MIRAMAR, Fla. – A team from NCUA and as many as 10 senior managers from Space Coast CU were speeding here over the weekend to try to save Eastern Financial Florida CU, the state’s third-largest credit union that was taken over on Friday.
The managers from Space Coast, located 160 miles north in Melbourne, were engaged by NCUA to resuscitate the troubled $1.6 billion credit union, with the possibility of combining the two credit unions, a source involved in the work-out effort told The Credit Union Journal on Friday. "Our job right now is to reassure the members that it will be business as usual,"20said the source.
Eastern Financial has been struggling for more than a year with the effects of the real estate bust in southern Florida, especially two multi-million dollar investments in failed condominium projects, as well as a failed $70 million investment in a risky collateralized mortgage obligation.
As a result the credit union reported a $133 million loss for 2008 and the elimination of all of its net worth, or capital, forcing state regulators to issue a strict cease and desist order last month. Among the issues raised in the supervisory order is the lack of a permanent president and CEO since the February 2008 dismissal of Stephen McGill.
For the first quarter Eastern Financial reported a $4.5 million loss and negative caputal of $3.5 million.
NCUA is believed to have provided a $100 million emergency loan to keep the credit union operating until a merger partner can be found. NCUA officials refused to comment.
Eastern Financial was chartered in 1937 to serve employees of Eastern Airlines. When the airline went bankrupt and was liquidated in 1991, the credit union expanded to serve more than 1,200 select groups.
Friday’s takeover of the one-time $2.4 billion credit union was undertaken by NCUA at the behest of the Florida Office of Financial Regulations, Bureau of Credit Union Regulation, which has jurisdiction over the state charter.
Among th e credit union's biggest problems was a $30-million loan to the Merco Group of the Palm Beaches for an oceanfront West Palm Beach condo project that never got built and went into foreclosure last year. The $30-million loan amounted to almost 15% of the credit union’s capital.
The credit union was also ordered, as part of the state’s C&D, to charge off all of its CDO investment.
