Order Requires Management Competency Review
A consent order from California’s Department of Business Oversight required the $21 million Eagle Credit Union to begin annually reviewing its senior staff.
“Within 60 days of the date of this order, respondent shall develop and implement a formalized process for evaluating respondent’s senior management personnel, to include the accounting manager and the operations manager,” the June 16 order read. “Respondent shall provide a written evaluation of management’s performance at least annually, and maintain a copy of the evaluation in the personnel file. Respondent shall document the review of management’s competencies in the executive board meeting minutes. Such process and its implementation shall be satisfactory to the commissioner and regional director as determined at subsequent examinations and/or visitations.”
The Lodi, Calif.-based credit union also agreed to correct accounting and internal control deficiencies identified in department examinations dated December 31, 2013 and June 30, 2013, as well as a CPA audit dated Sept. 30, 2013. Eagle also agreed to develop a reconciliation matrix to assure its general ledger is reconciled correctly and on schedule.
The six-point order also obliged the credit union to develop a revised strategic plan and budget to achieve positive earnings and net worth trends by year-end 2014.
In an email to CU Times, Eagle CEO Dan Robertson explained the 85-year-old credit union had served the residents of three counties primarily through outlets located in postal facilities. Eagle began to build a new facility in 2004 and this, combined with the Great Recession, had left it in trouble, Robertson wrote.
“In 2004 the board decided to construct a new facility in Lodi,” Robertson explained. “The goal was to increase the presence in the community and increase the ability to grow with the community. However, the downturn of the economy created a drag on growth, especially loans. The building that was meant to support and further growth was too big for the current economic environment and created a drag on earnings,” he wrote, adding, “[w]e are currently working to grow into this facility under the guidance of the board and the Department of Business Oversight.”
According to the NCUA’s data, Eagle’s net worth ratio stood at 9.05% as of March 31, 2014 and its ratio of delinquent loans to total loans remained lower than peers (0.91% for Eagle compared to a peer average of 1.21%). But the credit union’s ratio of net charged off loans to average loans was more than double that of its peers (0.99% compared to 0.46%) and the credit union’s return on assets came in at -0.81%.
Eagle Credit Union closed the first quarter having lost a little more than $43,000 and reported a net loss of $172,501 for 2013. Leading credit union expenses, according to the call report, were salaries and benefits of $425,930 for the year, office occupancy expense of $141,648 and office expenses of $384,906.
The NCUA’s ratio analysis for the credit union shows the credit union’s ratio of net operating expenses to average assets was way above its peer group as of March 31, at 4.70% for Eagle and 2.94% for peers.