Q2 Update on NJ CUs with Exposure to Taxi Medallion Loans

The following 3 New Jersey credit unions reported exposure to taxi medallion loans. The disruption of taxi industry by ride sharing companies dented the performance of these credit unions as of mid-year.

Aspire Federal Credit Union (Clark, NJ)

Aspire Federal Credit Union had a credit union service organization that specialized in financing taxi medallions.

As of June 2018, the $154.4 million credit union had $9.95 million in commercial loans not secured by real estate. Presumably most, if not all, of these loans were to finance taxi medallions.

Th credit union reported a mid-year loss of $1.22 million. In comparison, the credit union reported a loss of $1.09 million for the first 3 months of 2018.

As a result of the second quarter loss, the credit union's net worth fell by 1.3 percent to $10.26 million as of June 2018. The credit union was adequately capitalized with a net worth ratio of 6.64 percent.

The credit union reported a 17.9 percent decline in delinquent loans during the second quarter to $5.5 million. As of June 2018, the delinquency rate was 4.76 percent -- down 88 basis points from the prior quarter and 139 basis points from a year ago.

Aspire stated that $2.65 million of delinquent loans were commercial loans to members not secured by real estate. This is down 12.8 percent from the first quarter of 2018 and 44.3 percent from a year ago.

The delinquency rate on non-real estate commercial loans was 26.62 percent.

The credit unions reported net charge-offs of $2.75 million -- up from $1.9 million at the end of the first quarter of 2018. As of June $1.7 million in commercial loans were charged off with no recoveries.

Troubled Debt Restructured (TDR) commercial loans not secured by real estate were almost $3.5 million. This was 7.5 percent from the first quarter of 2018. Delinquent TDR commercial loans were $1.265 million at the end of the second quarter 2018. In other words, 36.5 percent of these loans were past due.

Provisions for loan and lease losses rose by $292,444 during the second quarter to $1.667 million.

However, since net charge-offs rose by more than provisions for loan and lease losses, allowance for loan and lease losses fell by 7.5 percent to $7.36 million. The credit union is over-reserved with a coverage ratio of 133.51 percent as of mid-year 2018.

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

United Teletech Financial Credit Union posted a mid-year loss of $1.4 million.

The loss was due to an increase in provisions for loan and lease losses. As of the end of the second quarter of 2018, the credit union reported provisions for loan and lease losses of $3.6 million.

Due to the loss, the credit union's net worth fell from $23.1 million at the end of 2017 to $21.7 million at the end of June 2018. The credit union's net worth ratio slipped over the same time frame from 7.23 percent to 7.01 percent. The credit union was barely well capitalized.

The credit union reported $23.7 million in commercial loans not secured by real estate. Presumably most, if not all, of these loans were taxi medallions participation loans to nonmembers.

As of June 2018, the credit union had almost $9.3 million in delinquent loans -- up from $5.3 million from the first quarter of 2018. The delinquency rate rose from 2.01 percent at the end of the first quarter to 3.57 percent as of June 2018.

Delinquent nonmember commercial loans were $4.8 million as of mid-year. The delinquency rate on nonmember commercial loans was 20.35 percent.

At mid-year, net charge-offs were $1.7 million, of which $721 thousand were nonmember commercial loans.

Troubled Debt Restructured (TDR) commercial loans were $12.1 million as of June 2018. The credit union reported that 12.29 percent of TDR commercial loans not secured by real estate were 60 days or more past due.

The increase in provisions for loan and lease losses increased the credit union's allowance for loan and lease losses balance to $12.2 million. Its coverage ratio was 131.89 percent.

First Financial Federal Credit Union (Freehold, NJ)

After posting a loss of $1.7 million for the first quarter of 2018, First Financial FCU reported a loss of $110,377 for the second quarter.

The credit union had $10.8 million in a commercial loans not secured by real estate. Most, if not all, these loans were taxi medallion participation loans to nonmembers.

The credit union reported a 26.2 percent increase in delinquent loans to almost $5.3 million during the second quarter of 2018. The delinquency rate rose 81 basis points during the quarter to 3.96 percent as of June 2018.

The $190 million credit union reported that $2 million in nonmember commercial loans not secured by real estate were 60 days or more past due. this was up from $1.6 million as of March 2018. The delinquency rate on these loans were 18.88 percent, up from 15.03 percent for the prior quarter.

Troubled Debt Restructured (TDR) commercial loans were almost $6 million as of June 2018. Delinquent TDR commercial loans were $1.6 million.
This translates into a delinquency rate on TDR commercial loans of 27.30 percent.

The credit union was undercapitalized as of June 2018 with a net worth ratio of 5.23 percent.

The credit union reported an allowance for loan and lease losses balance of almost $4.9 million. The credit union's coverage ratio (allowance for loan and lease losses to delinquent loans) was 92.61 percent at the end of the second quarter.