Cincinnati, Ohio.
After the $172 million Cincinnati Ohio Police Federal Credit Union “immediately” purchased some assets and assumed the share accounts of the $9.6 million Butler Heritage Federal Credit Union, the NCUA said Monday it liquidated the Middletown, Ohio-based financial cooperative.
For more than two years, BHFCU members have battled the NCUA in state and federal court. In May 2023, a group of 15 BHFCU members sued their credit union to block its proposed consolidation with the $340 million MyUSA Credit Union, also based in Middletown. The group alleged that the merger violated the credit union’s charter and federal regulations. A month later, an Ohio Magistrate Judge granted a group of 15 members a preliminary injunction that blocked and forced the cancellation of the consolidation, even after the NCUA's conditional approval and after the majority of BHFCU members voted in favor of merging with MyUSA. In January 2024, a state judge granted the 15 members a default judgement, which means they won their case outright.
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However, last January the NCUA conserved the BHFCU because of unsafe and unsound practices at the credit union.
“NCUA made the decision to liquidate Butler Heritage FCU and discontinue its operations after determining insolvency was imminent, and the credit union had no prospect for restoring viable operations,” the federal regulator said in a prepared statement.
The NCUA did not say what specific assets were sold to Cincinnati Ohio Police FCU. However, a substantial portion of its assets included $5.4 million in total cash and other deposits, and $1.9 million in held-to-maturity securities, according to BHFCU’s first quarter NCUA Call Report.
The credit union also held total shares of 1,705, amounting to $9.2 million.
BHFCU, which served 776 members, has not turned a profit since 2018 and its financial condition continued to deteriorate. At the end of last year, the credit union lost $260,633 and by the end of this year’s first quarter, BHFCU posted a loss of $89,520, according to NCUA financial performance reports.
When BHFCU was conserved, members criticized the NCUA saying it waited too long. Steve Snider and Kathy Wright are two of the 15 BHFCU members who have been involved in the lawsuit
“Over the last two and a half years we members have begged NCUA multiple times to do something about this negligent board of directors. NCUA ignored us all of that time which allowed the membership and assets to decline,” Snider and Wright said in a prepared statement in January. “None of that had to happen if NCUA had acted on information and facts we sent them in writing and know they were aware of.”
At this time, Snider has declined to comment regarding the credit union’s liquidation.
The NCUA moved the Ohio credit union members’ case to U.S. District Court in Cincinnati in February after Butler County Common Pleas Court Judge Greg S. Stephens in Hamilton, Ohio ruled that the independent federal agency must hand over nonpublic documents that the group of BHFCU members requested during the state court’s discovery process.
The members asked a federal judge to remand the case back to state court, but U.S. District Court Judge Douglas R. Cole ruled on June 13 that the case must remain in federal court. The members are appealing that ruling.
Snider and Wright are two of the 15 BHFCU members who have been involved in the lawsuit.
CU Times published a three-part series that revealed the inside story about how the BHFCU members successfully blocked the consolidation, repeatedly voiced their concerns about the credit union with the NCUA, and questioned why the federal agency did not act earlier to conserve BHFCU to appoint a turnaround CEO and a new board, which may have returned the financial cooperative to viability.
Based on their evaluation, the NCUA examiners determined in 2021 that BHFCU’s CAMEL composite rating was 4, which was the same rating the Ohio credit union received during a prior examination. The composite ratings are based on 1, which is the best rating, and 5, which is the worst rating, based on an NCUA examiner’s assessment of the credit union’s Capital Adequacy, Asset Quality, Management, Earnings and Liquidity/Asset-Liability Management or CAMEL.
Because BHFCU failed to address its problems identified by the NCUA well before 2021, the federal agency recommended that the credit union merge.
Over the years the NCUA, on occasion, has conserved other small credit unions for unsafe and unsound practices but they were not consolidated.
Peter Strozniak can be reach at [email protected].
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
