Riverdale Credit Union (Selma, AL) and Shreveport Federal Credit Union (Shreveport, LA), which were placed into conservatorship during the second quarter, are critically undercapitalized and have wiped out their net worth.
Shreveport Federal Credit Union
Shreveport Federal Credit Union with almost $86.7 million in assets saw its net worth fall from slightly more than $15.4 million at the end of 2016 to nearly -1.5 million as of June 2017. As a result, the credit union's net worth ratio fell from 14.65 percent at the end of 2016 to -1.68 percent as of June 30, 2017.
The decline in net worth was due to large losses incurred by the credit union. The credit union reported a loss of negative $17.1 million through the first two quarters of 2017. Most of the loss was due to $14.9 million in other non-operating expenses.
The credit union is also reporting other comprehensive income of almost minus 2.2 million. The credit union has negative equity capital just shy of minus $3.7 million.
Riverdale Credit Union
Riverdale Credit Union with $63.1 million in assets reported a loss of almost $10.5 million through the first six months of 2017.
The loss was due to a dramatic increase its provisions for loan and lease losses during the first six months of 2017. Provisions for loan and lease losses were almost $11.5 million as of June 2017. In comparison, provisions for loan and lease losses were $761.6 thousand a year earlier.
The loss wiped out the credit union's net worth, which fell from almost $8.9 million at the end of 2016 to minus $1.6 million at the end of the second quarter of 2017. The credit union's net worth ratio tumbled from 12.21 percent at the end of 2016 to negative 2.56 percent as of June 2017.
In addition, the credit union recorded a sharp increase in delinquent and charged off loans. The credit union reported having $7.7 million in delinquent loans at the end of the second quarter of 2017. As a result, 13.80 percent of its loans were 60 days or more past due.
Net charge-offs were almost $6.9 million for the first two quarters of 2017. The credit union reported a net charge-off rate of 23.45 percent for the first two quarters of 2017.
According to the Administrative Order, the NCUA Board determined that conservatorship was necessary because the credit union concealed books, papers, records, and assets of Riverdale Credit Union, and evidence exists of illegal and unsafe practices and NCUA staff cannot determine the full ramification of this activity.
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This is exactly what our board has been concerned about.
ReplyDeleteNCUA is so busy concocting new rules to avoid mergers, when they should be placing more accountability on THOUSANDS of credit unions that are not capable of competing without undue risk to the fund.
Over $20 million in capital just is--d away that our cu or some others could have put to better us for THEIR members and ours.
NCUA is compromised.
They're trying to hold on to a buggy whip.
The small cu is dormant and a risk.
Instead of building a stronger movement with a smaller number of credit unions that are much stronger, they're looking to make mergers impossible so that they can keep the numbers up.
Hello?
Congress?
Trump?
Hey chip...
ReplyDeleteThese should have been merged.
Have these not been reported on?
ReplyDeleteNot seeing anything from NCUA on this.
What's up with that?
KL: After a CU is conserved, what is the requirement for the regulator to deal with negative net worth? Doesn't prompt corrective action require action beyond just conserving? Can the regulator leave it in conservatorship indefinitely? How many other surprises are in the wings? It seems reportedly health credit unions fail quickly, but are not dealt with promptly according to PCA.
ReplyDeleteAccording to CUMAA, the Board will appoint a liquidating agent for a credit union if the credit union is critically undercapitalized on average during the calendar quarter beginning 18 months after the date on which the credit union became critically undercapitalized. But CUMAA provides several exceptions including the credit union is in substantial compliance with net worth restoration plan, has positive earnings or upward trend in earnings that is sustainable, and the Board certifies the credit union is viable and not likely to fail.
DeleteKeith -- this might be a little bit off track, but I would be interested in your take on looking at asset quality relative to troubled debt restructured (TDR). We always see ratios of past due and coverage that don't include performing TDR. Should ratios like that include performing TDR? By definition, they are "troubled" assets.
ReplyDeleteThese 2 failures did not happen instantaneously. Where the hell was the NCUA? Anyone taking responsibility at the NCUA? I didn't think so. The agency is irrelevant.
ReplyDeleteThe NCUA is irrelevant. These 2 did not fail overnight. It took several years for them to fail. And where the hell was the NCUA? No where to be found. And where was the NCUA examiner in charge? No where to be found. The NCUA collects quarterly data and does precious little follow up. The NCUA alights are on but sadly no one is in the office.
ReplyDelete