Where is the Transparency for NCUA’s Actions at Municipal Credit Union

In May, NCUA became conservator of the $3.0 billion Municipal Credit Union in New York City.

In the June call report, 45 days after the conservator took over, Municipal reported a $123 million YTD loss. This appears to have been caused by the termination of a defined benefit plan triggering a required funding of the shortfall. This loss reduced the credit union’s net worth ratio to 3.41%, or undercapitalized, from over 7% the quarter prior to NCUA’s becoming conservator.

The September 2019 Update

The most recent call report implies that the credit union had net income of $10 million as the YTD loss has been reduced to $113 million. Comparing June and September call reports shows total membership declined by 35,000 and total employment reduced by 104 (to a total of 591) in the three months ending September.

The average salary and benefits are $369,000. Total salaries and benefits have increased to $163 million from $62 million for the previous year. This extraordinarily high number suggests the credit union is paying out the terminated defined benefit program.

The professional services expense is running almost three times greater than the prior year: $18 million versus $6.9 suggesting the consultants are well compensated, or is there another explanation?

The credit union’s loan originations are down significantly at $378 million from $615 million in 2018. Shares declined by $76 million in the quarter. Delinquency is .85% and the allowance accounted is funded at 227% of total delinquent loans. Net worth is 3.87%, or still undercapitalized.

What is Going On?

What is the purpose of all of these very expensive charges? Why close out the retirement fund now when liabilities will stretch decades into the future? Why were over 100 employees let go? What is the reason for the decline in lending? Is this tied to layoffs? Who is responsible for these decisions? Is anyone overseeing this rundown of the credit union? What is the plan?

Most importantly, whose interests is the conservator serving. Is it. . .

• The employees who are taking the brunt of the layoffs?
• The members whose numbers fell by 35,000, shares by $76 million, and loans by $24 million in the September quarter?
• The conservator’s reputation and/or compensation?
• The NCUA’s desire to protect its public standing?
• The credit union system’s trusted role in New York City and the state?
• The cooperative option in the nation’s financial system?

No Transparent Goals

No one knows, because NCUA has not provided any information that would give all stakeholders insight into the goals of this regulatory seizure.

Without any goals, it is easy to defend whatever outcome occurs. (“We tried our best.”)

Options are not debated. Critical constituencies are left out of the deliberations. The result is that confidence in the outcome will always be open to question.

Operating in secret will only create further uncertainty. Is the goal a turnaround to return the credit union to its owners and the community? Or is this just a dressing up exercise to sell off this 100-year franchise and branch network to the highest bidder? And thereby let NCUA wash its hands for its responsibility in this situation?

The silence of NCUA board members, some of whom have been before congress twice in the past ten days, is deafening. It is easy to talk about future visions and past activities, but who is dealing with the here and now? Not even Municipal’s website mentions the NCUA’s takeover.

Chairman Hood, this is occurring on your watch. Are you a CEO on the bridge or one sleeping in your cabin?

Who is Affected by Municipal’s Conservatorship?

The field of membership from the web site:

Who Can Join?

You can Join MCU if you are:

• • • An employee of the City of New York
    • An employee of a hospital, nursing home, health facility, or their affiliates located in New York State
    • A Federal employee who works in the five boroughs
    • A State employee who works in the five boroughs
    • All students enrolled in a college, university, school, or institution, in the City University of New York (CUNY) education system
    • All students enrolled in St. John’s University who are attending campuses located in New York State
    • An employee working for agencies operating within the City of New York metropolitan area and which are at least in part funded by the City of New York or the State of New York
    • A retiree receiving a pension or annuity from one of the organizations that qualify for membership in MCU
    • An employee of an insurance company that offers health related insurance in the State of New York
    • An employee of companies that produce and/or supply hospitals in the State of New York with medical and other types of healthcare products
    • An employee of the City of Yonkers or Mount Vernon
    • An employee of a private college located in the City of New York
    • An employee of a private or public college in the counties of Nassau, Suffolk or Westchester
    • An employee of the Archdiocese of New York or Brooklyn
    • A member of certain private employers or industry groups
    • A family member of a member or individual who is eligible for membership. Eligible family members include those related by blood, marriage, adoption or living in the same household, including spouse, parent, stepparent, child, stepchild, sibling, stepsibling, grandchild, grandparent, or great grandparent. “Household” means living in the same residence and maintaining a single economic unit.