Melrose CU Reports $176.7 Million Loss due to Bad Taxi Medallion Loans

Problem taxi medallion loans cause Melrose Credit Union (Briarwood, NY) to post $176.7 million loss for 2015.

According to Melrose's Financial Performance Report, the credit union posted a loss of $155.5 million for the fourth quarter as the credit union significantly increased provisions for loan and lease losses. During the fourth quarter, Melrose increased provisions for loan and lease losses by almost $162.9 million. As a result, provisions for loan and lease losses for all of 2015 were $206.4 million.

Melrose at the end of 2015 reported that allowance for loan and lease losses were $230.3 million, up from $68.1 million as of the third quarter of 2015.

Due to its large loss in the fourth quarter, Melrose's net worth ratio dropped sharply from 17.30 percent at the end of the third quarter of 2015 to 10.69 percent as of December 31, 2015.

Bad taxi medallion loans caused delinquencies to rise at the credit union. Melrose reported that $155.34 million loans were 60 days or more past due at the end of 2015. This translates into 7.80 percent of the credit union's loans being delinquent.

Also, there is a sizeable portion of loans in the early stages of becoming delinquent. Melrose is reporting that $103.6 million loans are 30 to 59 days delinquent at the end of 2015.

As of December 2015, Melrose is reporting $374.7 million in troubled debt restructured (TDR) loans, which are all in nonaccrual status. This is up from $219.5 million at the end of the third quarter of 2015.

TDR loans at the end of 2015 were 182.70 percent of net worth and the TDR portion of loan loss reserves was $144.4 million.

The increase in loan loss reserves during the fourth quarter caused the coverage ratio for Melrose to increase to 148.25 percent from 54.15 percent as of the third quarter of 2015.

Melrose at the end of 2015 had a buffer (allowance for loan and lease losses and equity) of $421.7 million to absorb expected and unexpected losses.