Featured Savings Rates

Popular Posts

Featured Accounts

Melrose Credit Union Placed into Conservatorship Under the NCUA

POSTED ON BY

The New York State Department of Financial Services (DFS) today took possession of Melrose Credit Union this afternoon and appointed the National Credit Union Administration (NCUA) as conservator. It’s important to note that this isn’t a closure of Melrose Credit Union. The NCUA explains what the conservatorship means in its press release and in this FAQs document. Below is an excerpt from the FAQs:

A conservatorship means NCUA has assumed control of Melrose Credit Union to ensure its financial stability and safe-and-sound operation. In a conservatorship, NCUA works to address issues related to a credit union’s operations and financial condition while maintaining member services.

The NCUA also states that members can continue to conduct business at the credit union. Melrose Credit Union will remain open during the conservatorship. The long-term future of Melrose is uncertain as explained in the FAQs:

NCUA has assumed control of Melrose Credit Union to resolve operating issues with the goal of protecting member assets and seeking a resolution to identified problems. NCUA has made no decisions about the long-term future of the credit union; however, continued service to members is a priority.

I have never seen the NCUA make clear about the impact to uninsured deposits when a credit union is placed into a conservatorship, and that is continuing with the Melrose conservatorship. The NCUA just has this basic line that deposits remained insured:

Yes, member accounts at Melrose Credit Union remain safe and fully insured up to the maximums established in federal law.

Based on what I’ve seen with past conservatorships, members keep access to all of their deposits, even deposits over the insured limits. However, one possible outcome of a conservatorship is liquidation of the credit union, and when a liquidation occurs, members may lose uninsured deposits. Thus, Melrose members should immediately ensure that all of their deposits are under the NCUA coverage limits.

Another possible outcome of a conservatorship is that the NCUA arranges for the credit union to be merged into a larger and stronger credit union. That may be difficult for Melrose since it has almost $2 billion in assets. Only nine credit unions based in New York State are larger.

The third possible outcome is for the NCUA to make changes to Melrose so that it becomes financially healthy again. That may be difficult due to its large exposure to the New York taxi industry which is under pressure from Uber and other app-based ridesharing services. This 2015 New York Post article has more coverage on how the troubled New York City taxi industry was affecting Melrose and other credit unions.

Comments
higgens91
higgens91   |     |   Comment #1
Wow, was surprised about this one, Melrose has been a fixture here at Depositaccounts for many years. Thanks for the link to the NY Post article, I'll have a look at it. Though their rates have been pretty mediocre lately, I remember a few years ago they were considered a rate leader. What... did Sean Jelen jump from Valor to Melrose before being taken off to Levenworth?

All joking aside, that brings into question possible problems that may occur when a CU has a very small field of membership, if that membership demographic or occupation is in any way threatened. Many CUs started as small institutions with a very small FOM (there are still some out there like this, for people only of certain ethnic origin, or for those who belong to one particular company only). It explains the trend (what I think is a good one) of most CUs today to try to increase their FOM. Makes the institution healthier, and broadens the range of people who can enjoy its services. Remember, what was once United Airlines' CU is now Alliant. Hopefully Melrose will ride through this storm (no pun intended) and manage to get back on their feet.
Bozo
Bozo   |     |   Comment #3
Funny Melrose story. I toyed with the idea of buying a Melrose IRA CD some years back. Called them up. The nice lady (the CSR) answered on the first ring. Hmmm, seemed odd. I asked for the deposit forms, and she assured me they would be out by the evening's mail. Which they were. Hand addressed, by her. I then looked up the credit union, and found out it had one location. The exact return location on the forms I was mailed. Needless to say, I passed on buying an IRA CD from Melrose.

While I generally approve of "Mom and Pop" enterprises, the thought did enter my mind that Melrose might have been formed by "Mel" and "Rose", and run as a second business.
jimbeau
jimbeau   |     |   Comment #4
Melrose has always had an open charter. So, anyone can join it.   This was just a matter of concentrated risk.  Something the NCUA knew about for years.    There was a bubble in the taxi medallion market and then Uber came along and popped it.   New York City has a big hand in it's downfall.  People play by the rules and buy taxi medallions.  Uber breaks the rules and goes unpunished.  Unbridled capitalism at it's best.  It's really a pity that credit union founded nearly 100 years ago fails for these reasons.   I've got one CD left at Melrose that's maturing in May.  Worst case, I'll get a check for my 50K from the NCUAA.   However, I do feel sorry for the Melrose employees who will probably be out of a job shortly.
Rickny
Rickny   |     |   Comment #2
Melrose has many loans out for NYC taxi Medallions. Since lift and Uber came out the values of the medallions has dropped greatly. It wasn't a matter of if than when.
  |     |   Comment #7
When you take more money out like salary and bonuses, there is no money left to pay the accumulated interest on the maturing CDs and hence conservatorship.
jimbeau
jimbeau   |     |   Comment #12
This was about bad loans not salaries and bonuses. Where did you get that from, Trump?
  |     |   Comment #16
Jimbeau, Please restrain yourself first, there are people around who know more than you do.
#7 is correct, when you look at Melrose financial statement for the last 3 years, it clearly states that they withdrew
$75.6 millions to pay their own salaries and bonuses from the line of credit they had.
Very few of the loans are bad or in default, they have few late payers and that is all.

Bad management and bonuses destroyed the CU, same as Valor.

file:///C:/Users/Daisy/Downloads/CallReport5300_December-2016_MELROSE.pdf

Look after page 4, please, everything is disclosed line by line of all expenses and operations.
  |     |   Comment #17
For some reason your web site is blocking the PDF file, please download it from here:
http://recent5300.ncua.gov/Views/GetUpdateCreditUnions.aspx
In the name field type Melrose and then click on find.
At the bottom on the right is the PDF file.
jimbeau
jimbeau   |     |   Comment #18
According to the last call report that I could find, Melrose has over 500 million dollars in delinquent loans. That hardly jives with your statement "very few of the loans are bad or in default". As far as you other statement "Please restrain yourself first, there are people around who know more than you do." Apparently, you're not one of them.
carly
carly   |     |   Comment #8
I feel bad for them, but my first thought is to pull my CD. Does anyone plan to leave their CD's and just ride it out?
Rickny
Rickny   |     |   Comment #9
If you close your CD you may have to pay an EWP. As long as you are under the maximum limit for insurance coverage you are covered. If they are merged later with another CU the rate on your CD my drop but you will have the option to close. If the NCUA closes them down you will get a check within a week.
  |     |   Comment #10
account insured , if you try to pull it out ,you will be penalized,, if Melrose is taken over than you will have better options
jimbeau
jimbeau   |     |   Comment #13
I plan on riding it out. The only people who should be panicking are those whose deposits are over the NCUA insurance limits.
ChasR
ChasR   |     |   Comment #14
My only CD (relatively small) matures in May, so I'll ride it out. That's why we have federal deposit insurance.
  |     |   Comment #11
Panic time for Melrose CU members who don't understand how NCUA insurance works. Needless worry or fretting over what will happen next.
jib2424
jib2424   |     |   Comment #15
Would this be a good time to open a CD at Melrose?
Mike Feynman
Mike Feynman   |     |   Comment #19
So how does a credit union rated #25 on the 2015 Deposit Accounts list of Healthiest Credit Unions end up in conservatorship in 2 years. What use are the health ratings?
dollarsncents
dollarsncents   |     |   Comment #20
"Melrose first became undercapitalized after its second quarter 2016 Call Report was released by the NCUA."

Read the full article in the link provided by cumulus, comment #6.