Tremont Credit Union Hit With Letter of Understanding and Agreement
The NCUA and the Massachusetts Division of Banks jointly issued a Letter of Understanding and Agreement to the officials of $178.9 million Tremont Credit Union, Braintree, Mass.
Tremont's board accepted the letter without admitting or denying fault. The LUA required correction of several problems, including insider abuse and self-dealing, poor loan quality, inadequate internal controls and weak management.
The credit union's net worth plummeted from 14.25% to 7.81% over the last year according to its March 2010 financial performance report. At year-end 2009, delinquencies hit 7.81%, but fell back to 4.74% as of March 2010. Return on assets dropped to negative 6.71%, but was positive 0.76 as of the first quarter.
Among the charges in the LUA were failing to prevent insiders from abusing their powers in the lending and operations areas, failing to provide for an effective system to mitigate or identify problem assets and prevent deterioration of the net worth of the credit union, and operating with deficient earnings. "If left unresolved, these deficiencies may jeopardize the financial condition and/or operations of the credit union," the LUA stated.
The NCUA only listed one LUA all of last year and zero from 2006 through 2008. Tremont was the second in two weeks, following the LUA issued against Kappa Alpha Psi FCU on April 16. LUAs can be viewed at www.ncua.gov/Resources/AdministrativeOrders/LUA.aspx