## The (Generic) Credit Union Mission (2)

A number of years ago I attended a math workshop where one of the presenters explained probability theory by demonstrating that the probability of winning the jackpot in the Arizona Lottery by purchasing a ticket were almost the same as the odds of winning without buying a ticket. This caused the credit union’s coverage ratio (ALLL to Delinquent Loans) to climb from 63.48 percent to 87 percent over the quarter. The credit union has a buffer (capital plus ALLL) to absorb expected and unexpected losses of slightly more than \$24.1 million. These for credit unions expressed concerns that the disruption from Uber could adversely impact their financial performance. The credit union was reporting that 4.73 percent of its loans were 60 days or more past due.

These four credit unions are in the process of releasing their financial data and over the next several days, I will provide a snapshot into each of the individual credit union’s performance. I will begin by looking at Melrose Credit Union, which is the largest of the New York taxi medallion credit unions with \$2.1 billion in assets. This indicates that the credit union has a coverage ratio (ALLL to Delinquent Loans) of 72.17 percent.

As of the end of the second quarter, the credit union reported that 2.76 percent of all loans were delinquent. Early delinquencies rose from \$92.3 million as of March 2015 to almost \$149.1 million as of June 2015 suggesting that the credit union has a large pipeline of loans that should become delinquent in subsequent quarters. As a result, Melrose reported a second quarter loss of almost \$4.6 million; but the credit union is reporting a slim year-to-date profit of \$371 thousand. As of June, the credit union has allowances for loan and lease losses (ALLL) of almost \$39.9 million up from \$28.3 million from the previous quarter.

Also, Melrose Credit Union currently has \$371.7 million in equity capital and its net worth ratio is 18.04 percent. So, the combined cushion (capital plus ALLL) for the credit union to absorb expected and unexpected losses is slightly more than \$411 million. Taxpayers should no longer be asked to subsidize rent-free credit union branches in federal facilities.

The National Credit Union Administration now proposes to expand the ability of credit unions to make risky large loans by raising limits imposed by Congress to prevent abuse of their special status. The most aggressive credit unions want to compete with community banks, whose practices are not now within the purview of the regulators. The Credit Union National Association (CUNA) yesterday denounced heretical statements by National Credit Union Administration (NCUA) Chairman Debbie Matz, as she strayed from the dogma of credit unions being member-owned. Year-over-year, the number of problem credit unions are down by 44 credit unions.