Montauk Credit Union Conserved
The New York State Department of Financial Services took possession of the $178 million Montauk Credit Union in New York City Sept. 18 and appointed the NCUA as conservator, according to a prepared statement.
Montauk CU, one of the four New York cooperatives that serves the taxi medallion industry, posted a net income loss of $2 million at the end of the second quarter of 2015, according to NCUA financial performance reports. At the end of the second quarter of 2014, the credit union showed a net income gain of $1.6 million.
What's more, at the end of the second quarter, Montauk CU's return on average assets was -2.36, well below the peer average of 0.57. The credit union's net worth has also steadily declined from 12.40% in June 2014 to 10.34% in June 2015, in line with the peer average of 10.90%, according to NCUA financial performance reports.
New York regulators said they placed Montauk CU into conservatorship because of “unsafe and unsound conditions” at the credit union. Regulators did not specify what those specific conditions were.
While continuing normal member services, the NCUA said in a prepared statement that it will work to resolve issues affecting the credit union's operations. Members can continue to conduct normal financial transactions, deposit and access funds, make loan payments and use shares.
On Sept. 11, CU Times published an article detailing how app-based ridesharing services such as Uber and Lyft are becoming more popular by the day and causing the financial woes of some credit unions that serve the tax medallion industry, including Montauk CU.
In addition to Montauk CU, three other New York-based credit unions – the $271 million, 3,000-member LOMTO Federal Credit Union in Woodside; the $2.1 billion, 24,000-member Melrose Credit Union in Briarwood and the $692 million, 3,800-member Progressive Credit Union in New York City – have seen their income decrease and provisions for loan losses increase in 2015 as the transportation industry they serve has struggled to survive economic and technological changes.
“To put it bluntly, the imminent risk of cascading medallion foreclosures, followed by the collapse of the medallion market, and by extension the entire taxicab industry, is no longer a threatened harm – it is a reality that is already unfolding,” Todd Higgins, a lawyer with the New York City firm Crosby & Higgins and the counsel to Melrose CU, wrote in an Aug. 28, 2015 letter.
New York City taxi medallions should be valued at roughly $360,000, not $1.3 million as one source claimed as their peak price in 2014, according to HVM Capital, a Boston-based research and investment company.
Montauk CU is a federally insured, state chartered credit union with 2,893 members.