NEW YORK—The New York State Department of Financial Services Friday took possession of Montauk Credit Union here, and appointed NCUA as conservator.
The majority of Montauk’s lending is in taxi medallion loans. 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.
The threat to the taxi business in New York, as well as to CUs that make medallion loans here, has prompted a group of New York credit unions to sue the city, alleging Uber is operating illegally. The four CUs—Montauk, $2.1-billion Melrose CU, $692-million Progressive CU, and $278-million LOMTO FCU—recently lost their lawsuit.
Montauk has 2,893 members and assets of $178.5 million, according to the credit union’s most recent Call Report, a very high asset-to-member ratio, reflecting the value of the medallion loans.
NCUA data shows that Montauk delinquencies rose to 2.96% through June, and had been steadily increasing in the past year. In just six months, ROA dropped from 1.09% at the close of 2014 to -2.36% through June. Capital fell from 12.35% at the end of the year to 10.34% by the end of June.
The New York State Department of Financial Services placed Montauk into conservatorship because of unsafe and unsound conditions at the credit union, the NCUA stated in a release. Member services will be continued, the agency said.
Just what is ahead for CUs here that make taxi medallion loans is unclear. Progressive CEO Robert Familant told CUToday.info that taxi medallion credit unions will weather the storm, as they have in the past when the value of medallions has fallen, and then come back. He agreed, however, that the impact of ride-sharing services could keep medallion values from getting back to their all-time highs, but they will recover, he predicted.
“Medallions have definitely taken a hit, and the values may never come back to the all-time highs. And you know, that would be just fine,” said Familant. “The price of something does not have to go back to its highest point ever.”
Delinquencies at Progressive have leveled off at 1.04%, but capital has remained extremely strong and stable in the past year, ending June at 39.94%. Delinquencies are down at Progressive from just over 2% at the end of the year.
But the situation is not as good at Melrose CU, where delinquencies and troubled debt increased 25% over the two-month period ended July 31. Capital stood at 18.04% through June.
According to Crain’s New York Business, delinquent and troubled debt at Melrose is now approximately $400 million, which is nearly equal to the capital of the $2.1-billion Melrose CU.
Montauk is the second New York CU conserved Friday, with the $13-million Bethex FCU conserved earlier in the day.