Bay Ridge FCU Is Undercapitalized

Problem taxi medallion loans caused Bay Ridge Federal Credit Union (Brooklyn, NY) to post a loss for the first quarter of 2018 and to become undercapitalized.

After reporting a loss of $4.3 million for 2017, Bay Ridge FCU posted a loss of almost $2.4 million for the first quarter of 2018. The loss arose from a provision for loan and lease losses of $3.1 million during the first quarter -- this was up from $500,000 from a year ago.

Over the last year, the credit union's net worth fell by 35 percent to $12.3 million. As of March 2018, the credit union's net worth ratio was 6.55 percent; however, its risk based net worth requirement was 7.45 percent. As a result, the credit union was classified as undercapitalized.

The $188 million credit union reported holding $69.6 million in commercial loans not secured by real estate, as of March 2018. At least some of these loans were to finance taxi medallions.

Delinquent loans at the credit fell by almost 50 percent during the first quarter of 2018 to almost $3.9 million. However, early delinquencies (30 to 59 days past due) rose by 61 percent to $13.8 million.

Delinquent commercial loans not secured by real estate fell 71.6 percent to $1 million during the first quarter of 2018. But early delinquencies increased by 74 percent to almost $12 million.

Net charge-offs were nearly $2.1 million at the end of the first quarter. In comparison, a year ago net charge-offs were $104,259.

Troubled debt restructured (TDR) commercial loans not secured by real estate were $19.3 million at the end of March 2018. Almost $893 thousand of these TDR loans were 60 days or more past due; but approximately $5.9 million in these TDR commercial loans were 30 to 59 days past due.

The credit union's allowance for loan and lease losses increased by just over $1 million during the quarter to $7.5 million as of March 31, 2018. The increase in allowance for loan and lease losses coupled by a decline in delinquent loans caused its coverage ratio (allowance for loan and lease losses divided delinquent loans) to more than double during the quarter to 193.09 percent.