Quorum FCU Posted Q1 Loss, As It Addresses Defaulting Taxi Medallion Participation Loans

Quorum Federal Credit Union (Purchase, NY) reported a loss of $2.7 million for the first quarter of 2018, as the $867 million credit union increased provisions to cover troubled taxi medallion participation loans.

Provision for loan and lease losses was almost $6.3 million for the first quarter. In comparison, provision for loan and lease losses was $1.8 million a year earlier and $2.8 million for the fourth quarter of 2017.

Due to the first quarter 2018 loss, the net worth of the credit union fell from $67.3 million at the end of 2017 to $64.6 million as of March 31, 2018. The net worth ratio fell by 38 basis points during the quarter to 7.44 percent.

Quorum, as of March 2018, reported holding $58.7 million in commercial loans not secured by real estate. Presumably most, if not all, were taxi medallion participation loans. This was down from $64.4 million at the end of 2017.

The credit union had $42.7 million in delinquent loans, of which $31 million was participation loans. The delinquency rate on all loans was 5.87 percent at the end of the first quarter of 2018. However, the delinquency rate on participation loans was 30.93 percent.

Troubled debt restructured (TDR) commercial loans not secured by real estate were $23.5 million at the end of the first quarter, of which $17.1 million in nonaccrual status. Delinquent TDR commercial loans not secure by real estate were $8.1 million. In other words, 34.34 percent of these loans were 60 days or more past due. But this is an improvement from the end of 2017, when the delinquency rate was 59.48 percent.

The credit union had a net charge-offs of $6.9 million during the first quarter of 2018. Participation loans accounted for almost $5.5 million in net charge-offs. The net charge-off rate for participation loans was 21.13 percent. Quorum charged off $3 million in TDR commercial loans not secured by real estate.

Despite the increase in provision for loan and lease losses, allowance for loan and lease losses fell during the quarter from $34.15 million to $33.5 million due to higher net charge-offs. But the drop in delinquencies cause the coverage ratio (delinquent loans to allowance for loan and lease losses) to increase to 78.44 percent at the end of the first quarter from 62.48 percent at the end of 2017.