While the remaining three New York City taxi medallion lending credit unions garner most of the attention, there are other credit unions that have been affected by the disruption of the taxi industry. The following discussion looks at several of these credit unions.
First Jersey Credit Union (Wayne, NJ)
First Jersey Credit Union has a credit union service organization, USA Medallion Funding LLC, that specialized in taxi medallion lending.
First Jersey recorded a loss of almost $4.1 million through the first half of 2017, as it increased provision for loan and lease losses to $4.2 million.
As a result of the loss, the $101 million credit union's net worth fell from $8 million at the end of 2016 to $3.9 million as of June 2017. The credit union's net worth ratio fell from 6.91 percent to 3.87 percent over the same time period. As of the end of second quarter, the credit union was significantly undercapitalized.
Delinquent loans increased by 54.7 percent during the second quarter to $6.3 million as of June 30. As of the end of the second quarter, the delinquency rate on loans was 9.41 percent -- up from 5.80 percent at the end of the first quarter.
Most of the credit union's delinquent loans were member business loans. Almost $5.3 million in delinquent loans were in member business loans, presumably these loans were taxi medallion loans. The credit union reported that 36.74 percent of its member business loans not secured by real estate were 60 days or more past due.
In addition, almost $3.8 million in member business loans not secured by real estate were recorded as troubled debt restructured (TDR) loans at the end of the second quarter -- an increase of almost 31 percent from the prior quarter. As of June, almost a quarter (24.25 percent) of these loans were 60 days or more delinquent.
First Jersey charged off almost $1.3 million in non-real estate secured member business loans through the first half of 2017.
Due to the increase in provision for loan and lease losses, allowances for loan and lease losses rose from $4.5 million at the end of 2016 to $7.2 million at the end of June 2017. The credit union's coverage ratio was 114.63 percent at the end of the second quarter of 2017.
As of June 2017, the credit union has a buffer (net worth and allowance for loan and lease losses) of approximately $11.2 million to absorb expected and unexpected losses.
Bay Ridge Federal Credit Union (Brooklyn, NY)
Bay Ridge FCU reported a loss of almost $2.1 million through the first half of 2017, as the credit union increased its provision for loan and lease losses.
Provision for loan and lease losses increased from $500,000 at the end of the first quarter to $3.1 million as of June 2017, as the credit union builds its loan loss reserves.
Due to its loss, the credit union's net worth fell from $19 million to $16.9 million. Its net worth ratio fell 90 basis points to 8.44 percent during the second quarter.
Loans 60 days or more delinquent increased by 24.1 percent during the second quarter to just below $8 million. The delinquency rate at the end of June 2017 was 4.53 percent, up from 3.65 percent for the prior quarter.
A majority of the delinquent loans were member business loans not secured by real estate, most likely taxi medallion loans. As of June 30, delinquent member business loans were almost $5.8 million. The percentage of non-real estate secured member business loans that were delinquent as of June was 7.23 percent.
Net charge-offs were negligible.
Troubled debt restructured (TDR) business loans were $23.1 million as of June, up $479,298 from the prior quarter. As of June 30, 19.34 percent of TDR business loans were 60 days or more past due.
Due to the increase in provision for loan and lease losses, allowance for loan and lease losses increased by $2.6 million to $6.8 million.
Bay Ridge FCU has $200 million in assets as of June 2017.
Aspire Federal Credit Union (Wayne, NJ)
Aspire Federal Credit Union has a taxi medallion lending credit union service organization (CUSO).
At the end of June 2017, Aspire reported a mid-year loss of almost $2.8 million. The loss was due to a $3.4 million increase in provision for loan and lease losses.
As a result of the loss, the credit union's net worth fell from $17.5 million at the end of 2016 to slightly less than $14.8 million as of June 2017.
Over the same time period, the credit union'd net worth ratio declined from 10.11 percent to 8.73 percent.
Delinquent loans increased by 44.8 percent during the second quarter to $8.2 million. As of June, 6.15 percent of the loans were delinquent.
A majority of the delinquent loans were business loans not secured by real estate, as $4.75 million were past past due. These loans are most likely taxi medallion loans. The percentage of these business loans past due were 31.95 percent, this is up from 15.98 percent from the prior quarter.
Troubled debt restructured (TDR) business loans were $4.2 million at mid-year. This is down 1.9 percent from the previous quarter. As of June 2017, over one-third (35 percent) of all TDR business loans were delinquent.
Due to the increase in loan loss provisions, allowance for loan and lease losses increased by $1.8 million this year to $6.15 million.
Aspire FCU has $168.9 million in assets as of June 2017.
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Maybe what NCUA should do is give them 208 NOW so that they can then read their report recently released that says nearly all 208 CUs fail.
ReplyDeleteTHEN they can realize that they're going to fail sooner than simply watching the capital erode as it will. over the next year.
Maybe Hampel can write a white paper that only he understands and no one will read.
Keith - You have identified a slippery slope for the credit union community. The toxic waste from the taxi loans in on balance sheets throughout the U.S. The losses will continue to move in the fast lane at a high rate of speed. The NCUA could have put the brakes on this concentration risk. Again, the NCUA was asleep at the wheel. NCUA was asleep at the Corporate FCU wheel, too. Notice the trend. The NCUA is a pathetic agency without relevance.
ReplyDeleteKeith - You have identified a slippery slope for the credit union community. The toxic waste from the taxi loans in on balance sheets throughout the U.S. The losses will continue to move in the fast lane at a high rate of speed. The NCUA could have put the brakes on this concentration risk. Again, the NCUA was asleep at the wheel. NCUA was asleep at the Corporate FCU wheel, too. Notice the trend. The NCUA is a pathetic agency without relevance.
ReplyDeleteWith these staggering MILLION $$ losses has the Board of Directors fired Management? I didn't think so. Is Management still collecting huge salaries while the credit union is in a rectal bleed? Has the Board notified the "share holders - owners" of these huge million $$ losses? Is the board and management on a crack-pipe high and blinded by the smoke the monopoly on taxi medallion lending has been raped, pillaged and plundered by capitalism and Uber & Lyft? I say take away the drivers license of the board and management. Repo their license to run a financial institution. File a bond claim against the board and management to recover the losses based on bad management, mismanagement, fraud, deceit, deception, bad faith, unclean hands, etc. Recall the board and fire the management. Bank stock holders would do no less. Why should credit union share holder/owners accept these losses?
ReplyDeleteAgree. Sadly though, what losses? NCUA will cover their losses with our credit union member's money in the NCUSIF and if needed, take more dollars from our credit union, and no member vote required. Regulator and Insurer in-one, the ultimate financial cooperative.
ReplyDeleteGood point.
Delete"Regulator and insurer all in one".
NCUA a living example of conflict of mission which we see in our industry news reports daily.
Including the merger they want and the conversion rules they have.
Yes, the merger proposed rules are not to protect members at all. They're to protect NCUA and chip.
DeleteIn previous comment, chip refers to Chip Filson, who is an advocate for the voluntary merger rule.
Delete