June 30 call reports for the $808 million Arrowhead Central CU, released late yesterday by the NCUA, reveal the institution was running at a $1.45 million loss shortly after its June 25 conservatorship.
Dismissed management posted inaccurate information as of March 31 that distorted the true financial condition of the institution, the NCUA said in the release.
In particular, the loan loss reserve account was not adequately funded. The corrected statement increased Arrowhead's loan loss reserve by $4 million and related loss reserve expense by nearly $13 million as of June 30.
The NCUA said former Arrowhead management did not comply in first quarter with loan loss reserve methodology previously approved by an external CPA review. The regulator said it has also determined the team, which includes former CEO Larry Sharp, Chief Financial Officer Daniel Marcicente, Senior Vice President of Lending Gene Shabinaw and Senior Vice President of Strategic Development Ray Messler, did not charge off loan losses in a timely or consistent manner, and historical ratios did not consistently reflect actual losses the credit union was experiencing.
Further, the NCUA and the California Department of Financial Institutions rejected four net worth restoration plans filed by Arrowhead, citing deficiencies. Management did not properly identify and monitor loan modifications to ensure they complied with generally accepted accounting principles and provided relief or assistance to the members, NCUA said.
The financial results are available on the NCUA's website.