Wednesday, February 14, 2018

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.






7 comments:

  1. Remember when credit unions were hit with assessments to bail out the NCUA mismanagement and gross incompetence at the corporate credit unions due to a lack of oversight and supervision? The financial hits just keep on coming. Prepare once again to be squeezed and juiced like a lime at a NCUA margarita festival. Expect the Duke Street announcement on Friday, February 16 long after the credit union closes. With a 3 day President's weekend optimistically you will miss the announcement. Where is the NCUA? How did this happen? Why did this happen? Is anyone at the NCUA being held accountable? Anyone being held responsible? At least reassign those accountable and responsible to a higher pay grade in keeping with NCUA civil servant protections. Keep the obscene salaries and benefits flowing. Budget deficit? No problem, just raise operating fees. Drop the hammer with another huge assessment. So sad. Too bad.
    Nassau FCU
    Loan to shares 12-2013: 60% 12-2017: 73%
    ROA 12-2013: -0.09% 12-2017: -2.17%
    Net Worth 12-2013: 9.46% 12-2017: 7.30%
    Net Worth 12-2013: $37M 12-2017: $28M
    Income 12-2013: (-$358,000) 12-2017: (-$8.8M)
    Did the NCUA issue a cease and desist order? Any Special Actions? Any DOR (Document of Resolution)? Please do share how the increased loan to share ratio proved beneficial. Where is the members decline in Net Worth of $7 Million? Can the member owners file a class action lawsuit for wasting corporate assets? Is there bond coverage? Does CUNA offer Stupid Bond Insurance coverage?
    Same questions for Town Hempstead (below)
    Loan to Shares 12-2013: 51% 12-2017: 55%
    ROA 12-2013: .06% 12-2017 -0.74%
    Net Worth: 12-2013: 7.55% 12-2017: 6.31%
    Net Worth: 12-2013 $4.9M 12-2017: $4.4M
    Income: 12-2013: $67,000 12-2017 (-$918,000)
    Where did the decline of $500,000 in Net Worth go? Does the NCUA business plan for Taxi Credit Union Medallions expect they can make it up in volume? Why permit the continued ramp up? Why does the NCUA Interest Rate Specialist see no problem in 15 year Medallion financing? Why does the NCUA Concentration Risk Specialist see no problem as credit unions double down as losses continue to increase? The answer: The more troubled credit unions the greater likelihood of continued NCUA employment with lavish salaries and benefits all bought and paid for by the credit unions - victims of NCUA mismanagement.

    ReplyDelete
    Replies
    1. Note to McW:
      F*#k us all Once...
      But Twice!?
      Time's Up!


      Delete
  2. How many banks are doing Taxi Medallion lending? How well is that working for them? Credit Unions are failing at this - but do you have something for us to compare these pathetic losses, too?

    ReplyDelete
    Replies
    1. There are banks that originated taxi medallion loans. Here are some banks that I am aware of -- Capital One, Citigroup, Connectone Bank, Signature Bank of New York, Flushing Bank, and Medallion Financial and its subsidiary Medallion Bank.

      These banks, with the exception of Medallion Financial, were not concentrated in medallion loans, so these loans did not have much of an impact on their performance.

      In addition, FDIC imposed regulatory limits on taxi medallion loans at Medallion Bank to 3 times capital.

      Delete
  3. NCUA, or somebody capable entity, needs to skate NOW to where the puck is going to be next. What OTHER industry is credit union business lending forming a concentration in? Has a legitimately measured and documented loss-reserve discipline been installed by someone with actual EXPERIENCE from that industry and not one of our well spoken academic spectators?

    ReplyDelete
  4. The reason why CUNA was awol in advising credit unions about losses on taxi loans is apparently because they were busy hiding their own losses.
    Hiding losses.
    They learned at the feet of the master, NCUA and Hampel.
    Meanwhile hiding their league of southeast credit union “metoo” moment.

    ReplyDelete
  5. What do we hear from the NCUA? The deafing sound of silence.

    ReplyDelete