.03% on June 30, a solid notch above the 7% threshold but less than the 10.8% averaged by other credit unions with more than $500 million in assets.
Kinecta also says it has tightened its lending policies and no longer provides financing through used-car dealers.
In an unusual diversification, Kinecta last year acquired Nix Check Cashing, Southern California's largest check-cashing chain. The idea was to introduce mainline financial products to the lower-income customers who use Nix, spokeswoman Laura Oberhelman said.
Kinecta is now offering credit union services at separate windows at five of Nix's 55 branches. The Nix operations remain profitable, Oberhelman said.
Congress has encouraged credit unions to develop programs for underserved communities, McKechnie said, but only three federally insured credit unions have gone so far as to buy check-cashing outfits.
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scott.reckard@latimes.com
