NCUA To Tell Court First Virtual CU Has No Chance Of Resuscitation
ALEXANDRIA, Va. – NCUA lawyers are expected to tell a federal court this afternoon the agency refused to lend further assistance to Kappa Alpha Psi FCU, the nation’s first online-only credit union, and moved to liquidate the institution because it had no chance of being returned to financial health.
The six-year-old, $750,000 credit union, shuttered Aug. 3, is asking the federal court for a temporary restraining order to block the NCUA liquidation because its board believes it is on the verge of receiving financial assistance that would put in on firm ground.
In its court filing, Kappa Alpha Psi FCU, which was chartered by a nationwide African-American college fraternity, alleges that actions by NCUA, including last year’s and this year’s corporate credit union bailout charges, helped push it into insolvency. Credit union officials also said NCUA refused its request for a grant from the agency’s Community Development Revolving Loan Fund and declined to endorse its application for a $100,000 grant from the Treasury Department’s Troubled Asset Relief Program.
“Kappa Alpha Psi Federal Credit Union was never able to generate consistent operational profits, build its net worth position, maintain its records in a sound manner, grant quality loans or adequately collect on delinquent loans. Those factors led to the involuntary liquidation action that the NCUA Board took on Aug. 3,” said John McKechnie, chief spokesman for the agency.
In addition, the credit union did not meet the requirements for CDCI TARP money due to concerns over the credit union’s long-term viability, capability of management and its troubled financial condition, said McKechnie. “NCUA has spent considerable time and resources in an attempt to help the credit union to achieve adequate capitalization. Unfortunately, the effort was not successful.”
“Involuntary liquidation was deemed the most appropriate course of action,” the NCUA spokesman said.
Lawyers for the credit union say the credit union’s own numbers showed net worth at mid year of more than $25,600, or 3.67%. But NCUA’s own financials erased all of that net worth and show negative $22,200 of net worth. The lawyers say the credit union’s figures, plus a commitment from an undisclosed source for a non-member deposit of $100,000, would put it on the right track toward a strong financial condition.