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.