Taxi Medallions Weigh on the Performance of Several NJ Credit Unions

Problem taxi medallion loans weigh on the performance of several New Jersey credit unions.

Aspire Federal Credit Union (Clark, NJ)

Aspire Federal Credit Union reported a loss of almost $1.1 million during the first quarter of 2018, after posting a loss of approximately $6.1 million for 2017.

The credit union reported provision for loan and lease losses of almost $1.4 million at the end of the first quarter of 2018.

Due to the loss, the credit union's net worth ratio fell by 64 basis points to 6.62 percent.

The credit union had almost $10.5 million in commercial loans not secured by real estate. Presumably these loans financed taxi medallions.

Delinquent loans fell by 24.5 percent during the first quarter of 2018 to $6.7 million. The delinquency rate declined from 7.13 percent to 5.64 percent during the quarter.

Roughly 45 percent ($3 million) of all delinquent loans were commercial loans not secured real estate. As of March 2018, 29 percent of these commercial loans were delinquent.

Additionally, another $1.5 million of commercial loans not secured by real estate were 30 to 59 days past due.

Aspire FCU had $1.9 million in net charge-offs, of which almost $1.4 million were for commercial loans not secured real estate. The net charge-off rate for commercial loans was 44.35 percent.

In addition, troubled debt restructured (TDR) commercial loans were $3.2 million at the end of the first quarter of 2018, down from $3.9 million at the end of 2017.

Because net charge-offs exceeded provision for loan and lease leases during the first quarter of 2018, the allowance for loan and lease losses fell by 6.7 percent to $7.9 million as of March 31, 2018. The coverage ratio (allowance for loan and lease losses divided by delinquent loans) rose from 94.99 percent to 117.39 percent during the first quarter.

First Financial Federal Credit Union (Freehold, NJ)

First Financial FCU reported a loss of $1.7 million during the first quarter of 2018, due to provision for loan and lease losses of almost $1.7 million.

Due to its first quarter loss, the credit union became undercapitalized with a net worth ratio of 5.10 percent. Its net worth was $9.6 million.

The credit union had roughly $10.9 million in commercial loans not secured by real estate as of March 31, 2018. However, this is down 32.8 percent from the end of 2017. Most, if not all, of these loans were to finance taxi medallions.

Delinquent loans fell by 33 percent during the first quarter to almost $4.2 million. Nonmember commercial loans not secured by real estate accounted for $1.6 million of these delinquencies.

The delinquency rate for nonmember commercial loans was 15.03 percent.

TDR commercial loans not secured by real estate were $6 million as of March 2018, down 18.6 percent from the prior quarter.

The credit union reported a 41.8 percent increase in allowance for loan and lease losses during the quarter to $4.7 million. This provided the credit union with a coverage ratio of 112.58 percent, up from 53.03 percent at the end of 2017. The improvement in the coverage ratio was due to a decline in delinquent loans and an increase in loan loss reserves.

United Teletech Financial Federal Credit Union (Tinton Falls, NJ)

While the headline numbers show an improvement in United Teletech Financial FCU's performance, the credit union reported a surge in early delinquencies during the first quarter of 2018.

The credit union reported an improvement in delinquencies, positive net income, and higher net worth ratio.

Loans 30 to 59 days delinquent more than doubled during the first quarter to $13.3 million as of March 2018.

The credit union had $24 million in commercial loans not secured by real estate -- most were taxi medallion loans.

Approximately $1.1 million of these loans were 60 days or more past due. However, $6.1 million of these loans are 30 to 59 days past due. Thus, 22.46 percent of commercial loans were at least 30 days or more delinquent.

At the end of the first quarter of 2018, TDR commercial loans were $12.3 million. Almost $3 million of these loans were in the early stage of delinquency.

Allowance for loan and lease losses were just shy of $10 million at the end of March 2018. Its coverage ratio was 188.93 percent. This means the credit union can right off all loans 60 days or more past due and have loan loss reserves left over.