Two years ago, AEA Federal Credit Union's future looked bleak asit nearly succumbed to the greed of a lending officer who took thecooperative to the brink of collapse.

It was in December 2010 when the NCUA stepped in to place the$231 million Yuma, Ariz., credit union into conservatorship afteran 11-month FBI investigation revealed that William Liddle, who worked as vice president of businessservices, was the mastermind behind the approval of business loansin an apparent kickback scheme.

During his time at the credit union, Liddle approved more than$25 million in business loans, according to an indictment from aPhoenix federal grand jury. Liddle, along with his wife Rhonda, andFrank Ruiz, an Arizona businessman, were arrested Dec. 2, 2010for their roles in approving questionable AEA business loans inexchange for nearly $1 million, according to the Arizona Office ofthe United States Attorney.

Ruiz used the loans to fund his businesses, many of which arenow bankrupt. He testified against Liddle last year, was ordered topay more than $6 million restitution to AEA and was sentenced totwo years in prison. On Jan. 31, the NCUA officially banned Liddlefrom participating in the affairs of any federally insuredfinancial institution.

AEA said Liddle was hired in November 2004 to develop and managea business services program based on his formal education andprofessional expertise in commercial lending and internationalbusiness. Liddle resigned from his position in December 2009 tomanage his business, Desert Capital Advisors LLC, according to thecredit union.

AEA said inconsistencies were detected following Liddle'sdeparture prompted an audit of business lending activitiesconducted by an executive committee appointed by AEA officials.

The credit union's business loan losses caused a drop incapital, prompting the NCUA to require preparation of a five-yearnet worth restoration plan. To keep afloat, the credit union alsohad to close one branch and reduce staff by more than 35%. Backthen AEA had $22 million in delinquent business and constructiondevelopment loans and $45 million in delinquent member businessloans excluding agricultural loans. Total outstanding loan balancessubject to bankruptcy were $37.7 million. All loans charged off dueto bankruptcy to date total $6.9 million.

In the end, Liddle was convicted in 2012 of conspiracy, fraud,wire fraud and transactional money laundering. He was sentenced to15 years in prison, five years of supervised release and ordered topay restitution in the amount of more than $25 million.

After two years of righting the ship, it appears AEA is finallyemerging from the dregs of financial losses. In January, the NCUAsaid several new services and more efficient operations helped AEAimprove its financial conditions last year.

The credit union posted 2012 year-end net income of $3.15million, according to the agency. Total assets at the end of thefourth quarter stood at $231 million, and the net worth ratioimproved by 137 basis points from year-end 2011, ending the fourthquarter at 4.02%, the NCUA said.

“We reduced expenses, streamlined operations, retooledinfrastructure, introduced an array of new services and continuedthe process of returning AEA to the core credit union business model,” said ElizabethWhitehead, NCUA Region V director and agent for the conservator.“We see significant progress in all of these areas, and we are verypleased with the credit union's positive performance in 2012.”

Indeed, when AEA was placed in conservatorship at the end of2010, the NCUA's top priorities back then were to reduce loanlosses by aggressive collection efforts and prudent lendingpractices, control expenses and build net worth, said JohnFairbanks, NCUA public affairs specialist.

“The decision to conserve AEA enabled us to continue normalcredit union service to members with experienced management inplace correcting previous service and operational weaknesses,”Fairbanks said. AEA's management team and staffintroduced new services to the credit union's 42,000 members thispast year, the NCUA said. The credit union unveiled a new homebanking website and mobile platform, launched a suite of checkingaccounts, created a direct auto lending platform and announced afixed-rate Visacredit card program.

The financial institution also joined the shared branching andCO-OP ATM networks in 2012, creating 36,800 additional servicesites for members.

It is the goal to release AEA from conservatorship this year,the NCUA said. Whitehead said when the time comes, management ofthe credit union will be returned to a highly capable local boardof directors. Fairbanks said that release date decision willbe made by the NCUA board. A specific month or quarter is not knownat this time, he added.

In a letter tomembers posted on the AEA website, Brian Mendivil wrote that he isthe interim CEO. He previously served as AEA's executive vicepresident for the past two years and said he has been activelyinvolved in AEA's re-emergence as a strong financial organizationserving residents of Yuma and La Paz counties.

Mendivil succeeds Tom Martin, who held the position sinceDecember 2010. At press time, the NCUA had not confirmed Mendivil'sappointment. “As your interim CEO, I will put over 21 years offinancial management experience to work for you. My commitment isto continue steering AEA Federal Credit Union on its positivecourse, while maintaining a members-first philosophy,” Mendivilwrote.

Established in 1942, AEA operates five branches. Membership isopen to individuals and their family members who live, work,worship or attend school in Yuma or La Paz counties in Arizona.

The Mountain West Credit Union Association, which represents 154credit unions in Arizona, Colorado and Wyoming, is optimistic aboutAEA's future.

“The progress that AEA Federal Credit Union has shown over thelast year is very encouraging. We are both excited andhopeful about their continued growth and success,” said Joy Audet,MWCUA director of corporate communications.