Two sources, who asked not to be named, said the NCUA and the New York Department of Financial Services are soliciting merger bids for Montauk Credit Union, which was placed into conservatorship in September because of its financially troubled taxi medallion loan portfolio.
However, it is unclear whether the government agencies are still reviewing merger bids or whether a merger bid has been selected and has yet to be publicly announced, sources said.
"The agency has made no final decisions about Montauk," NCUA Public Affairs Specialist John Fairbanks said in response to CU Times' inquiry about the merger bids. The New York Department of Financial Services said it had no comment when contacted Wednesday.
On Wednesday, the NCUA issued a press release stating Montauk has taken several steps to address financial and management issues affecting the safety and soundness of its operations.
According to the NCUA release, Montauk worked with members, where appropriate, to address identified issues.
"As a result, the credit union has modified $60.6 million in loans," the NCUA release stated. "The credit union hired experienced loan workout specialists to assist with its collections process. The credit union also retained professional accounting guidance to determine the adequacy of its allowance for loan and lease losses."
Most of those loans are taxi medallion loans, which accounts for 85% of Montauk's loan portfolio. Of the credit union's 800 loans, 683 are member business loans with a net MBL balance of $163 million, according to Montauk's Call Report.
The credit union's taxi medallion borrowers are struggling to repay their loans because of the growing popularity of mobile, app-based ride-sharing services such as Uber and Lyft.
As of Dec. 31, 2015, Montauk was critically undercapitalized with a net worth ratio of 1.74%. Total shares and deposits were $158.2 million. The allowance for loan losses increased from $5.5 million to $21.9 million during the quarter, and net loans totaled $143.8 million at the end of the fourth quarter.
Montauk reported in its Dec. 31, 2015 Call Report that its reportable delinquent loans totaled 183 and amounted to $40.3 million.
Of the total of delinquent loans, 118 were member business loans that accounted for $30.1 million and 48 were TDR business loans that amounted to $12.4 million, according to Montauk's Call Report.
In addition, 47 participation loans were delinquent and totaled $3.3 million.
Montauk also reported that $2.6 million in total outstanding loan balances were subject to bankruptcy.
The credit union held $2.8 million in regular reserves and zero dollars in undivided earnings as of Dec. 31. In December 2010, about six months before Uber began servicing the New York City market, Montauk reported $6.6 million in undivided earnings and $4.6 million in regular reserves for a net worth of 9.48%.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
