Louisville Police CU Liquidated After $5.4 Million in Losses

Kentucky regulators liquidated the Louisville Metro Police Officers Credit Union Friday after it had burned through $5.4 million in losses in its last two reported quarters as state and federal agents investigated allegations of internal theft.

The Kentucky Department of Financial Institutions on Friday appointed the NCUA as liquidating agent for the federally insured credit union, and it allowed Commonwealth Credit Union of Frankfort, Ky. ($1.2 billion in assets, 98,376 members) to acquire the Louisville credit union’s 3,349 members, shares and $20 million in assets for terms that were not disclosed.

In the six months that ended March 31, the assets of Louisville Metro Police Officers CU fell nearly $7.7 million, or more than a quarter of their total. The decline included about $4.4 million in loans.

Its delinquencies rose from a reported 1.75% in September 2017 to 9% by Dec. 31. The delinquency rate had fallen to 4.1% by March 31.

No charges have yet been reported from the investigation started by state authorities and first revealed in December 2017. Members filed a class-action lawsuit in March alleging fake loans had been taken out in their names.

The NCUA conserved Louisville Metro Police Officers Credit Union in December just 10 days after the Kentucky Department of Financial Institutions disclosed that it had turned over to the FBI an investigation of internal theft.

“The decision to liquidate Louisville Metro Police Officers Credit Union and discontinue its operations was made after determining the credit union was insolvent and had no prospect for restoring viable operations,” the NCUA said in a news release emailed at 5 p.m.

In its September 2017 call report—the last before it was conserved—the credit union’s situation seemed rosy, with a modest profit and a net worth ratio over 11%. By the end of December, its “well capitalized” status had dissolved into “critically undercapitalized” with a ratio approaching -2%. By March it was nearly -11%.

Louisville generated a $3.7 million loss in the last three months of 2017 aided by a $218,897 spike in loan loss provisions and a $3.5 million charge under the NCUA account called “miscellaneous operating expenses,” a category that was just over $12,000 for the first nine months of the year.

In the first quarter, the main contributors to the credit union’s $1.7 million loss were a $171,854 loan loss provision and $1.4 million in miscellaneous operating expenses.