Defaulting taxi medallion loans have wrecked Melrose Credit Union (Briarwood, NY). The taxi industry has been disrupted by ride sharing companies, such as Uber and Lyft.
Melrose Credit Union was unprofitable and insolvent as of mid-year 2018. It has been under conservatorship, since February 10, 2017.
Over the last year, the credit union's assets have plummeted from $1.62 billion to $1.12 billion.
The credit union reported a mid-year loss of $171.8 million. Melrose recorded a loss of $60.6 million for the second quarter of 2018.
The second quarter loss was due to an increase in provision for loan and lease losses by $57.16 million to almost $159.3 million as of June 2018.
The second quarter loss caused the credit union's net worth to fall by 20.3 percent during the quarter to a negative $359.7 million at the end of 2018. Melrose's net worth ratio was a minus 32.04 percent.
In addition, the credit union reported $359.7 million in delinquent loans. As of June 2018, 28.88 percent of all loans were 60 days or more past due.
Troubled debt restructured (TDR) commercial loans not secured by real estate were $186.1 million as of June 2018 -- down from $227.2 for the prior quarter. Melrose reported that 55.64 percent of these TDR commercial loans were 60 days or more past due.
Net charge-offs experienced a significant increase during the second quarter of 2018. As of June 2018, net charge-offs were $141.5 million -- up from $35.5 million at the end of March 2018.
The credit union reported that 44 members had filed for bankruptcy year-to-date with loans of $47.7 million.
Net charge-offs increased more than provision for loan and lease losses during the second quarter. As a result, the allowance or loan and lease losses fell by 15.2 percent during the quarter to $259.8 million. The credit union's coverage ratio (allowance for loan and lease losses divided by delinquent loans) was 72.23 percent as of June 2018.
In addition, Melrose has drawn $231 million of its $300 million line of credit. The National Credit Union Administration has guaranteed the line of credit from one or more corporate credit unions.
When Melrose goes into receivership, this will most likely be the costliest natural person credit union failure to the National Credit Union Share Insurance Fund.
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Love how the NCUA pays "manager" and keeps bleeding the capital away to pretend the loss to the fund isn't as grave. Why aren't they packaging the assets and selling or do a loss sharing agreement?
ReplyDeleteAnything is better than the $100's of thousands it must cost for interim mgmt plus a slew of examiners travel and salaries to hang out in Manhattan (they don't stay in queens).
If i'm not mistaken the FDIC isn't allowed to do this, it must sell/liquidate the assets.
What was the NCUA thinking? As far back as December 2005 the credit union had a loan to share ratio exceeding 132%. Melrose forever continued the ratio full throttle over 100%. Today it is still racing at 98%. Did the NCUA bother to consider concentration risk? How could some 44 members file bankruptcy exceeding $47M? Did anyone during the NCUA examination for the past 20 years bother to open a loan file and review same for debt to income ratio, debt load, ramping up, credit worthiness, etc. December, 2005 Net Worth was 32%. June, 2018 it is -32% Did the examiner on site over the the past 20 years notice a declining net worth ratio and conduct due diligence to ascertain the cause of the slippery slope down hill? So today the NCUA has MELROSE with a net worth that is -$370M. NCUA has guaranteed the MELROSE Note Payable of $231M. The credit unions regulated by the NCUA are now on the hook for over $600M due to the gross incompetence of NCUA examinations and oversight at MELROSE. The NCUA is going after MELROSE CEO Kaufman. Is the NCUA going after any of it own on Duke Street for contributory negligence in the examination process? A process where over 20 years of annual examinations the NCUA provided a green light on toxic taxi medallion loan waste. Did the NCUA examination check the loan files on these medallions - actually millions in subprime bankrupt grossly over priced, over valued, depreciating taxi cabs. Will the NCUA OIG call the NCUA to account for their lack of due diligence, lack of engagement, that has allowed this $600M+ loss to the credit union community? This helps to explain why the NCUA is holding back a full and complete refund to the credit union community of the corporate credit union litigation recovery. Brilliant NCUA hat trick. Take the recovery from another NCUA "shit show" (WesCorp, USCentral, Members United) and use the proceeds to coverup another NCUA "screw up" at the taxi medallion credit union. The NCUA clown car remains full - full of clowns dressed up as pseudo-NCUA examination "specialists." There is nothing special about the NCUA. What do you expect from the NCUA? We are not shocked. Just disappointed. It's not their fault at the NCUA. They are in over their head. They just don't get it. And the credit union failures continue. And the credit unions continue to pay for the NCUA screwups of a federal government civil servant agency grossly overpaid, under performing and unaccountable.
ReplyDeleteJust another case of pushing it down the road and someone else with be stuck with it. Just what NCUA did with Telesis here in California. How much did the share insurance fund really pay out on that CU excluding the $70+ million paid to Premier America CU?
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