New Horizons CU Under Cease and Desist Order

The Alabama Credit Union Administration issued a cease and desist order against New Horizons Credit Union (Mobile, AL).

The cease and desist order found that the $221.5 million credit union and one or more of its institution-affiliated parties have engaged in unsafe or unsound practices, violation of law, rule, and regulations, and have violated the conditions set forth in an February 23, 2017 Letter of Understanding and Agreement (LUA).

Specifically, the cease and desist order found:

• The credit union failed to comply with full and fair disclosure of its financial and operating conditions.
• The board of directors failed to adequately supervise and direct credit union's management.
• The credit union had inadequate management.
• The credit union failed to address a number of material deficiencies listed in the Document of Resolution Status Report in a March 2017 Examination Report and comply with terms and conditions specified in the LUA.
• The credit union operated with capital that was classified as adequately capitalized.
• The credit union had ineffective credit risk management practice and poor underwriting practices that resulted in poor asset quality and high net charge offs.
• The credit union did not timely charge off uncollectible loans.
• The credit union failed to follow Generally Accepted Accounting Principles to calculate its allowance for loan and lease losses.

The cease and desist order mandated that the credit union needed to take a number of corrective actions.

The cease and desist order required the credit union to address corporate governance deficiencies. The credit union's board is expected to improve its oversight of the credit union's affairs.

The credit union is further required to form a director's committee. One of its duties is to identify at least 3 potential merger partners. Discussions with potential merger partners are to be reported to the credit union's board and the credit union's regulator in writing no later than October 1, 2017.

The credit union will implement a prompt corrective action plan to become well-capitalized.

The credit union must also address credit risk and compliance risk problems. For example, credit union management must immediately charge off all loans that meet or exceed the credit union's charge off policy. If loans 90 days or more past due are not charged off, management must document the reason why these loans are not charged off. the collateral repossessed, and the collateral is in the process of foreclosure and repossession.

The cease and desist order became effective on September 3, 2017.

Read the order.