NCUA Named Conservator of Troubled Michigan CU

NCUA Named Conservator of Troubled Michigan CU
November 9, 2016 Marketing GrafWebCUSO

The Michigan Department of Insurance and Financial Services Wednesday appointed the NCUA as the conservator of the financially troubled $22.3 million Valley State Credit Union in Saginaw.

The MDIFS placed Valley State into conservatorship on Aug. 17 because of unsafe and unsound practices at the credit union.

Although the state regulator did not specify the credit union’s issues, Valley State has been losing money since 2011, according to NCUA financial performance reports. From 2011 to 2015, the credit union’s net income losses totaled more than $195,000.

However, Valley State suffered heavier net income losses of $229,780 at the end of this year’s first quarter and an additional $301,069 in net income losses at the end of the second quarter, according to NCUA financial performance reports.

Additionally, the credit union lost $457,956 at the end of the third quarter bringing its total losses to $988,805 this year.

Valley State’s delinquent loans soared from 4.95% in September 2015 to 15.76% in September 2016.

In September 2015, the credit union posted 73 delinquent loans worth $834,941. By September 2016, those numbers increased to 228 total delinquent loans worth more than $2.2 million, according to Valley State’s NCUA call reports. Most of those delinquencies were used car loans.

Delinquent indirect loans also increased substantially from 28 worth $355,129 in September 2015 to 122 indirect delinquent loans worth $1.4 million in September 2016, according to the credit union’s NCUA call reports.

Though Valley State posted a net worth of 9.77%, its ROAA was -2.57%, according to NCUA financial performance reports.

While continuing normal member services, the NCUA will work to resolve issues affecting the credit union’s operations, the MDIFS reported in a prepared statement.

Members who have questions about the conservatorship should contact Valley State.

This marks the second time this year a Michigan credit union has been placed into conservatorship.

In January, state regulators placed the $68 million Clarkston Brandon Community Credit Union into conservatorship after its former CFO, Michael Anthony LaJoice, admitted to embezzling more than $18 million from the Clarkston, Mich.-based cooperative. 

The credit union was merged in March into the $3.2 billion Michigan State University Federal Credit Union in East Lansing. LaJoice was charged with bank fraud and pleaded guilty in a Detroit federal court last week.

State regulators also liquidated the $2 million Veterans Health Administration Credit Union in March. By September, Michigan Attorney General Bill Schuette arrested and charged Fuataina Afutiti, 50, of Westland, VHACU’s former president/CEO, for allegedly stealing more than $2.3 million from the Detroit-based credit union.