Taxi Medallion Loans Impact Two NJ CUs

Several New Jersey credit unions with exposure to taxi medallion loans experienced additional deterioration in their financial performance.

First Jersey Credit Union (Wayne, NJ)

The $91 million credit union recorded a year-to-date loss of $5.8 million at the end of the third quarter. The loss was ties to a $4.6 million year-to-date increase in provision for loan and lease losses.

As a result of the loss, the credit union's net worth fell to slightly less than $2.2 million. At the end of the third quarter, the credit union was significantly undercapitalized with a net worth ratio of 2.40 percent, down from 3.80 percent as of June 2017.

The credit union reported $5.6 million in delinquent loans. This was down from $6.3 million from the previous quarter. The percent of loans 60 days or more past due was 8.88 percent as of the most recent financial performance report. Delinquent loans as a percent of net worth were 256.29 percent.

Delinquent commercial loans not secured by real estate -- presumably taxi medallion loans -- were almost $4.6 million as of September. The delinquency rate on these loans was 35.05 percent.

In addition, troubled debt restructured commercial loans were nearly $4.7 million.

The credit union reported a September 2017 net charge-offs of $2.3 million, of which $2 million was commercial loans. The net charge-off rate was 4.60 percent; but the net charge-off rate for commercial loans was 17.54 percent -- up from 4.37 percent from a year ago.

Due to the increase in provision for loan and lease losses, the allowance for loan and lease losses was $6.8 million. The coverage ratio was 121.64 percent as of September 2017, up from 114.63 percent on June 2017.

Over the last year, assets at the credit union shrunk by $34.2 million. During the last quarter, assets fell by $10.4 million.

Aspire Federal Credit Union (Clark, NJ)

Aspire FCU reported a year-to-date loss of $5.8 million as the credit union seeks to build reserves to cover bad taxi medallion loans. The $161 million credit union reported almost a doubling of provisions during the third quarter from $3.4 million to $6.7 million.

As a result of the loss, the credit union's net worth fell from $17.5 million at the end of 2016 to $11.7 million as of September 2017. The credit union's net worth ratio dropped by 283 basis points to 7.28 percent.

Delinquent loans rose during the last quarter from $8.2 million to $9.2 million. The delinquency rate on loans rose 106 basis points to 7.21 percent.

Commercial loans not secured by real estate -- presumably taxi medallion loans -- accounted for almost half of the delinquent loans ($4.5 million). The percentage of these commercial loans 60 days or more past due was 34.52 percent.

The credit union is reporting net charge-offs of $2.8 million as of September 2017. The net charge-off rate was 2.80 percent.

Troubled debt restructured commercial loans were approximately $3.9 million at the end of the third quarter of 2017.

Due to the increase in provisions for loan and lease losses, the credit union's allowance for loan and lease losses jumped from $4.3 million at the end of 2016 to $8.2 million as of September 2017. The credit union's coverage ratio was 88.73 percent -- up from 58.64 percent at the end of 2016.