Missing $1.7M Expedites Wisconsin Credit Union Merger
Concerns about the financial viability of Oshkosh Central Credit Union and the revelation that more than $1.7 million was missing from its vault prompted Wisconsin regulators to approve a July 30 merger of the Oshkosh-based, $28.2 million credit union into the $2 billion Community First Credit Union in Appleton, Wis.
Pending final approval from the NCUA, the merger is expected to take effect Sept. 1.
In early May, the Wisconsin Department of Financial Institutions said it was investigating alleged substantial irregularities at the 3,432-member Oshkosh Central, which prompted the suspension of its longtime president/CEO Mark Patchak and bookkeeper Melisa Beyer.
The two were later fired, said Catherine J. Tierney, president/CEO of Community First Credit Union.
“Almost $2 million is missing from the institution and lots of other irregularities were uncovered,” Tierney said in an interview Tuesday with CU Times.
State regulators determined more than $1.753 million in cash was missing from the credit union’s vault.
Oshkosh Central filed a civil lawsuit against Beyer in state court to prevent her from selling a boat, camper and SUV worth approximately $120,000.
“We filed civil litigation to have a protective order on those assets,” Tierney said. “She did admit to falsifying records. She did not to admit to the theft of the money. The FBI is continuing that investigation."
She added, “Our concern in filing the legal action was to enjoin her (from selling) what we consider to be significant assets that she had acquired over the course of the last couple of years while working at credit union, in light of the irregularities and the money that is missing.”
Oshkosh Central did not file a civil lawsuit against Patchak, who was appointed Oshkosh Central’s president/CEO in 1994. He was paid an annual salary of nearly $130,000 in 2012, according IRS 990 forms.
Tierney said Oshkosh Central’s board of directors decided to merge in late May with Community One following the findings of state regulators.
“The board looked at their options and a merger seemed to be the best option,” said Tierney who, at the request of state regulators, took over management of Oshkosh Central after the suspensions of Patchak and Beyer.
Because of Oshkosh Central’s challenging financial condition, state regulators waived the requirement of the majority vote of the credit union’s members to approve the consolidation.
“Based on the circumstances and the willingness of another credit union to step in, it was in everyone’s best interests, including the members, to expedite the merger,” Kim Santos, director of Wisconsin’s Office of Credit Unions said. “Thus, the Office of Credit Unions waived the requirement of a majority vote.”
Though NCUA financial performance reports showed the Oshkosh Central posted a net worth of 10%, it was below peer average of 12%.
However, the credit union also posted lower than peer averages in return on average assets (0.03% vs. 0.20%), gross income (3.81% vs. 4.42%), yield on average loans (4.15% vs. 6.10%) and net interest margin (2.82% vs. 3.06%) at the end of 2013.
While Oshkosh Central total loans slid slightly from $20.6 million in 2009 to $20.4 million in 2013, its loan income substantially dropped from $1.2 million in 2009 to $847,000 in 2013, according to NCUA financial performance reports.
It also posted net losses of $41,034 in 2011 and $327,375 in 2012. Last year, the credit union saw a net gain of $8,493.
Oshkosh Central also posted a net gain of $35,517 by the end of the first quarter of this year but recorded a net loss of more than $92,000 at the end of the second quarter, according to NCUA financial performance reports.
Tierney attended the Oshkosh Central annual meeting in June, which was also attended by more than 200 members.
“In my mind, it was very, very important for members to have a clear understanding of what’s happening and how it is going to impact them,” she said. “We were very pleased with annual meeting as we had many, many questions.”
In addition, “We explained what happened with the credit union and what would happen as a result of the merger. We had the opportunity to introduce ourselves. It has been very heartwarming, and we are quite pleased with the members’ response.”
Tierney said there have been no substantial outflows of members or deposits.
“The reality is we were able to step in and help save this credit union and make it a better day for the members,” Tierney said. “As I said to the members at the annual meeting, the reason we are here is because our last name is credit union too.
Tierney continued, “We’re happy to make sure that these members continue to have member ownership in a financial cooperative with a very safe and a very strong financial cooperative.”