Monday, February 8, 2016

Q4 Update on Taxi Medallion Lender Progressive CU

Despite the growth of bad taxi medallion loans, Progressive Credit Union (New York, NY) built loan loss reserves and maintained its large capital cushion. This gives the credit union the strength to ride out the disruptions impacting the taxi industry.

In the last quarter of 2015, Progressive CU increased its provisions for loan losses by $9 million to almost $16.3 million. This increase in provisions caused the credit union's allowance for loan and lease losses to grow from $12.86 million as of September 2015 to $21.8 million at the end of 2015.

Progressive CU reported a strong capital position of $268.5 million at the end of 2015. As a result, its net worth ratio at the end of 2015 was 40.91 percent -- up from 38.83 percent a year earlier. This lack of leverage at Progressive CU means it currently has the capacity to manage defaulting taxi medallion loans.

Asset quality at the $665 million credit union deteriorated during the fourth quarter. Delinquent loans at Progressive Credit Union grew by $14.3 million during the quarter to $20.8 million at the end of 2015. This more than tripling of delinquent loans caused the delinquency ratio to jump from 1.05 percent as of September 30, 2015 to 3.45 percent at the end of 2015.

The credit union also reported almost doubling of troubled debt restructured (TDR) loans during the fourth quarter to $47.9 million as of December 2015. TDR loans represented 17.58 percent of the credit union's net worth.

The good news for Progressive is that the pipeline of early delinquencies fell during the fourth quarter from almost $13.5 million at the end of the third quarter to approximately $9.9 million as of December 2015.

Progressive's coverage ratio (allowance for loan and lease losses to delinquent loans) was 104.89 percent at the end of 2015. This means that all loans 60 days delinquent or more could be completely written off and Progressive would still have some leftover loan loss reserves.

Saturday, February 6, 2016

CTK Credit Union Closed

The Wisconsin Office of Credit Unions served an order of liquidation on CTK Credit Union of Milwaukee and immediately appointed the National Credit Union Administration as liquidating agent.

The Wisconsin Office of Credit Unions made the decision to liquidate CTK Credit Union and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

CTK Credit Union was a federally insured, state-chartered credit union that served 397 members and had assets of $163,197, according to the credit union’s most recent Call Report.

CTK Credit Union reported 4 consecutive years of losses. As of the end of 2015, the credit union was undercapitalized with a net worth ratio of 5.88 percent and had a delinquent loan ratio of 22.98 percent.

CTK Credit union is the first credit union to be liquidated in 2016.

Read NCUA's press release.

Friday, February 5, 2016

Bad Taxi Medallion Loans Weigh on LOMTO FCU

LOMTO FCU (Woodside, NY) flipped from a profit in 2014 to a loss in 2015 as problems with taxi medallion loans affected the performance of the credit union.

LOMTO went from a profit of $4 million for 2014 to a loss of almost $3 million for 2015, as the credit union significantly increased provisions for loan and lease losses.

During the fourth quarter, LOMTO increased provisions for loan losses by $2.5 million to slightly less than $6.8 million at the end of 2015. In comparison, provisions for loan losses were 534,400 a year earlier.

The increase in provisions boosted the credit union's allowance for loan and lease losses. Allowances for loan and lease losses jumped by $2.3 million during the fourth quarter to almost $10.2 million as of December 31, 2015.

Due to the 2015 loss, the equity capital of the credit union dropped from $44.5 million at the end of 2014 to $40.6 million at the end of 2015. As a result, the net worth ratio of the credit union fell by 114 basis points during the year to 15.56 percent.

Delinquent loans (60 days or more past due) grew by $2.7 million during the fourth quarter of 2015 to $6.4 million. As a result, the delinquent loan ratio rose from 1.53 percent at the end of the third quarter to 2.65 percent at the end of 2015.

The pipeline of early stage delinquent loans increased by $4.1 million during the fourth quarter to almost $9.5 million.

Troubled debt restructured (TDR) loans as od December 2015 was $37.9 million. A year earlier, the credit union reported no TDR loans. Roughly $18.3 million in TDR loans were in accrual status, while slightly less than $19.7 million of the TDR loans were in nonaccrual status. The credit union is reporting that at the end of 2015 the TDR portion of allowances for loan and lease losses was $6.7 million -- up from $2.4 million from the previous quarter. Also, TDR loans as of December 2015 were 89.13 percent of the credit union's net worth.

The credit union reported almost $1 million in net charge-offs for 2015.

Thee credit union's coverage ratio (allowance for loan losses to delinquent loans) was 158.36 percent at the end of 2015; but is down from 210 percent at the end of the third quarter.

At the end of 2015, the credit union's buffer (allowance for loan and lease losses and equity capital) to absorb the expected and unexpected losses was approximately $50.8 million.

Thursday, February 4, 2016

Low-Income Cleveland-based CU Conserved

The Superintendent of the Ohio Division of Financial Institutions on February 4 placed Cory Methodist Church Credit Union, of Cleveland, into conservatorship and appointed the National Credit Union Administration as conservator.

The Superintendent placed Cory Methodist Church Credit Union into conservatorship because of unsafe and unsound practices at the credit union. While continuing normal member services, NCUA will work to resolve issues affecting the credit union’s operations.

The credit union reported a loss of approximately $145 thousand for 2015, after posting a 2014 loss of almost $50 thousand. According to its December Call Report, the credit union had a net worth ratio of 21.94 percent and a delinquent loan ratio of 33.90 percent. The credit union had a net charge-off ratio for 2015 of 5.32 percent.

