The financially troubled $19.8 million Valley State Credit Union was liquidated Friday by the Michigan Department of Insurance and Financial Services.
The state regulator made the decision to liquidate the Saginaw-based credit union and discontinue its operations after determining the credit union was insolvent with no prospect for recovery. The NCUA was named the liquidating agent.
The federal agency also said the $498 million ELGA Credit Union of Burton, Mich. assumed Valley State CUs assets, shares, and loans and will continue serving its 2,715 members. Valley State’s office will stay open.
Last August, the Michigan regulator placed Valley State into conservatorship because of the credit union’s unsafe and unsound practices. Three months later, the NCUA was appointed the conservator.
Although the state regulator did not specify the credit union’s unsafe and unsound practices, Valley State has been losing money for years, according to NCUA financial performance reports.
At the end of last year, for example, Valley State posted a net income loss of $2 million, a net worth of 2.90% and an ROAA of -9.16%.
The credit union’s financial performance reports also shows Valley State CU posted a sharp increase in delinquent loans from 4.77% in 2015 to 7.42% in 2016, which is well above the peer average of 1.29%.
In addition, the credit union real estate loans plummeted from $5.5 million in 2012 to $3.8 million in 2016. While its unsecured loans increased from $1.7 million in 2012 to $2.5 million in 2015, the unsecured loan portfolio fell to $1.8 million in 2016. Other loans increased substantially from $3.6 million in 2012 to $10.1 million in 2015. However, the credit union’s other loan portfolio dropped sharply to $6.2 million in 2016, according to NCUA financial performance reports.
Valley State CU’s provision for loan/lease losses totaled $1.9 million in 2016, $258,212 in 2015, $54,118 in 2014, $18,470 in 2013 and $37,326 in 2012, accord to NCUA financial performance reports.
Chartered in 1955, Valley State Credit Union is the second federally insured credit union liquidation in 2017.
In March, the $1.7 million Florida Conference AME Church Federal Credit Union was the first federally insured credit union to be liquidated this year. Its assets and members were assumed by the $626 million Gulf Winds Federal Credit Union, of Pensacola, Fla.
