ALEXANDRIA, Va.–The failure of two credit unions during the time period of April—September of this year cost the National Credit Union Share Insurance Fund nearly $7 million, with nearly all of that represented by one CU, according to Semiannual Report to Congress by NCUA’s Office of Inspector General.
The big loss was $6.3 million caused by the former Paducah Teachers FCU in Kentucky.
“PTFCU became insolvent with no prospect to restore solvency due to a high-risk loan portfolio, alleged fraudulent activity, financial insolvency and insufficient operational staff,” the agency said in the report.
The then $12-million credit union was liquidated in September, and as CUToday.info reported here, the $278.9-million C-Plant FCU, also based in Paducah, purchased some assets and assumed most of PTFCU’s share accounts.
The credit union has approximately 1,200 members at the time of liquidation.
‘No Unusual Circumstances’
In its report, the OIG stated, “We conducted limited reviews of two failed credit unions that incurred losses to the Share Insurance Fund under $25 million between April 1, 2022, to September 30, 2022. Based on those limited reviews, we determined none of the losses warranted conducting additional audit work. For the two failed credit unions, we concluded that either: (1) there were no unusual circumstances or (2) we had already addressed the reasons identified for failure in recommendations to the agency in our MLR Capping report or other MLR reports.”
$400K Loss
The second credit union that led to a loss to the NCUSIF was MSBA Employees FCU in Garden City, N.Y., which was liquidated in July. It represented a $439,089 loss to the fund.
“MSBA entered into a merger with Consumers Federal Credit Union with cash assistance,” the OIG report said. “MSBAs net worth was critically undercapitalized with no reasonable expectation of solvency due to poor recordkeeping and poor asset quality.”
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