Credit union under-reported losses

Arrowhead Credit Union, which was seized over the weekend because of its weakening financial condition, filed inaccurate loan data, according to the National Credit Union Administration. No details on what was under-reported, but the disclosure raises more questions about the San Bernardino-based credit union and the circumstances behind its takeover. From the Press-Enterprise:

Business and community leaders have said they were surprised by the takeover because the credit union appeared to be recovering from steep losses it suffered by the end of 2008 and 2009. [Larry Sharp, Arrowhead's CEO], and Chip Filson, an independent credit union consultant who had done work for Arrowhead several years ago, both contend the San Bernardino-based institution was improving and had more than enough in reserves to cover delinquent loans.

[CUT]

According to the Federal Credit Union Act, a credit union is considered significantly undercapitalized if its net worth ratio, what regulators use to determine the financial health of a credit union, is below 4 percent. Arrowhead Credit Union's net worth ratio was 3.5 percent at the end of March. Sharp said the financial institution's net worth ratio rose to 3.68 percent by May.

No surprise on what upended Arrowhead - consumer loans accounted for about 90 percent of its portfolio.