KENSINGTON, Md. — In the wake of its 2006 attempt to convert to a mutual bank, Lafayette Federal Credit Union has been struggling and steadily shrinking, even as the CUs leadership has pressed its legal case against its former CEO over the failed attempt.
According to NCUA's records, when Lafayette formally announced its ultimately doomed attempt at a charter change in June 2006 the credit union had $332 million in assets and 16,369 members who had deposited $251.6 million in depository accounts. The credit union then had 7,859 loans on its books for $254.8 million along with a return on average assets of 0.65 (peer group 0.71) and an income of almost $1.1 million.
But as of June 2007, only one year later, Lafayette reported only $295.8 million in assets and 15,848 members whose total deposits had dropped to $235.7 million. The credit union now has only 7,218 loans on the books worth $246 million, a return on assets of only 0.26 (peer group 0.71) and an income of only $400,194. And that number included adding $362,852 from the CU's loan loss account. If that amount had not been added, the CU would have made just slightly over $37,000 for the quarter.
Recommended For You
In addition, according to NCUA's numbers, the CU shows almost $3.2 million dollars in total delinquent loans as of this past June, compared to $441,435 in June 2006. Of the current $3.2 million delinquent, the CU listed almost $2.6 million between two and six months overdue.
This at a time while other CUs of Lafayette's size were posting strong growth in membership, loans and assets of 2.34%, 3.28% and 8.23% respectively, according to NCUA's numbers.
NCUA declined to answer questions about Lafayette's financial position and the credit union has declined to respond to several interview requests about its sliding numbers.
Legal Wranglings
The agency released its numbers as Lafayette has continued its legal proceedings against William Brooks, its former CEO and his son, William Brooks Junior, a former employee. As part of its effort to make their case against both Brooks, the credit union has sought or is seeking depositions from members who opposed the conversion attempt as well as and credit union industry leaders who also opposed it. Lafayette has also initiated legal proceedings seeking to depose Credit Union Times and its reporter David Morrison.
Other credit union leaders Lafayette has either subpoenaed or seeks to subpoena include Jim Blaine, CEO of the $13 billion State Employees' Credit Union in Raleigh, North Carolina, in his capacity as a leader of the National Center For Member Trust; Michael Beall, CEO of the Maryland and D.C. Credit Union Association; and noted credit union attorney Steven Bisker.
Blaine said his deposition is scheduled for sometime in October in North Carolina. Beall has been deposed after successfully limiting the scope of the deposition and the court blocked Bisker's attempted subpoena.
"I really think it's sad, but not terribly surprising," said Thomas Carter, a Lafayette member who works for the U.S. Agency for International Development and who helped organize members against the conversion attempt. "Members are indicating their lack of confidence with the credit union leadership with their feet."
Carter was one of the three Lafayette members opposed to the conversion that, according to court records, the CU has subpoenaed or sought to subpoena in its attempt to prove its case. The other two are Scott Steins, the Lafayette member who had his ability to use the CU's ATMs suspended after he approached members in a branch about a petition to recall the board and Amber Brooks, another USAID employee.
According to court records, Carter is the only one to have been subpoenaed so far.
Carter said he had been surprised by the move to subpoena him since he had never met either William Brooks or William Brooks Junior and had only included them on e-mail that had also been addressed to many other people opposed to the Lafayette conversion attempt.
"I realized fairly quickly that was a fishing expedition," Carter said of the deposition, describing how both Arnold Rosenthal, Lafayette FCU chairman his brother Barry, who is serving as lawyer for the CU in the case, had both been present for the deposition with Barry asking the questions and Rosenthal whispering additional questions to him.
Carter estimated that the CU leadership had cast as wide a net as possible in the case not so much to find information but to try to intimidate any possible opponents of another conversion attempt that he said he and other members felt confident was still coming.
But other sources familiar with the conversion process expressed doubt that the CU would be able to mount another conversion with the current state of its financials.
For his part, Blaine said he welcomed the chance to share his opinions and his actions in the Lafayette case, remarking that the good thing about depositions was that they leave you space to air your views.
For his part, Carter said that even if Lafayette's leadership did not try to convert the credit union again he was unsure what the CU could do with its current leadership to try to get the institution back on track. One place to start would be finding a new CEO, he said, preferably one from outside the credit union who had no history with the controversy and who could reach out to members.
Michael Hearne, Lafayette's previous CEO, has sent e-mails to other credit union CEOs letting them know he is no longer with the credit union. The CU has never announced or confirmed his departure and lists Juan Marulanda as acting CEO on its record with NCUA.
"Lafayette deeply needs to reconcile with its members," Carter said, adding that cooperatives stand or fall on the basis of the trust the members share in each other.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
