By Ray Birch
NEW YORK—Problems for credit unions making taxi medallion loans in this city markedly increased it the fourth quarter of 2015, according to Call Report data—including a huge annual loss at Melrose CU of $176.6 million due in large part to increased allowance for loan losses.
The value of taxi medallion loans in New York—as well as in other cities across the U.S.—has dropped markedly due to ride sharing services such as Uber.
Losses at the conserved Montauk CU totaled $17.6 million by the end of last year, with most of the net-income loss arriving during the fourth quarter. The New York State Department of Financial Services placed Montauk into conservatorship on Sept. 18, 2015 and appointed NCUA as conservator.
At Melrose CU, losses mounted in Q4 to $176.6 million. The $1.9-billion Melrose reported its first losses of the year in the third quarter ($21.2 million), having reported a positive $4.9 million in Q1. Allowance for loan loss reserves at Melrose more than tripled in Q4 to $230 million from $68 million in the third quarter. Delinquent loans to total loans stood at 7.8% at the end of the year, with charge-offs 0.06%.
The $665-million Progressive CU reported a year-end $411,110 gain, but income was markedly down from the third quarter ($5.5 million).
LOMTO FCU lost $2.9 million by the close of 2015, including $1.4 million in Q3, and $236,885 in Q2. The $274-million credit union reported positive net income of $650,988 in the first quarter and $4 million in 2014.
Large capital buffers may help some weather the storm of falling medallion prices, if medallion values eventually regain some of their worth. Progressive’s capital remained steady and extremely strong at 40.91% at the end of the year. LOMTO’s net worth slipped slightly to 15.56% at the close of 2015. The conserved Montauk watched its capital slide to 1.74% at year-end.
On the surface, Melrose CU’s capital of 10.69% makes it well-capitalized by NCUA standards. But that figure is down from 18.44% at the end of 2014 and 17.30% at the end of September, 2015.
The threat to the taxi business in New York, as well as to CUs that make medallion loans here, prompted the four New York credit unions last year to unsuccessfully sue the city of New York, alleging Uber is operating illegally by conducting “illegal hails.” Todd Higgins, one of the attorneys who represented Melrose in the lawsuit last year stated that the actions of Uber “threatens to collapse the industry.”