Municipal Credit Union Records $126 Million Loss

The NCUA labeled Municipal Credit Union “significantly undercapitalized” after recording a $126.2 million loss in the second quarter after the New York City credit union was placed in NCUA conservatorship.

The credit union ($3.1 billion in assets, 598,638 members), whose former CEO was sentenced to prison for fraud in June, recorded a $109.1 million increase in its “Employee Compensation and Benefits” line, which was $129.3 million for three months ending June 30, up from $20.2 million in 2018’s second quarter.

Altogether, net income went south by $132.3 million from the second quarter of 2018 to 2019’s second quarter. Other contributors were relatively minor:

• Net interest income before loan loss provisions fell by $7.9 million;
• The loan loss provision rose by $6.4 million;
• Fees and other operating income was flat; and
• Other noninterest expenses rose by $8.7 million.

The loss caused the credit union’s net income ratio to fall from a “well capitalized” 7.59% in March to its “significantly undercapitalized” 3.41% ratio in the June report.

MCU’s call report for June also reflects an odd combination of real estate loan originations falling in number from the first quarter to the second quarter, while their value increased. The opposite happens with all other loans.

The number of real estate loans granted by March 31 was 527, but the year-to-date number fell to 293 by June 30, a decline of 234 loans.

The value placed on the loans granted year to date rises from $32.9 million in March to $73.4 million by June, a second-quarter increase of $40.5 million.

On the flip side, there were 4,133 non-real estate loans produced during the three months ending June 30, but the value of the loans is -$26.4 million.

NCUA officials wouldn’t comment on MCU’s results, and unlike SEC filings, credit union reports do not include notes to explain material events.

Impacts on the NCUA reserve fund would only be felt if the credit union was liquidated.

Kam Wong, who was president/CEO of MCU – New York City’s largest and oldest financial cooperative – until he was fired in 2018, was sentenced in June to 5.5 years in federal prison for embezzling nearly $10 million from MCU.

The New York State Department of Financial Services took possession of MCU and appointed the NCUA as its conservator in May, less than a year after Wong pleaded guilty to embezzlement from MCU.

From about 2009 to 2018, court documents showed he stole millions of dollars from the credit union through various fraudulent schemes, lived a lavish lifestyle by driving luxury cars, ate at high-end restaurants, paid for five-star hotel rooms and spent $5.5 million on New York lottery tickets.