First Hurricanes, Now Wildfires: Here's Where California's Credit Unions Stand in the Wake of Another Natural Disaster

Tuesday, October 17, 2017

Remi Lukosiunas

First it was hurricanes along the Gulf Coast, and in Puerto Rico and Florida. Now, it’s wildfires in California. It seems like we just can’t catch a break when it comes to natural disasters.

As the wildfires burn through parts of California, jumping from one neighborhood to another, we can only look on with horror at some of the unbelievable pictures. Some aerial shots look like the aftermath of a nuclear explosion – entire neighborhoods completely wiped out with only piles of ashes left behind.

As these horrific events unfold, and just like with recent hurricanes, stress and losses are beginning to pile up for everyone. So, we went back to our Weiss Ratings database to evaluate what that might mean for regional financial institutions.

Based on our latest analysis, there are 211 banks with branches in the state of California, and 169 banks headquartered there. As you would expect, banking giants like JPMorgan Chase Bank, NA (Rated “B”), Wells Fargo Bank, NA (Rated “B-”), and Bank of America, NA (Rated “B-”) have numerous locations in the state. But they probably aren’t too concerned about the fires from a business standpoint because problems at a handful of branches wouldn’t make a major dent in their overall banking operations.

What I found surprising is that more credit unions than banks call California home. My analysis shows that 318 credit unions are based there, compared to only 169 banks. Even if you add in the ones that only have branches in California, the total of 211 banks falls far short of the credit union numbers.

Credit unions are generally much smaller in size, something that causes additional concern during natural disasters and economic downturns. And according to reports from the Credit Union National Association, or CUNA, there are a handful of small California credit unions to keep an eye on this time.

Smallest California Credit Unions in The Path of the Wildfires

This table shows the ones to watch. Although the above institutions could be in danger, only one of them is rated “D”, while two have a “C” rating, and one is a “B-”. So, most of them were in decent shape in terms of financial safety before disaster struck.

Meanwhile, a separate organization called the National Credit Union Administration, or NCUA, estimates a broader group of 18 credit unions have been affected by the fires. That could include physical damage to branches, early closing hours, or a complete business closure – each scenario resulting in losses and disruption in daily activities.

But if you stand back and analyze the overall California credit union industry, this is what their safety ratings look like. As you can see, a majority of state institutions merit a “C” or higher rating, suggesting that the state’s credit union industry is quite healthy.

Ratings of the ten largest credit unions in the state also confirm that notion:

Ten Largest California Credit Unions

Although two of them were in the direct path of the wildfires — First Technology Federal Credit Union (Rated “A-”) and Redwood Credit Union (Rated “A”) — their excellent safety ratings suggest that the institutions can handle a fair amount of financial stress.

In fact, 90% of the ten-largest California credit unions are rated either “A” or “B” by Weiss Ratings. Kinecta Federal Credit Union is the lowest-rated institution in the group with a “C+” safety rating.

Bottom line: While the wildfires may not cause such widespread devastation as the recent hurricanes, they can certainly have a negative impact on people’s finances, which for financial institutions, can eventually translate into late loan payments and pressure on profits.

Regardless of where you conduct your financial business, be sure to always check the safety of your institution with Weiss Ratings.

Think Safety,

Remi Lukosiunas


Remi Lukosiunas

Money and Banking Edition, By Remi Lukosiunas, Financial Analyst

Remi Lukosiunas, a Financial Analyst, joined Weiss Ratings in 2014 with a financial services background in internal audit and the credit union industry. Remi conducts banking, credit union, insurance and investment research. He has also written extensively on stocks and investing using ratings as a guide. Remi is a graduate of Florida State University with a degree in multinational business.

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