The NCUA is urging a federal court to uphold its liquation of Kappa Alpha Psi FCU while the credit union claims it had taken steps to improve its financial condition.

The credit union alleged in its court filing, in which it requested a temporary restraining order, that the credit union was irreparably damaged by the NCUA's refusal to give the credit union a grant from the Community Development Credit Union Fund and by not backing its application for a grant from the Troubled Asset Relief Program.

The Texas-based credit union also contended that the agency didn't use the most recent earnings results before it decided to liquidate.

Recommended For You

The NCUA contends that the credit union is minimally capitalized and there were no reasonable prospects for the credit union to achieve adequate capitalization.

"Kappa Alpha Psi Federal Credit Union was never able to generate consistent operational profits; build its net worth position; maintain their records in a sound manner; grant quality loans; or adequately collect on delinquent loans. Those factors led to the involuntary liquidation action that the NCUA Board took on Aug. 3, 2010,".the agency said.

"Newly founded credit unions have ten years to reach an adequate capital level, which is a 6% net worth ratio; however, Kappa Alpha Psi FCU has never been able to show it can reach that level of capitalization," it added.

The Addison, Texas-based credit union, the nation's first virtual credit union, had $779,854 in assets as of March 31. Its loan income fell by 49.1% in the first quarter of 2010, the most recent data available. In the fourth quarter of last year the income fell 65%.Its net worth ratio was 1.95% as of March 31 and 0.58% as of last Dec. 31.

NOT FOR REPRINT

© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.