NEW YORK–A consent order has been issued to the $1.9-billion Melrose Credit Union by the New York State Department of Financial Services following a joint safety and soundness exam conducted by the Department and NCUA.
The order said the review uncovered “significant supervisory concerns relating to the conduct of the credit union’s business, including unsafe and unsound banking practices and apparent violations of laws and regulations.”
Melrose Credit Union is a taxi medallion lender whose loan portfolio has been hit hard by the emergence of services such as Uber and Lyft. As CUToday.info reported here, CEO, Alan Kaufman, recently departed, and Steven Krauser is now the acting CEO.
The consent order requires the credit union to “take all steps necessary to correct the “unsound banking practices.” Among the requirements in the consent order:
- The board and supervisory committee have been ordered to review all policies of Melrose CU and to increase (their) participation in the affairs of the credit union “consistent with the role and expertise commonly expected for directors of credit unions of a comparable size.”
- The board and supervisory committee were ordered to hold meetings no less frequently than monthly and to review all income and expense reports, as well as other performance metrics.
- The board has been ordered to hire a CEO with “proven ability in managing a credit union or bank of comparable size and complexity, with experience in improving asset quality of a low-quality loan portfolio,” as well as to hire a similarly skilled senior lending officer and CFO.
- As part of a management report, Melrose is also to identify the qualifications of board members and supervisory committee members to hold those roles.
- MCU has been ordered to formulate a plan to reduce its risk position in each asset class identified as “substandard or doubtful,” and to reduce those positions, and to eliminate from its books all assets or portions of assets marked as “loss.”
- Regulators also ordered that the CU formulate a written plan to “prudently reduce and manage its taxi medallion loan concentrations for New York, Chicago and Philadelphia.”
- MCU is to fund the ALLL shortfall that was identified during the exam.
- The credit union is also ordered to overhaul its loan policies and procedures.
- Within 60 days of the order, MCU is to engage an independent firm or individual(s) to review its loans.
Melrose CU, which reported a loss of $176.6 million last year, showed a loss of $5.6 million through Q1. The credit union’s net worth stood at 10.37% through Q1, down slightly from December but well off 18.44% at the end of 2014.
Melrose reported that delinquent loans to total loans more than doubled between December 2015 (7.8%) and March 2016 (18.62%). As of March 2016, Melrose had almost $371 million in loans 60 days or more past due, up from $155 million at the end of 2015.