Liquidated & Merged Credit Unions Cause $4.1 Million Loss to SIF
Two West Virginia financial cooperatives are closed because of suspicious activity and fraud allegations.
Four credit unions that were liquidated or merged caused an estimated loss of $4.1 million to the Share Insurance Fund, according to the NCUA’s Office of Inspector General Semiannual Report to the Congress.
The report, released late last month, showed that two West Virginia credit unions, liquidated on Nov. 15, 2022, accounted for more than $2.8 million of the total estimated loss.
The $2.7 million Mingo County Education Federal Credit Union in Williamson, W.Va., caused a Share Insurance loss totaling $2,369,773. The $477,610 O.F. Toalston Federal Credit Union in Logan accounted for $465,164 of the Share Insurance loss, according to the OIG report.
The NCUA first placed MCE and OFT into conservatorship and then liquidated the credit unions because of “suspicious activity including loan and share manipulation, recordkeeping concerns and allegations of potential fraud,” the OIG’s report said.
Although NCUA financial performance reports for both credit unions did not show any losses, they both had very high rates of loan delinquencies.
The loan delinquency rate for MCE was nearly 65%, compared to its peer average of 1.42%, its 2022 third quarter NCUA Financial Performance Reports showed. The credit union posted 306 total loans at the end of September 2022, according MCE’s last Call Report.
The loan delinquency rate for OFT was almost 60% compared to its peer average of 3.40%, NCUA Financial Performance Reports showed. The credit union posted five loans at the end of September 2022, according to OFT’s last Call Report.
The OIG’s report also showed the $11.9 million Woodlawn Federal Credit Union in Pawtucket, R.I., caused a loss of $1,205,718 to the Share Insurance Fund. Woodlawn was merged into the $3.4 billion Navigant Credit Union in Smithfield, R.I., during the first quarter of this year.
Woodlawn recorded a net loss of $186,640 at the end of this year’s first quarter and a net income loss of $147,900 at the end of last year, according to NCUA Financial Performance Reports. At the end of the first quarter, the credit union’s loan delinquency rate was 26% compared to a peer average of less than 1%.
“WFCU failed because of its poor financial condition with various administrative remedies that were not resolved,” according to the OIG’s report.
Finally, the OIG report also showed that the $727,157 Inter-American Federal Credit Union in Brooklyn, N.Y., caused a $74,451 loss to the Share Insurance Fund.
IAFCU was involuntarily liquidated in March because it did not resolve concerns over violations of cease-and-desist orders regarding the Bank Secrecy Act, recordkeeping, dormant accounts and supervisory committee weaknesses, according to the OIG report.