Virginia Credit Union will absorb much of the assets from the now defunct Life Line Credit Union. (Photo by Michael Schwartz.)
A local credit union was shut down last week by regulators after it was deemed insolvent and beyond repair.
Life Line Credit Union, which offered membership to local medical organizations including Bon Secours Richmond Health System, was forced to close on Friday by the State Corporation Commission’s Bureau of Financial Institutions.
The National Credit Union Administration, the credit union equivalent of the FDIC, then stepped in as receiver of Life Line and arranged for much of its assets to be absorbed by Virginia Credit Union, which also will manage its customers’ accounts.
In its closing order, the SCC said it took the action “to protect the public interest.”
The SCC said that Life Line, which was chartered in 1969, had insufficient net worth for a safe and sound operation, had no reasonable prospect of rehabilitation and had failed to devise a plan to turn itself around.
“Generally speaking, when an institution reaches a level of capitalization that’s critical in nature, we need to step in and protect the public interest and protect depositors,” said Joe Face, the commissioner of the state’s Bureau of Financial Institutions.
Life Line operated a single office on the seventh floor of a medical office building at 5855 Bremo Road on the campus of Bon Secours St. Mary’s Hospital. It had struggled for the last few years with diminished levels of capital and income. Its membership base had dwindled to about 2,000 members, and its remaining assets were just $7.9 million.
Its Bremo Road branch is now closed.
Glenn Birch, spokesperson for Virginia Credit Union, said the organization was asked by the NCUA to take on some of Life Line’s assets and its members.
“That would enable those members to continue to have service and access to their money,” Birch said.
“These aren’t real common situations. I don’t’ know that we’ve been involved in one before. In this case, we felt like we could be helpful.”
Virginia CU took on Life Line’s deposits, but did not take on Life Line’s loans. The NCUA continues to manage the loans, the federal regulator said. It said the reasons for that are confidential.
The largest credit union headquartered in Richmond, Virginia CU now has about 230,000 members and assets of $2.5 billion. It has 16 branches around the state, 13 of which are in the Richmond area.
Face said when a closure decision is made, the institution is informed the day of and it’s typically done around close of business on a Friday. That allows regulators to go in and have customer accounts set up at another institution by the beginning of the following week.
“It’s a very smooth process,” Face said.
Although failure is not a common occurrence, Life Line is the fourth credit union to go under in 2014. Thirteen were shuttered in 2013, and 14 failed in 2012. Even at the peak of the recession’s toll on the financial industry, when banks were failing every week, credit union failures were not as common because many are merged into healthier institutions before they get to death knell of demise.
As nonprofit institutions, credit unions can more easily be involved in mergers or acquisitions than banks because no money typically changes hands.
The Richmond market has seen its share of consolidation in recent years, as many smaller local credit unions, some struggling and some not confident of the future, have sought merger partners.
Most recently, Resources Federal Credit Union, whose members are employees of Genworth Financial, was merged into Petersburg-based Peoples Advantage Federal Credit Union.
“It’s becoming more difficult to make a go of it,” Face said of smaller credit unions. Rising costs of regulatory compliance are often cited as reasons for the trend of consolidation.
Three credit unions failed in Virginia last year, according to the NCUA. They were NCP Community Development CU in Norfolk, Lynrocten CU in Lynchburg and Shiloh of Alexandria FCU.
Virginia Credit Union will absorb much of the assets from the now defunct Life Line Credit Union. (Photo by Michael Schwartz.)
A local credit union was shut down last week by regulators after it was deemed insolvent and beyond repair.
Life Line Credit Union, which offered membership to local medical organizations including Bon Secours Richmond Health System, was forced to close on Friday by the State Corporation Commission’s Bureau of Financial Institutions.
The National Credit Union Administration, the credit union equivalent of the FDIC, then stepped in as receiver of Life Line and arranged for much of its assets to be absorbed by Virginia Credit Union, which also will manage its customers’ accounts.
In its closing order, the SCC said it took the action “to protect the public interest.”
The SCC said that Life Line, which was chartered in 1969, had insufficient net worth for a safe and sound operation, had no reasonable prospect of rehabilitation and had failed to devise a plan to turn itself around.
“Generally speaking, when an institution reaches a level of capitalization that’s critical in nature, we need to step in and protect the public interest and protect depositors,” said Joe Face, the commissioner of the state’s Bureau of Financial Institutions.
Life Line operated a single office on the seventh floor of a medical office building at 5855 Bremo Road on the campus of Bon Secours St. Mary’s Hospital. It had struggled for the last few years with diminished levels of capital and income. Its membership base had dwindled to about 2,000 members, and its remaining assets were just $7.9 million.
Its Bremo Road branch is now closed.
Glenn Birch, spokesperson for Virginia Credit Union, said the organization was asked by the NCUA to take on some of Life Line’s assets and its members.
“That would enable those members to continue to have service and access to their money,” Birch said.
“These aren’t real common situations. I don’t’ know that we’ve been involved in one before. In this case, we felt like we could be helpful.”
Virginia CU took on Life Line’s deposits, but did not take on Life Line’s loans. The NCUA continues to manage the loans, the federal regulator said. It said the reasons for that are confidential.
The largest credit union headquartered in Richmond, Virginia CU now has about 230,000 members and assets of $2.5 billion. It has 16 branches around the state, 13 of which are in the Richmond area.
Face said when a closure decision is made, the institution is informed the day of and it’s typically done around close of business on a Friday. That allows regulators to go in and have customer accounts set up at another institution by the beginning of the following week.
“It’s a very smooth process,” Face said.
Although failure is not a common occurrence, Life Line is the fourth credit union to go under in 2014. Thirteen were shuttered in 2013, and 14 failed in 2012. Even at the peak of the recession’s toll on the financial industry, when banks were failing every week, credit union failures were not as common because many are merged into healthier institutions before they get to death knell of demise.
As nonprofit institutions, credit unions can more easily be involved in mergers or acquisitions than banks because no money typically changes hands.
The Richmond market has seen its share of consolidation in recent years, as many smaller local credit unions, some struggling and some not confident of the future, have sought merger partners.
Most recently, Resources Federal Credit Union, whose members are employees of Genworth Financial, was merged into Petersburg-based Peoples Advantage Federal Credit Union.
“It’s becoming more difficult to make a go of it,” Face said of smaller credit unions. Rising costs of regulatory compliance are often cited as reasons for the trend of consolidation.
Three credit unions failed in Virginia last year, according to the NCUA. They were NCP Community Development CU in Norfolk, Lynrocten CU in Lynchburg and Shiloh of Alexandria FCU.