Thursday, August 4, 2016

Nonperforming Taxi Medallion Participation Loans Contribute to Quorum's Woes

Quorum Federal Credit Union (Purchase, NY) reported a mid-year loss of almost $6 million, as the credit union continued to build its loan loss reserves to address problems loans, including taxi medallion participation loans.

As I reported earlier, Quorum Federal Credit Union held $76.3 million portfolio of taxi medallion participation loans. Total non-member business participation loans at the credit union were $95.5 million as of June 2016. So, most of these non-member participation loans are taxi medallion loans.

Through the first six months of 2016, provisions for loan and lease losses were approximately $14.9 million. The credit union added slightly more than $8 million in provisions for loan and lease losses during the second quarter.

As a result, allowances for loan and lease losses rose from $7.74 million at the end of 2015 to $21 million as of mid-year 2016. The credit union's coverage ratio is 69.91 percent as of mid-year.

Delinquent participation loans were $17.9 million or 14.12 percent of its participation loans, as of June 2016. An additional $10.5 million in participation loans were 30 to 59 days past due. Unfortunately, the Call Report does not break out delinquent participation loans by type of loan.

All delinquent loans (60 days or more past due) were $30 million as of June 2016. The delinquency rate was 3.58 percent.

In addition, Troubled Debt Restructured (TDR) business loans were $15 million as of June 30, 2016. This is up 61 percent during the quarter. TDR business loans in non-accrual status were $10.8 million. Total TDR loans were $21.8 million.

Due to the loss, Quorum experienced a decline in its net worth. Net worth was $66.2 million and the credit union's net worth ratio was 7.04 percent as of June 2016. Quorum's net worth ratio is down from 7.56 percent at the end of 2015. Quorum was barely well-capitalized as of June 2016.

It is clear that the disruption in the taxi medallion market is weighing on the performance of Quorum Federal Credit Union.
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