Three More NY Credit Unions Reporting Problems from Taxi Medallion Loans

Three more New York credit unions -- Bay Ridge Federal Credit Union, Nassau Financial Federal Credit Union, and Town of Hempstead Employees Federal Credit Union -- are feeling the effect of Uber and other ride sharing apps on the taxi industry.

I would like to thank a reader for the tip that both Nassau Financial and Town of Hempstead Employees FCUs had exposure to taxi medallion loans.

Bay Ridge Federal Credit Union (Brooklyn, NY)

Bay Ridge FCU reported a loss of $4.3 million for 2017, as the credit union increased provision for loan and lease losses.

Provision for loan and lease losses increased from $1.7 million for 2016 to $6.5 million for 2017.

Its 2017 loss caused its net worth to drop from almost $19 million at the end of 2016 to $14.7 million as of December 2017. The $192.8 million credit union saw its net worth ratio fall 185 basis points over the same time period to 7.62 percent.

The credit union at the end of 2017 reported $72.7 million in outstanding commercial loans not secured by real estate. Presumably some of these commercial loans are secured by taxi medallions.

At the end of 2017, the credit union reported almost $7.4 million in delinquent loans -- down from the third quarter, but up from a year ago. At the end of 2017, 4.31 percent of its loans were 60 days or more past due.

The credit union is also reporting $8.6 million in early delinquencies (30-to-59 days past due) as of December 2017. This is up from $44,890 at the end of the third quarter of 2017.

A majority of the delinquent loans and early delinquencies were member commercial loans not secured by real estate. Delinquent commercial loans not secured by real estate were slightly less than $3.7 million at the end of 2017. Early delinquencies were almost $6.9 million.

Net charge-offs were $3.9 million for 2017 -- up from $427 thousand at the end of 2016. The net charge-off rate was 2.23 percent at the end of 2017, up from 0.25 percent from a year ago.

Troubled debt restructured (TDR) commercial loans not secured by real estate were $20.5 million as of December 2017. Almost 15 percent of these TDR loans are 60 days or more past due.

The credit union has $6.4 million in allowance for loan and lease losses, up from $3.8 million from a year ago. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 87.02 percent, up from 57.17 percent a year ago.

Key questions for the credit union's management and board are: What is the credit union's total exposure to taxi medallion loans and what is the price of taxi medallions the credit union is using to evaluate its portfolio?

Nassau Financial Federal Credit Union (Westbury, NY)

Nassau Financial FCU reported a loss of almost $8.9 million for 2017, as the credit union significantly increased its provision for loan and lease losses in 2017.

Provisions for loan and lease losses rose from $454,148 at the end of 2016 to almost $8.2 million at the end of 2017.

The $403 million credit union at the end of 2017 reported outstanding commercial loans not secured by real estate of $24.2 million. One suspect that some of these loans were to finance the purchase of taxi medallions.

The 2017 loss caused its net worth to drop from $38.3 million at the end of 2016 to $29.4 million at the end of 2017. Its net worth ratio over the same time period tumbled by 194 basis points to 7.30 percent.

The credit union is reporting $12.9 million in delinquent loans in its most current call report. Its delinquency rate was 4.77 percent.

A majority of the delinquent loans at the end of 2017 were nonmember commercial loans not secured by real estate at $7.4 million. Almost 31 percent of nonmember commercial loans not secured by real estate were past due.

In addition, troubled debt restructured commercial loans not secured by real estate were $8.2 million at the end of 2017, of which all were in non-accrual status.

The credit union significantly increased its allowance for loan and lease losses from about $1.4 million at the end of 2016 to $7.7 million at the end of 2017. The increase in its loan loss reserves caused its coverage ratio to climb from 11.23 percent on December 31, 2016 to 59.73 percent on December 31, 2017.

Town of Hempstead Employees Federal Credit Union (North Baldwin, NY)

Town of Hempstead Employees Federal Credit Union reported a loss of almost $919 thousand for 2017, after posting a profit for 2016.

The 2017 loss arose from a more than five-fold increase in 2017 provision for loan and lease losses compared to 2016 to $554,500 and a 33 percent increase in 2017 employee compensation and benefits to almost $2.8 million.

As the result of the 2017 loss, the $123 million credit union saw its net worth decline by 10.6 percent in 2017 to slightly less than $7.8 million. The credit union saw its net worth ratio fall from 7 percent to 6.31 percent. The credit union is now adequately capitalized.

The credit union is reporting outstanding commercial loans not secured by real estate of $7.1 million at the end of 2017, down from $9.6 million at the end of the third quarter of 2017. Presumably some of these commercial loans were to finance the purchase of taxi medallion loans. The credit union had $6.4 million commercial loan participations.

At the end of 2017, the credit union reported almost $1.4 million in delinquent loans, which means 2.11 percent of loans were delinquent.

However, the credit union saw an increase in the pipeline of early delinquencies. Loans 30-to-59 days past due grew by 321 percent during the fourth quarter of 2017 to approximately $1.1 million.

The credit union more than doubled its allowance for loan and lease losses during 2017 to almost $813 thousand. As a result, the credit union's coverage ratio rose from 48.46 percent in 2016 to 59.18 percent in 2017.

This means the credit union at the end of 2017 has a total buffer of net worth and allowance for loan and lease losses of $8.6 million to absorb expected and unexpected losses.