A new report issued by the National Credit Union Administration (NCUA) on last year's failure of Eastern Financial Florida Credit Union (EFFCU) found that the one-time high-flying CU was brought down by risky investments in CDOs as well as loan losses and other concerns.
"Eastern Financial suffered substantial losses in the CDO investments during 2007 and 2008 that, coupled with increasing loan losses and other contributing operating factors, quickly eroded the credit union's net worth and led to its insolvency," said the report, conducted by NCUA's office of inspector general.
At one time, EFFCU boasted $2.4 billion in assets. To date, its failure is the largest in CU history, according to The Credit Union Journal.
The nonprofit was chartered in 1937 to serve employees of Eastern Airlines. Eventually it was acquired in a supervisory merger by Space Coast Credit Union. NCUA says as Eastern's profitability lagged its asset growth, management and the board approved a leverage strategy allowing it to invest in risky investments, specifically CDOs.