Taxi medallion participation loans continued to be a drag on the performance of United Teletech Financial Federal Credit Union (Tinton Falls, NJ), as medallion values continue to fall.
The credit union may have up to $24.76 million in outstanding taxi medallion participation loans as of December 31, 2017.
The $319.8 million reported a 2017 loss of $9.6 million -- up from a loss of $1.64 for 2016.
The 2017 loss was due to the jump in provision for loan and lease losses in 2017. The credit union stated in its 2016 Annual Report that it "continued to assess and reserve capital for any exposure it may have to loan participation for taxi medallions in New York City." As a result, the credit union reported $11.7 million in provision for loan and lease losses in 2017 -- up from $4.9 million in 2016.
Due to the 2017 loss, the credit union's net worth fell by $8.5 million to $23.1 million. The net worth ratio plummeted by 208 basis points to 7.23 percent.
The credit union reported $8.3 million in delinquent loans at the end of 2017. Approximately, $2.3 million of the delinquent loans were non-member commercial loans not secured by real estate
Moreover, the credit union reported holding $12.35 million in troubled debt restructured commercial loans not secured by real estate at the end of 2017.
The credit union had $6.3 million in net charge-offs for 2017, of which almost $2 million for nonmember commercial loans not secured by real estate, presumably taxi medallion participation loans.
The increase in provision for loan and lease losses caused the credit union to build its allowance for loan and lease losses from almost $4.9 million at the end of 2016 to $10.3 million at year-end 2017. This caused the coverage ratio to increase from 44.41 percent to 123.74 percent over the same time period.
The credit union may have to increase provision for loan losses this year. Flushing Financial Corporation in its January 30 earnings release stated that it cut its carrying value for its taxi medallion portfolio by over 50 percent to an average carrying value of $164,000 per New York City taxi medallion loan.
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I am not an NCUA EIC - but does anyone on Duke Street see a trend here? The NCUA must be pleased as punch leading credit unions down a primrose path of financial ruin. The NCUA is out of order. What do we know? We know there is a method to the NCUA madness. The more troubled credit unions the more budgeted to the NCUA. The NCUA is living the life as they continue to step up into bigger pay grades. The NCUA is getting the last laugh at credit union expense as the NCUA continues to live the life as they pimp the credit unions they are regulated to examine. The irony is they collect more pay, more overtime as the number of credit unions decline because the regulator has encouraged them to load up on alt-a paper (corporate credit unions) and load up on taxi medallions. The NCUA are not liars, they just take economical liberty with the truth as they impose assessments and hire more talent to manage a shrinking pool of credit unions. Its a mad world! Mad kings! And the NCUA has gone mad.
ReplyDeleteOn the farm we don't permit the coyote to protect and defend the chicken coop. It would be a conflict of interest. On Duke Street we permit the NCUA to protect and defend the credit union community. Huge conflict of interest. The NCUA owns the insurance fund & is charged with protecting it. When the fund runs low the protection racket imposes assessments on those they are charged with protecting. The more assessments the more cash to the racket charged with providing the protection. Call it rewarding bad behavior. The worse it gets the more they collect. The conflict is the incentive to increase the budget for personal gain all at the expense of those they regulate. The greater the shakedown - the greater the income. This leaves a bitter taste to the credit union community. Far worse than what Monica experienced. And just as hard to swallow.
ReplyDeleteNCUA obtains the quarterly call report data. Do they read it? Do they understand the data? Do they look for trends? Or is the reporting to the NCUA a huge exercise in mental masturbation? Year end 2014 United has 10.35% Net Worth and Year end 2017 United has 7.23% Net Worth. At the same time they ramp up the loan to share ratio from 86.74% to 93.75%. This practice is called: Making It Up in Volume. Sadly, not working. ROA falls like a rock from 0.40% down to (-2.92%). Income moves from $1.2M down to ($-9.6M). All this on the back of a credit union of $319M in Assets. Is NCUA on a crack-pipe high? Is the smoke so thick on Duke Street they can't read the data? The NCUA Capital Market Specialist is not so Special. The NCUA Concentration Risk Specialist must be constipated to miss the concentration. The stain of gross incompetence at the NCUA is far darker than the stain on Monica's blue dress. At least her stain was small..."Bill's." The NCUA taxi medallion stains from United and others will be huge...no pun intended and the assessments are getting bigger. Credit Unions are once again getting screwed without the kiss. Another NCUA reach-around. Credit Unions need protection from the NCUA an unregulated regulator lacking competence, integrity or fidelity. Beyond the White House things are looking...Stormy at the NCUA.
ReplyDeleteYour reporting implies there is a loan problem here beyond the taxi loans.
ReplyDeleteThis credit union is probably already insolvent.
NCUA will play the string out per usual. Just like they’re doing with Melrose, did with Montauk, did with Wescorp and chetco. It never ends.
The only reason they’re still around is because they “report” to a body even worse managed then themselves...congress. The imbecile factory on the hill.
NCUA holds a fair share of the blame, but so too, do the management teams and boards that govern them. Credit unions reach outside for earnings when they cannot operate successfully from within. The boards that govern them have no experience in the industry, so they must trust the management team (and NCUA, the baby-sitter of the management team). The management teams usually have no experience in commercial lending, and apply bad assumptions to the actions they engage in. The root cause of the problem is an expense appetite that cannot be satisfied with the existing revenue diet. The sugar high created by reaching outside, always leads to a crash. The boards that govern credit unions need to understand this. Unfortunately, they don’t. Shame on them too.
ReplyDeleteAlthough NCUA may share some of the blame for not stepping in sooner, it was no secret that Uber, etc. were on the horizon. This is due to poor planning, poor insight and future considerations as well as bad lending practices and management that attracted high risk borrowers.
ReplyDelete