Wednesday, February 3, 2016

Taxi Medallion Lender Montauk Records $17.7 Million Loss, Is Critically Undercapitalized

Taxi medallion lender Montauk Credit Union (New York, NY), which was placed into conservatorship on September 18, 2015, recorded a 2015 loss of $17.692 million.

According to Montauk's Financial Performance Report, the credit union increased provisions for loan and lease losses by $20 million in 2015. In the last quarter of 2015, provisions for loan losses jumped by $16.4 million.

This increase in provisions caused the credit union's allowance for loan and lease losses to balloon during the fourth quarter to $21.96 million from $5.58 million at the end of the third quarter. Almost $10.8 million in allowance for loan and lease losses was for troubled debt restructured (TDR) loans.

Due to the loss, Montauk's net worth ratio plummeted from 10.54 percent on September 30 to 1.74 percent on December 31. As a result, Montauk Credit Union became critically undercapitalized.

Loans 60 days or more past due swelled at Montauk Credit Union. Delinquent loans grew from almost $16.3 million at the end of the third quarter to $40,4 million at the end of 2015. This means almost a quarter (24.39 percent) of Montauk's loans were at least 60 days past due.

In addition, $17.1 million in loans were in the early stage of becoming delinquent (30 - 59 days past due).

Montauk also reported that $33.1 million in loans were TDRs loans at the end of 2015. That means TDRs represent 1,172.46 percent of the credit union's net worth.

Furthermore, Montauk actively participated taxi medallion loans to other credit unions. At the end of 2015, Montauk was reporting that 20.10 percent of its participation loans were delinquent. This would indicate that other credit unions that had bought these participations from Montauk will be feeling pain.

Montauk is probably under-reserved given its level of nonperforming loans. Montauk's coverage ratio (allowance for loan losses to delinquent loans) was 54.32 percent at the end of 2015.

At the end of 2015, Montauk had a total buffer (allowance for loan and lease losses and equity) of almost $24.8 million to absorb both expected and unexpected losses.

According to NCUA, Montauk has modified $60.6 million in loans.

Read NCUA's press release.
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