NCUA Liquidates Defense Logistics FCU for Unsafe & Unsound Practices

The NCUA said Thursday it liquidated Defense Logistics Federal Credit Union after determining the New Jersey credit union engaged in unspecified unsafe and unsound practices.

The $27.2 billion Pentagon Federal Credit Union in McLean, Va., immediately assumed DLFCU’s assets, member shares and loans.

In 2019, the NCUA issued a cease and desist order that required the cooperative to address 15 stipulations regarding its operations, including internal control procedures, various audits, loan charge-offs and extensions, member account verification and other issues.

Chartered in 1959, DLFCU served civilian and military personnel of the Defense Contract Administration Services District in Newark, N.J., and the Defense Contract Audit Agency of Northern New Jersey. Its main office was in the Picatinny Arsenal, near Dover, which develops advanced conventional weapon systems and ammunition for all branches of the U.S. military.

A review of DLFCU’s Call Reports and financial performance reports showed that the credit union’s membership, assets and loan income have been declining for years.

For example, in 1990, the credit union posted assets of $1,526,164 and recorded loan income of $101,384. In that year, it served nearly 800 members. By 2000, its membership fell to 582, while its assets dropped to $1.2 million and loan income declined to $57,000.

By the end of the first quarter of this year, DLFCU was serving 219 members and managing $506,435 in assets. The credit union posted loan income of $2,838. It posted a net loss of $2,401 at the end of the first quarter and recorded a net loss of $13,132 at the end of last year, according to NCUA financial performance reports.

James Schenck, president/CEO of PenFed, said DLFCU’s loans and share accounts were converted to PenFed’s system Thursday.

“And all 219 members of Defense Logistics Federal Credit Union now have access to PenFed’s award-winning digital services,” Schenck said. “PenFed member service representatives are on dedicated phone lines to answer any questions from the former Defense Logistics members. We are honored to serve these members of our national defense community and all who support them.”