New York Regulator Conserves Municipal Credit Union

The New York State Department of Financial Services on Friday said it took possession of the $3 billion Municipal Credit Union, less than a year after its former President/CEO Kam Wong pleaded guilty to embezzling nearly $10 million from one of New York’s largest financial cooperatives.

The state agency named the National Credit Union Administration as conservator.

In 2017, the New York DFS said it had uncovered deficiencies in board oversight that had facilitated the multi-million-dollar embezzlement by Wong. He was charged by the U.S. Attorney in Manhattan with embezzlement, and he was banned from the credit union industry by the NCUA in May 2018.  He pleaded guilty to embezzling nearly $10 million from MCU in November 2018.

DFS removed MCU’s supervisory committee in May 2018, and its board of directors in June 2018 due to what the regulators called severe deficiencies in their oversight of the overall management of the affairs of the credit union and designated an on-premises administrator to oversee the general management of the credit union. The state regulator did not identify the on-premises administrator.

Based on ongoing supervision by DFS and the NCUA, the New York regulator made the decision Friday to appoint NCUA as conservator and terminate the administrator’s engagement.

“DFS is taking possession of MCU and appointing the NCUA as conservator in order to continue the close joint DFS/NCUA monitoring of the credit union’s condition, operations, and controls, to ensure that member funds are protected and that member services continue without interruption,” New York DFS Acting Superintendent Linda A. Lacewell said.

A review of the MCU’s financial performance reports filed with the NCUA, however, does not show that the credit union is in any financial distress, although its net worth has declined from 8.76% in 2014 to 7.59% at the end of the first quarter of this year.

What’s more, the credit union has shown no substantial declines in its total loans or loan income though its net income decline from $17.5 million in 2017 to $11.4 million at the end of last year. At the end of the first quarter of this year, MCU recorded a net income of $2.8 million, down from the net income of $4.6 million in March 2018.

The credit union allowance for loan and lease losses jumped from $18.8 million in 2017 to $22.5 million in 2018. At the end of first quarter, its ALLL was $22.6 million, according to NCUA financial performance reports.

Last year, the credit union’s membership increased by 37%.

Member services will continue uninterrupted at all of the credit union’s 22 branch locations in the New York metropolitan area. Members can continue to conduct normal financial transactions, deposit and access funds, make loan payments, and use shares during the conservatorship.

Members with questions about Municipal Credit Union’s operations may contact the credit union at 212-238-3300 between 8:30 a.m. and 8 p.m. Monday through Friday. Members with questions about the conservatorship may review the Municipal Credit Union’s frequently asked questions posted on the NCUA’s website. Members with questions about their Share Insurance Fund coverage can find more information in the Share Insurance Coverage section of NCUA’s MyCreditUnion.gov consumer website.