Tuesday, August 16, 2016

Melrose CU under Enforcement Order

Melrose Credit Union (Briarwood, NY) is under a consent order with the New York Department of Financial Services (Department), which was issued in July.

The consent order cited the credit union for unsafe and unsound banking practices and apparent violations of laws and regulations.

The consent order stated that the Board of Directors and Supervisory Committee needed to increase their participation in the affairs of the credit union, including meeting no less than monthly.

The credit union shall retain qualified management, including chief executive officer, senior lending officer, and chief financial officer.

The credit union will submit within 90 days of the order a plan to reduce each asset classified as substandard or doubtful. In the order, reduce means collect, charge-off, sell, or improve the quality of an asset.

In addition, the credit union shall not extend any additional credit to borrowers that has been charged-off the books are classified as a loss. Furthermore, no more credit will be extended to borrowers whose loans are classified as doubtful, substandard, or special mention in the 2015 Report of Examination.

Also, the credit union shall eliminate from its books by sale, collections, or charge-offs all loans classified as loss.

The order will require the credit union to develop a plan to reduce and manage its exposure to taxi medallion loans for New York, Philadelphia, and Chicago.

The credit union will also fully fund all allowance for loan and lease losses shortfalls.

Melrose will be required to improve its liquidity. The credit union will increase its primary liquid assets to at least 3 percent of total assets or to a level necessary to meet projected cash requirements for a ninety day period, whichever is greater. in addition, the credit union will be required to maintain primary liquid assets plus investments that are investment grade and held as available for sale of at least 5 percent of total assets.

Read the consent order.


  1. Where the hell has the NCUA been all these years? Melrose loan to share ratio has exceeded 116% since 2008. How do you say: CONCENTRATION RISK? Net Worth has crashed from over 20.0% to less than 7.50% That sound you hear is capital crashing from over $364M to less than $132M. And which Corporate FCU is holding the $96M Note Payable? This taxi is out of gas.

  2. Maybe Mike Higgins the preacher to all cus will review the information and declare he is still not worried yet.
    The medallion story really shows the deep rooted failure of our industry.
    Consultants that preach to credit unions, without substance.
    Trade associations that are busy writing letters to NCUA and ABA, congress while Rome burns...wasting our money.
    Our regulator somehow ignores the medallion concentrations and puts us in position to pay more assessments while interconnectedness still in vogue with $96M borrowed from a corporate.
    Millionaire Kaufman CEO of melrose rides off into the sunset. Mr. Know it all.
    Cu press practically ignoring the story.

    1. @Anonymous - My comments about Melrose were in response to a simple question about their likelihood of survival. Please don't twist it to fit your personal agenda. I have no dog in the fight over their survival. I simply made note of their large amount of loan loss reserve and the fact that if it was exhausted the earnings power of the remaining assets would not provide sufficient income to fund more reserves. You can’t undo history with this credit union, but you can attempt to figure out a way to make sure it does the least damage to the insurance fund going forward.

    2. Mike Higgins..."the least amount of damage going forward". That opportunity was lost a few years ago.
      Suggest you diversify your sources and uses of research and information. Not as knowledgeable as you think.

  3. This feels like requiring a fire evacuation plan......after the house has burned to the ground. What we don't know if what previous exams and DORs consisted of.



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