An independent auditor – Moss Adams, LLP – has been engaged to conduct a “full-scope” material loss review (MLR) of the failed Indianapolis’ Newspaper Federal Credit Union, according to a recent inspector general report to Congress.
The National Credit Union Administration (NCUA) Office of Inspector General (OIG), in its report covering activities from April 1 through Sept. 30, 2021, said the MLR of this credit union, which was closed in January, is aimed at determining the cause (or causes) of failure and the resulting loss to the National Credit Union Share Insurance Fund (NCUSIF); assessing the NCUA’s supervision of the credit union; and providing appropriate suggestions and/or recommendations to mitigate future losses.
The $2.29 million estimated NCUSIF loss from this institution’s failure is way below the $25 million threshold that would trigger a full-scope MLR outright, but in this case, the agency has noted, there were unusual circumstances: the CEO and manager were alleged to have committed fraud relating to the credit union’s loan portfolio.
The recent OIG report doesn’t give a projected end date for this review. Meanwhile, it said four other insured credit unions that were closed from April through September involved SIF losses each below the $25 million MLR threshold, and they involved no unusual circumstances. Two (previously reported) were involuntarily liquidated, and two were handled through assisted merger, as follows:
- Defense Logistics Federal Credit Union: The failure of this institution is estimated to cost the SIF $63,898. The institution was closed July 1 through involuntary liquidation and purchase-and-assumption with Pentagon FCU “due to ongoing unresolved non-compliance issues” related to NCUA rules and regulations.
- Community Owned Federal Credit Union: This credit union’s failure is estimated cost the SIF $750,772. It was involuntarily liquidated Sept. 17 due to insolvency from “a lack of a viable field of membership, inability to expand services, and lack of permanent, experienced personnel to operate the credit union,” the OIG report states.
- Fedstar Federal Credit Union: Resolving this credit union is expected to cost the SIF $342,000. It was handled through an assisted merger June 1 with Infirst Federal Credit Union due to “insolvency from issues with an underfunded Allowance for Loan & Lease Losses account, failure to timely charge off non-performing loans, unreconciled accounts, unauthorized expenses on the corporate credit card of the former Chief Executive Officer, improper controls over Automated Clearing House processing, weak internal controls, excessive unsecured loans over policy limits, and unreported nonmember deposits,” the OIG reported.
- Empire Branch 36 National Association of Letter Carriers Credit Union: Estimated to cost the SIF $350,000, this institution was resolved July 22 through an emergency assisted merger with Rockland Employees Federal Credit Union due to “insolvency from eroding net worth, unprofitability, and insufficient earnings to cover operating expenses,” the report states.
NCUA Semiannual Report to Congress (April 1 – Sept. 30, 2021)