HOYT LAKES, Minn. – State regulators issued a cease and desist order last week against Northridge Community CU for exceeding the state’s limits on holding of fixed assets and the $36 million credit union said it plans to sell one of its branch buildings to satisfy the regulators.
Don Werdock, president of the credit union, said officials in the Minnesota Department of Commerce are concerned with losses the credit union wracked up in recent years, $442,000 for 2005, $172,000 for 2006 and $115,000 for 2007. "We’ve been continually improving the last three years, but we haven’t made a profit and the Department of Commerce isn’t pleased with us not making a profit," Werdick told The Credit Union Journal yesterday. He said the credit union, which holds 11.5% capital, has been improving its performance, and reported $73,000 in losses for the first quarter.
The state regulators cited the credit union for operating in an unsafe and unsound manner by exceeding the 5% fixed assets limits. According to Werdick, Northridge Community has 6.7% of its assets in fixed holdings. The cease and desist order says the "excessive investment in fixed assets" has resulted in excessive non-interest expenses that caused the losses in 2005, 2006 and 2007.
The plan is to sell a building housing one of its branches, which has been appraised for $1.3 million, then lease the 900 square-foot branch back from the new owners. "That will help our cash flow," he said.
The credit union’s troubles originated with the 2001 closure of the LTV iron mine and the lay-off of 1,400 workers, many of whom were credit union members, explained Werdick.
He said they have no current plans to seek a merger.
