Regulators Are Too Quick To Merge Small, Troubled CUs
Please accept this letter to the editor as my response to Mr. Dennis Moriarity, CEO of Unity Credit Union in Warren, Mich. I totally agree with this article written by Mr. Moriarity (Fold NCUA's Tent Before Regulator Folds CUs, CU Journal Sept. 6). NCUA has been riding us hard with a net worth restoration plan and we agree with the DOR and have been diligently improving our overall position and increasing our net worth each and every month for 2010. We acknowledge that we have some problems, but we have addressed each and every one; however it seems that each time NCUA is in our office their focus has changed to another problem.
The CU purchased one of our repossessed automobiles for use by the CEO. This was board approved; we paid $3,000.00 higher than our best offer after six months of sales efforts, which was $1,000 less than FULL retail. NCUA went bonkers and said we had to get a legal opinion for this transaction or it would have to be reversed. We discussed this with our attorney and he provided us with a legal opinion stating this was well within the law. NCUA refused to accept his legal opinion and the examiner said nothing we could do would satisfy this problem other than reverse it. Our attorney, who is a well-respected CU lawyer said he would have this addressed from the top of NCUA down to the examiner in charge. They are still listing this on our DOR report.
We are a $10-million CU and NCUA has berated us on our ALLL External Factors when we have a greater percentage of Loan & Lease Loss Reserves than any credit union in our chapter. NCUA has actually had two- and three-day visits asking if we have a merger partner as our only survival is merging. We have assured NCUA that if our Net Worth Restoration Plan fails, we have discussed merging with a credit union nearby. My board does not want to merge unless there are no options for survival. Currently our net worth as of Aug. 31, 2010 matches our Net Worth Restoration Plan for First quarter 2012.
I recently attended a networking group of 15 credit unions within our region, where I mentioned TDRs and not a single CU there even knew about TDRs. I was the smallest CU in attendance and not even the two largest CUs ($100-million-plus) knew of TDRs. NCUA has berated us with TDRs for the last two examinations. The only TDRs we have are Chapter 13 Bankruptcies (three). I feel NCUA's goal is to force us into a merger because we are a small CU. We have reminded NCUA that their own regs must allow for the Corporate and NCUSIF premium charges against our net worth. These charges have exceeded $125,000 of our net worth to date, and as Mr. Moriarity has so eloquently stated, NCUA cannot give us a timeline on when these charges will stop.
I talked to a credit union CEO in California whose net worth was under 5% and they were not under any letter of any type. They were, of course, a much larger CU than us. (Our Net worth as of Aug. 31 is 6.21%) As I said I really feel that NCUA's goal is to force a merger and they're really not concerned with our members in this community. Our own NCUA Chairperson has said that NCUA was on target to merge or liquidate 150 credit unions during 2010.
I really don't think small credit unions really have a voice in the regulatory process of NCUA unless you have double digit net worth. I feel we are facing extinction and our members will be forced to move to larger organizations or operate in a cash status only!
I really hope you do not publish my name as this would probably be the last "death knell" for me as a credit union CEO!
Editor's note: name withheld upon request.