It's Bank Failure Friday!!!

We have the 3^rd credit union failure of the year, Municipal Credit Union of New York City.

There is a story behind this, it's the oldest credit union in New York State, and it appears that it may have been done in response to its former CEO's embezzlement uncovered last year:

The New York State Department of Financial Services on Friday said it took possession of the $3 billion Municipal Credit Union, less than a year after its former President/CEO Kam Wong pleaded guilty to embezzling nearly $10 million from one of New York’s largest financial cooperatives.

The state agency named the National Credit Union Administration as conservator.

In 2017, the New York DFS said it had uncovered deficiencies in board oversight that had facilitated the multi-million-dollar embezzlement by Wong. He was charged by the U.S. Attorney in Manhattan with embezzlement, and he was banned from the credit union industry by the NCUA in May 2018. He pleaded guilty to embezzling nearly $10 million from MCU in November 2018.

DFS removed MCU’s supervisory committee in May 2018, and its board of directors in June 2018 due to what the regulators called severe deficiencies in their oversight of the overall management of the affairs of the credit union and designated an on-premises administrator, Mark Ricca, to oversee the general management of the credit union.

Based on ongoing supervision by DFS and the NCUA, the New York regulator made the decision Friday to appoint NCUA as conservator and terminate the administrator’s engagement.

………

A review of the MCU’s financial performance reports filed with the NCUA, however, does not show that the credit union is in any financial distress, although its net worth has declined from 8.76% in 2014 to 7.59% at the end of the first quarter of this year.

What’s more, the credit union has shown no substantial declines in its total loans or loan income though its net income decline from $17.5 million in 2017 to $11.4 million at the end of last year. At the end of the first quarter of this year, MCU recorded a net income of $2.8 million, down from the net income of $4.6 million in March 2018.

The credit union allowance for loan and lease losses jumped from $18.8 million in 2017 to $22.5 million in 2018. At the end of first quarter, its ALLL was $22.6 million, according to NCUA financial performance reports.

Last year, the credit union’s membership increased by 37%.