NEW YORK–Capital at the $1.9-billion Melrose Credit Union has now dropped below levels that would require Prompt Corrective Action (PCA). Melrose has been suffering losses as a result of the decline in values of taxi medallions, which make up the bulk of its loan portfolio, as a result of services such as Uber and Lyft.
According to the Financial Times, new numbers from Melrose show delinquencies rose 17% between April and June of 2016 to hit $435 million. The credit union has also had to restructure $359 million worth of loans, reported the Financial Times, and its losses were up tenfold from $5.6 million at the end of Q1 to $57 million at the end of Q2.
As a result, Melrose Credit Union’s net worth ratio has declined to 7.49%, down from 19.22% three years ago and beneath a required level of 9.89%, according to the Financial Times.
The declining capital will require Melrose to submit a net worth restoration plan to NCUA.
NCUA has acknowledged its concerns over credit unions that make taxi medallion loans, including the risks they pose to the National Credit Union Share Insurance Fund (NCUSIF). NCUA often finds a merger partner for CUs struggling with capital issues, but Melrose CU’s asset size will mean challenges in finding another CU willing to take it on. NCUA has already liquidated one taxi medallion CU, Montauk CU, while another, Lomto, is also reporting losses (although its capital remains above PCA levels).