Bakery Employees Credit Union under Enforcement Order

California Department of Business Oversight (DBO) disclosed a final order against Bakery Employees Credit Union (Montebello, CA).

According to the order, Bakery Employees CU shall commence a search to identify a merger partner who is acceptable to the Commissioner of DBO. Bakery Employees shall provide a monthly written progress report to the Commissioner and the Regional Director of the National Credit Union Administration (Regional Director) detailing the due diligence of its search for a merger partner.

The final order also requires the $6.9 million credit union to retain management and maintain a Board of Directors (Board) acceptable to the Commissioner. Such person (or persons) shall be qualified to restore the credit union to a sound condition, operate the credit union in a safe and sound manner, comply with the provisions of this Order, and comply with applicable laws and regulations.

The credit union is ordered to complete corrective actions to address all accounting and internal control deficiencies related to the general ledger account balances that were identified in the examination dated March 31, 2015. Also, the credit union shall engage a qualified independent third party to obtain an opinion audit to validate the reconciliation of the general ledger accounts for Catalyst Corporate Credit Union and Money Gram for the periods beginning 12/31/2013 and continuing to the current month at time of reconciling.

The supervisory committee shall ensure the development and maintenance of a monthly progress report on all concerns noted in regulatory examination reports and independent audits.

Furthermore, the Board shall ensure that management maintains a list of all of vendors, including a description of the service provided by each vendor; the level of importance of each vendor’s service to the credit union’s business; and identification of the vendors that provide critical services to the credit union.

The credit union is required to develop a plan that is satisfactory to the Commissioner and Regional Director to achieve profitability with a benchmark of 0.1% of total assets for each quarter in years 2015 and 2016. At a minimum, the plan shall include the following: (a) Loan growth by type and interest rate; (b) Increased quality control to ensure the loan growth is consistent with current policy and the credit union’s loss reserves; (c) Anticipated provisions for loan loss expense; (d) Reduced operating expenses by amount and category; (e) Fee income by type and amount; (f) Specific quarterly performance benchmarks, minimally to include return on assets, operating expenses and net worth; and (g) Contingency plans in the event the above goals are not met, including trigger points for specific actions.

This order supersedes and replaces the Letter of Understanding dated December 9, 2014.

Read the final order.