BIRMINGHAM, Ala.—The Alabama Credit Union Administration has issued a cease-and-desist order to Secure First Credit Union, ordering it to clean up a number of practices, including loans to senior management and board members, and to reduce its staff.
The cease-and-desist follows a 2013 Letter of Understanding and Agreement (LUA) issued by the ACUA to the credit union that the regulator said has been ignored.
The order to Secure First comes at the same time the Alabama CU Administration is embroiled in a dispute with Alabama One Credit Union that requires it to replace senior management. The CU is challenging the order.
The $44-million Secure First’s most recent 5300 call report shows it has $186,280 in loans outstanding to officials and senior executives. It reported a loss of $280,329 through Q1, but has 13% capital.
In the cease-and-desist, the Alabama regulator has ordered that:
- The Secure First board and supervisory committee are out of compliance with the LUA, and that oversight must be improved. The order specifically calls for compliance with previously issued Documents of Resolution.
- Unsafe and unsound lending practices need to be rectified. The ACUA said the CU has failed to fully underwrite workout loans, charge-off non-performing loans in a timely manner, and establish proper lending policies and procedures.
- The CU’s ALLL account methodology reflects a loss ratio of 0.00%, and that there is no designated pool for TDRs in the ALLL calculation.
- Due to an inadequate compliance program, it must implement a dual control system for submitting SARs, appoint a compliance officer, and provide BSA/AML training to the supervisory committee.
- Secure First must obtain NCUA and ACUA approval for any changes in officials and senior management. The ACUA said, for example, the previous CEO departed in December 2014 and an interim CEO was named, but regulators were not notified of the change.
- The credit union must reduce staff to 14 from 18, must reduce the salary expense to 25% of gross income, and must improve profitability to ensure net worth growth, while developing “more realistic and achievable marketing strategies for loan growth.”
- Secure First must discontinue granting insider loans that exceed the allowable debt-to-income ratio offered to regular members; must discontinue insider loans that exceed the allowable LTV ratio offered to regular members; must discontinue offering impermissible loan discounts to officials; must adopt a board policy requiring loan requests of any amount to an elected official be underwritten to the same standards as any other member’s request, and that such loan requests be approved or denied by a majority of the board.
- Any dispute involving any transaction (fee, overdraft, etc.) with the account of an elected official or their immediate family should be handled by the board.
- The Supervisory Committee must engage in annual training.
- Secure First must identify personnel with knowledge and expertise in the FIMAC ALM Model.