Financial regulatory body NCUA shuts down two credit unions within a 48-hour period
In recent developments, the National Credit Union Administration (NCUA) has announced the liquidation of two federal credit unions - Aldersgate Federal Credit Union and Butler Heritage Federal Credit Union.
Based in Marion, Illinois, Aldersgate Federal Credit Union served 811 members and had $10.6 million in assets. The credit union, which includes ministerial and probationary members, full-time employees, local pastors, clergy persons, and diaconal ministers under appointment of the Illinois Great Rivers Conference of the United Methodist Church, was placed into conservatorship last month due to violations of several provisions of the Federal Credit Union Act and NCUA rules and regulations.
On the other hand, Butler Heritage Federal Credit Union, located in Middletown, Ohio, served 772 members in Butler County. Despite having a net worth of around 5%, the credit union experienced financial underperformance, prompting the NCUA's actions. The liquidation decision reflects concerns over sustainability amid liquidity challenges driven by factors such as the Federal Reserve’s rate increases in 2023-2024, which strained credit union borrowing and operations sector-wide.
The assets of both credit unions were acquired by other federal credit unions. The assets of Butler Heritage Federal Credit Union were acquired by Cincinnati Ohio Police Federal Credit Union (COPFCU), which has nearly $173 million in assets and serves over 10,000 members. The members of Butler Heritage will experience a smooth transition to COPFCU, and their accounts are insured by the NCUSIF.
The NCUA's liquidation decision aligns with its regulatory mandate to protect members’ deposits and maintain stability in the credit union system by closing and resolving institutions that are no longer financially viable. This often follows assessments finding that merger or rescue options are not feasible or sufficient to restore viability.
It is important to note that the NCUA currently operates with a single board member due to President Trump firing two Democrat board members, Todd Harper and Tanya Otsuka, on April 16. The board, with one member, can carry out its usual supervisory and enforcement duties, but cannot vote to implement policy changes or approve new enforcement actions without a quorum of two members.
The Ohio Division of Financial Institutions, along with the NCUA, provides oversight and examination to ensure the safety and soundness of all credit unions operating in Ohio. The members' deposits in both credit unions are federally insured by the National Credit Union Share Insurance Fund up to $250,000.
In a separate development, both fired NCUA board members, Todd Harper and Tanya Otsuka, are suing Trump and some other government officials over their "patently unlawful removal[s]."
[1] NCUA Liquidates Aldersgate Federal Credit Union [2] NCUA Liquidates Butler Heritage Federal Credit Union
The liquidation of Aldersgate and Butler Heritage Federal Credit Unions underscores the NCUA's commitment to ensuring the stability and safety of the credit union system. The decisions to liquidate both institutions were made due to their insolvency, a condition characterised by liabilities exceeding assets and an inability to meet financial obligations. Insolvency typically results from prolonged financial underperformance, inadequate net worth, and failure to maintain regulatory capital requirements, which undermine a credit union's safety and soundness.
[1] The liquidation of Aldersgate Federal Credit Union, amid concerns over its violations of federal regulations, highlights the National Credit Union Administration's (NCUA) mission to secure the stability and safety of the credit union industry.
[2] The liquidation of Butler Heritage Federal Credit Union, faced with liquidity challenges exacerbated by the Federal Reserve’s rate increases, underscores the NCUA's rigorous oversight of business practices within the banking and insurance sector.
[3] These liquidations serve as reminders of the importance of personal finance management and adherence to rules within the wealth-management sector, ensuring the prosperity and longevity of financial institutions.
[4] General news outlets and crime and justice sections may report on the ongoing legal battle between the former NCUA board members, Todd Harper and Tanya Otsuka, and President Trump, questioning the legality of their termination, potentially influencing future appointments and policy within the financial sector.