Members of Cory Methodist Church CU will be able to conduct normal financial transactions at Steel Valley Federal Credit Union

Cory Methodist Church Credit Union is a federally insured, state-chartered credit union with a low-income designation that has 710 members and assets of $1.6 million, according to the credit union’s most recent Call Report.

Read NCUA's press release.

Melrose CU Reports $176.7 Million Loss due to Bad Taxi Medallion Loans

Problem taxi medallion loans cause Melrose Credit Union (Briarwood, NY) to post $176.7 million loss for 2015.

According to Melrose's Financial Performance Report, the credit union posted a loss of $155.5 million for the fourth quarter as the credit union significantly increased provisions for loan and lease losses. During the fourth quarter, Melrose increased provisions for loan and lease losses by almost $162.9 million. As a result, provisions for loan and lease losses for all of 2015 were $206.4 million.

Melrose at the end of 2015 reported that allowance for loan and lease losses were $230.3 million, up from $68.1 million as of the third quarter of 2015.

Due to its large loss in the fourth quarter, Melrose's net worth ratio dropped sharply from 17.30 percent at the end of the third quarter of 2015 to 10.69 percent as of December 31, 2015.

Bad taxi medallion loans caused delinquencies to rise at the credit union. Melrose reported that $155.34 million loans were 60 days or more past due at the end of 2015. This translates into 7.80 percent of the credit union's loans being delinquent.

Also, there is a sizeable portion of loans in the early stages of becoming delinquent. Melrose is reporting that $103.6 million loans are 30 to 59 days delinquent at the end of 2015.

As of December 2015, Melrose is reporting $374.7 million in troubled debt restructured (TDR) loans, which are all in nonaccrual status. This is up from $219.5 million at the end of the third quarter of 2015.

TDR loans at the end of 2015 were 182.70 percent of net worth and the TDR portion of loan loss reserves was $144.4 million.

The increase in loan loss reserves during the fourth quarter caused the coverage ratio for Melrose to increase to 148.25 percent from 54.15 percent as of the third quarter of 2015.

Melrose at the end of 2015 had a buffer (allowance for loan and lease losses and equity) of $421.7 million to absorb expected and unexpected losses.

Wednesday, February 3, 2016

Taxi Medallion Lender Montauk Records $17.7 Million Loss, Is Critically Undercapitalized

Taxi medallion lender Montauk Credit Union (New York, NY), which was placed into conservatorship on September 18, 2015, recorded a 2015 loss of $17.692 million.

According to Montauk's Financial Performance Report, the credit union increased provisions for loan and lease losses by $20 million in 2015. In the last quarter of 2015, provisions for loan losses jumped by $16.4 million.

This increase in provisions caused the credit union's allowance for loan and lease losses to balloon during the fourth quarter to $21.96 million from $5.58 million at the end of the third quarter. Almost $10.8 million in allowance for loan and lease losses was for troubled debt restructured (TDR) loans.

Due to the loss, Montauk's net worth ratio plummeted from 10.54 percent on September 30 to 1.74 percent on December 31. As a result, Montauk Credit Union became critically undercapitalized.

Loans 60 days or more past due swelled at Montauk Credit Union. Delinquent loans grew from almost $16.3 million at the end of the third quarter to $40,4 million at the end of 2015. This means almost a quarter (24.39 percent) of Montauk's loans were at least 60 days past due.

In addition, $17.1 million in loans were in the early stage of becoming delinquent (30 - 59 days past due).

Montauk also reported that $33.1 million in loans were TDRs loans at the end of 2015. That means TDRs represent 1,172.46 percent of the credit union's net worth.

Furthermore, Montauk actively participated taxi medallion loans to other credit unions. At the end of 2015, Montauk was reporting that 20.10 percent of its participation loans were delinquent. This would indicate that other credit unions that had bought these participations from Montauk will be feeling pain.

Montauk is probably under-reserved given its level of nonperforming loans. Montauk's coverage ratio (allowance for loan losses to delinquent loans) was 54.32 percent at the end of 2015.

At the end of 2015, Montauk had a total buffer (allowance for loan and lease losses and equity) of almost $24.8 million to absorb both expected and unexpected losses.

According to NCUA, Montauk has modified $60.6 million in loans.

Read NCUA's press release.

CFPB Urges Banks and CUs to Improve Checking Account Access

The Consumer Financial Protection Bureau (CFPB) is taking steps to improve checking account access amidst Bureau concerns that consumers are being sidelined by the lack of account options and by inaccurate information used to screen potential customers.

CFPB Director Cordray stated: "Today, for a wide variety of reasons, there are nearly 10 million unbanked households that have no checking or savings account."

To address the issue of checking account access, the CFPB sent a letter to the 25 largest retail banks encouraging them to make available and widely market lower-risk deposit accounts that help consumers avoid overdrafts and fees. The CFPB is also urging banks and credit unions to offer consumers accounts that do not authorize them to spend money they don’t have and to prominently advertise the availability of these accounts.

The CFPB notes that these lower-risk accounts may include prepaid cards, as well as no overdraft checking accounts.

In addition, the CFPB issued a bulletin warning banks and credit unions that failure to meet accuracy obligations when they report negative account histories to credit reporting companies could result in enforcement actions.

Finally, the CFPB is providing consumers with resources to help navigate the deposit account system.

Read press release.

Read CFPB Director Cordray's Prepared Remarks.
 

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