For the second time this year, Michigan regulators placed a credit union into conservatorship.
The Michigan Department of Insurance and Financial Services said Wednesday it took over the financially troubled $24.8 million Valley State Credit Union in Saginaw.
In January, the state regulators placed the $68 million Clarkston Brandon Community Credit Union into conservatorship after its former CFO Michael Anthony LaJoice admitted to embezzling more than $18 million, the Clarkston, Mich.-based cooperative.
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The credit union was merged in March into the $3.2 billion Michigan State University Federal Credit Union in East Lansing. LaJoice was charged with bank fraud by federal prosecutors, but his plea hearing has not been scheduled yet.
After examining Valley State's books, the Michigan regulator said it determined to place the credit union into conservatorship because it was "necessary to protect the public interest."
Although the regulator did not specify the credit union's issues, Valley State has been losing money since 2011, according to NCUA's financial performance reports. From 2011 to 2015, the credit union's net income losses totaled more than $195,000.
However, Valley State suffered heavier net income losses of $229,780 at the end of this year's first quarter and an additional $301,069 in net income losses at the end of the second quarter, according to NCUA's financial performance reports.
Although the credit union showed a net worth of 9.40%, it posted an ROAA of -2.40% at the end of the second quarter.
Valley State's call reports revealed its delinquent loans soared from June 2015 to June 2016.
In June 2015, the credit union posted a total of 53 delinquent loans worth $411,418. By June 2016, those numbers increased to 176 total delinquent loans worth $2 million.
According to Valley State call reports, 110 indirect loans were in delinquency that were worth $1.4 million at the end of June 2016. At the end of June 2015, the credit union posted only 13 indirect loans in delinquency worth $142,000.
However, the credit union posted only eight troubled debt restructured loans worth $148,624 by the end of the second quarter this year. In June 2015, Valley State posted 10 TDR loans worth $291,607.
Chartered in 1955, Valley State CU serves more than 3,000 members and employs four full-time employees and three part-time employees.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
