Conserved Edinburg Teachers Credit Union Lost $2.5 Million

The conserved Edinburg Teachers Credit Union posted a loss of $2,578,138 while its membership dropped by 40%, according to 2021 fourth quarter NCUA financial performance reports.

Since the NCUA took over the Edinburg, Texas-based credit union in March 2021, it has lost money in every quarter except Q1. From March to December of last year, loans fell from $14.4 million to $12 million and assets plummeted from $111 million to $103 million.

Loan income grew from $315,460 in March 2021 to $1,159,886 in December 2021, but the year-end loan income was lower than the $1,418,228 in loan income that ETCU posted in December 2020.

According to NCUA financial performance reports, ETCU recorded a loss of $742,603 in “other reserves,” and a $1,536,322 loss under the non-interest income and (expense) line item at the end of last year. For comparison, ETCU posted $988 in 2020 and $20,388 in 2019 in non-interest income; $0 in 2018, and $4,000 in non-interest income in 2017. From 2017 to 2020, the credit union showed no losses in its “other reserves” line item.

What’s more, ETCU’s membership plunged from 12,543 in March 2021 to 7,417 at the end of 2021, according to NCUA Call Reports.

Apparently, the NCUA was concerned about membership retention. On Dec. 22, ETCU promoted on its website a Christmas open house event for members to “come in and see YOUR credit union’s new look,” an invitation on its website read. The event included refreshments and a chance to win a prize.

The NCUA has disconnected links on ETCU’s website to its annual reports and financial reports.

Although the Texas Credit Union Department said conservatorship for ETCU was necessary to protect the public interest, the regulator cited no specific reason when it appointed the NCUA as the conservator.

While ETCU’s financial performance reports showed the credit union was not struggling financially or losing money, the credit union’s 2019 IRS 990 return showed that its former President/CEO Jeffrey B. Moats was paid a total compensation of $1,611,821, which was four times the median base salary and bonus pay for CEOs across all asset sizes in that year.

In 2019, TECU’s total employee compensation and benefits totaled $1,930,385 and fell slightly to $1,898,658 in 2020. Under the NCUA’s conservatorship, total employee compensation and benefits amounted to $1,501,797 in 2021, NCUA financial performance reports showed.

A CU Times review of the credit union’s IRS 990 returns from 2008 to 2019 showed that Moats received $8,799,709 in total compensation.

About two months after ETCU was conserved, Moats sued the credit union and the NCUA in state and federal courts.

The former CEO said in court documents that he decided to sue the NCUA because it failed to pay actual damages resulting from his employment contracts with the credit union and the federal agency’s refusal to return his personal belongings.

The NCUA agency said it was within its regulatory authority to fire Moats and most, but not all, of his personal property had been returned. The federal agency said it was investigating whether certain artwork claimed by Moats may have been purchased with commingled funds. He claimed personal belongings included artwork on display at the credit union office worth an estimated $275,000.

The NCUA revealed in court documents that it was conducting an investigation “against him (Moats) for, among other things, commingling credit union funds.”

Through his lawyers, Moats denied that he commingled any credit union funds.

After a months-long legal battle, a Texas federal judge dismissed Moats’ lawsuit in December.