Thursday, May 6, 2010

Bay Gulf CU's C & D

Bay Gulf Credit Union (Tampa, FL) is under a cease and desist order from the Florida Office of Financial Regulation for unsafe and unsound banking practices.

The order found that the credit union was not operating with sufficient earnings to restore the credit union to being well-capitalized. At the end of the first quarter of 2010, Bay Gulf reported a loss of $823,706 and had a net worth (capital) ratio of 5.24 percent. The credit union has agreed to implement a net worth restoration plan that would return the credit union to being well-capitalized within 10 quarters.

Achieving this target could be a challenge, as the First Quarter Financial Performance Report shows that Bay Gulf CU did not set aside any reserves for a 2010 NCUSIF premium assessment.

The enforcement action also requires that the credit union adequately fund its allowance for loan and lease losses (ALLL) and loans are charged off according to Generally Accepted Accounting Principles. Any deficiency in the ALLL shall be remedied by a charge to current operating earnings in the calendar quarter in which the deficiency is discovered and prior to submitting the Call Report.

Additionally, the credit union is to review its loan modification process. At the end of the first quarter, Bay Gulf reported almost $13.4 million in modified loans or 12.03 percent of its loan portfolio. Almost $7.5 million of its modified loans are real estate loans. The order requires the credit union to develop policies and procedures to distinguish between loan modifications and troubled debt restructurings. The order states that credit union should accurately account for past due loans on its Call Report.

With respect to member business loans, the order states that Bay Gulf “will not fund any new, rollover or letters of credit member business loans, with the exception of loans guaranteed by the Small Business Administration.” The credit unions cannot resume making member business loans until Bay Gulf demonstrates substantial compliance with all parts of the order and the credit union is profitable and loan losses are at an acceptable level. Also, the order requires that the credit union to document the analysis of the balance sheet and the profit and loss statement of the businesses with lines of credit outstanding.

The enforcement action further requires the Board and management of the credit union to monitor the liquidity needs of the credit union. The daily liquidity report “should analyze projected sources and uses of funds, evaluate liquidity alternatives, and determine expected liquidity under adverse economic conditions.”

1 comment:

  1. Put this in perspective; like vs. how many open Cease & Desist federal orders against BANKS in Florida?

    In just the past eighteen months 24 Florida banks have failed. On top of that about 25 additional new FL bank C&Ds have been issued over the same period, according to FDIC's website. There may be more but FDIC delays publication for a while. Regardless, a reader can click on the banks’ Orders to read details like the ones included in your blog post, so as to get all the nearly-dirty details of bank wrongdoing and unsafe, unprotected bank practices which are quite salacious.

    Q: Why does Congress need to re-regulate banks?
    A: Banking is what banking does.

    (With apologies to Forrest Gump author Winston Groom)



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