Loan losses plaguing Craftsman Credit Union of Detroit prompted the Michigan Department of Insurance and Financial Services to liquidate the credit union on Friday.
The regulator determined the state-chartered credit union was insolvent and had no prospect for restoring viable operations. It appointed the NCUA as liquidating agent.
The $367 million, 49,277-member Security Credit Union of Flint, Mich., immediately assumed Craftsmans members and deposits, and some loans. Craftsman primarily served employees of Detroit's General Motors plants since 2008, when it ended the year with 10.54% delinquencies and 4.48% chargeoffs.
Loan losses steadily eroded capital and accelerated in 2011, with chargeoffs rising above 10%. That left Craftsman with 11.05% net worth by the end of 2011. Another tough second quarter in 2012 dropped net worth to below 9%, but the credit union seemed to hold steady in the second half of 2012 and the first quarter of this year, matching above peer chargeoffs with a healthy net margin.
But in the second quarter ended June 30, after Craftsman reported a more than $2 million net loss, total net worth fell to 1.46% from 8.43% the previous quarter. Loan loss provisions soared from $31,662 in the first quarter to $1.43 million. Operating expenses saw a steep increase from $223,079 in March to $948,203 in June.
Of Craftsmans $8.56 million total loans, $5.8 million were in real estate. Craftsman is the 12th federally insured credit union liquidated this year.