Redwood Credit Union, the third-largest financial institution in Sonoma County, is taking over a 75-year-old Santa Rosa credit union that has struggled financially in recent years.
Cal State Central Credit Union, which has lost money for the last five years, asked Redwood Credit Union in January to take over its operations. The two announced an agreement to merge Friday, pending approval from regulators.
“We weren’t really looking to do it, but it’s a good fit for us,” said Brett Martinez, president and chief executive of Redwood Credit Union. “And more importantly, it’s a good solution for their members and employees.”
Cal State Central Credit Union did not have the financial strength to offer the number of branches and services provided to members at Redwood Credit Union, said Jim Larson, its longtime chief executive.
“We have about 16,000 members who will soon have access to many more services,” Larson said.
Redwood Credit Union had $1.7 billion in assets and 151,000 members in 2010. The merger will increase its membership by about 11 percent, and add Cal State Central Credit Union’s $90.3 million in assets.
Redwood Credit Union posted $6 million in earnings last year, bouncing back from a 2009 loss of $11.5 million.
The rebound was driven primarily by two factors, Martinez said. First, the credit union did not have to set aside as much money for loan losses in 2010 — $38.9 million last year compared to $48 million in 2009.
Secondly, Redwood Credit Union was required to pay $11.5 million into a national credit union insurance fund in 2009. Last year that number dropped to $3.9 million.
The amount of its delinquent loans increased 6.6 percent in 2010 to $31.6 million, and it wrote off a record $32.3 million in defaulted loans.
But the economy appears to have hit bottom, and as people get back to work their financial problems will begin to ease, Martinez said.