MIRAMAR, Fla. – NCUA said this afternoon it has assumed control of Eastern Financial Florida CU, the once high-flying airlines credit union that lost $114 million last year.
Among the causes of the failure of Florida’a third largest credit union were bad real estate investments, including two failed condominium projects, and more than $70 million of failed collateralized debt obligations.
The Florida Office of Financial Regulations, Bureau of Credit Union Regulation appointed NCUA as conservator today after placing the $1.6 billion credit union into conservatorship.
NCUA has assumed control of the credit union and has appointed officials from Space Coast CU of Melbourne, Fla., to temporarily manage Eastern Financial Florida CU’s day-to-day operations. NCUA’s goal is to continue credit union service to the members and ensure safe and sound credit union operations.
Eastern Financial was chartered in 1937 to serve employees of what eventually became Eastern Airlines. When Eastern was liquidated in 1991, the credit union branched out to serve more than 1,000 select groups.
The state regulators issued Eastern Financial a cease and desist order last month that covered a variety of management shortcomings, including management of member business loans, recording of delinquencies and charge-offs and the lack of a permanent CEO, since the February 2008 departure of president and CEO Stephen McGill.
Among other things, Eastern Financial was directed to charge off any permanent impairment to more than $70 million of collateralized debt obligations it holds, as well as to obtain final appraisals on an undeveloped condominium project that is in foreclosure. The regulator also cited Eastern Financial for not having enough core deposits to ensure it can meet funding obligations; not possessing adequate loan underwriting standards; carrying an excessive level of concentrations of member business loans; and not having adequate oversight to prevent violations of the Bank Secrecy Act.
