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Additional Thoughts on Melrose "Credit News 24"

While I have commented on Melrose Credit Union's solvency, I have not focused enough attention on Melrose's liquidity position.

During the fourth quarter, Melrose, which is in conservatorship, had a deposit outflow of $102 million, as deposits fell from almost $1.716 billion to approximately $1.614 billion.

The credit union has $737.1 million in deposits that mature in less than one year.

In addition, it reported uninsured deposits of almost $41 million. These uninsured deposits pose a flight risk.

On the other hand, Melrose Credit union had $58.6 million in cash at the end of 2017. Its cash on hand fell by almost $124 million during the quarter

Cash and short-term investments were 3.92 percent of assets at the end of 2017. This was down from 9.66 percent on September 30, 2017; but higher than the 1.50 percent at the end of 2015.

The credit union reported uncommitted lines of credit of $175.7 million. This is down from $249.3 million from a year earlier. However, I am not sure that these lines of credit will be available.

Also, Melrose should have established a contingent emergency borrowing authority with either the Central Liquidity Facility (CLF) or the Federal Reserve.

The National Credit Union Administration does not comment on whether a credit union is a member of the CLF.

Furthermore, the conservatorship of Melrose may have closed its access the Federal Reserve's Discount Window.

Moreover, Melrose as of the end of 2017 has borrowed $55,643,796 from a Federal Home Loan Bank (FHLB). These advances from a FHLB are secured with assets and over-collateralized.

If Melrose is liquidated by NCUA, these advances from a FHLB would increase the size of the loss to the National Credit Union Share Insurance Fund, as FHLBs have super lien priority. This means that FHLBs claims come before the NCUSIF.


Title : Additional Thoughts on Melrose "Credit News 24"
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