Several NJ CUs Feel the Impact of Taxi Medallion Loans

The disruption from ride sharing companies of the taxi industry continues to rile the performance of several New Jersey credit unions struggling with loans that financed taxi medallions.

Aspire Federal Credit Union (Clark, NJ)

Aspire Federal Credit Union reported a year-to-date loss of $1.5 million as of September 2018. The credit union posted a loss of $313,741 during the third quarter.

The third quarter loss arose from an increase in provision for loan and lease losses by $795,101 during the quarter.

Due to the third quarter loss, Aspire's net worth fell from $10.26 million as of June 2018 to $9.94 million as of September 2018.

However despite the decline in net worth, Aspire's net worth ratio edged higher by 13 basis points during the third quarter to 6.77 percent. The increase in the net worth ratio was due to $7.67 million decline in assets during the third quarter to $146.8 million. Aspire is adequately capitalized as of September 2018.

The credit union reported a 4.6 percent increase in delinquent loans in the third quarter to almost $5.8 million. As of September 2018, the overall delinquency rate was 5.07 percent, a 31 basis point increase during the quarter.

More than half (51.6 percent) of the delinquent loans were commercial loans not secured by real estate, presumably taxi medallion loans. As of September 2018, almost $3 million in commercial loans not secured by real estate were 60 days or more past due. In other words, 35.70 percent of these loans were delinquent.

Troubled debt restructured (TDR) commercial loans not secured by real estate were $2.7 million at the end of September 2018, a decrease by 22 percent during the quarter. As of September, 20.41 percent of TDR commercial loans were in default.

During the third quarter of 2018, net charge-offs rose by $1.4 million to slightly less than $4.2 million, of which $2.6 million of these net charge-offs were non-real estate secured commercial loans. As of September 2018, the credit union's net charge-off rate was 4.67 percent.

Allowance for loan and lease losses fell by 8.4 percent during the third quarter to $6.7 million. Despite the decline in loan loss reserves, the credit union remained well-reserved with a coverage ratio of 116.91 percent.

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

Defaulting taxi medallion participation loans at United Teletech Financial FCU caused delinquent loans to surge by almost 72 percent during the third quarter of 2018.

There were $15.9 million in loans that were 60 days or more past due, as of September 2018. This is up from nearly $9.3 million in delinquent loans at the end of June 2018.

The overall delinquency rate between the second and third quarter went from 3.57 percent to 6.28 percent.

Almost 67 percent of all delinquent loans were nonmember commercial loans not secured by real estate, presumably these loans were to finance taxi medallion loans. During the third quarter 2018, delinquent nonmember commercial loans not secured by real estate surged by 123.3 percent to $10.7 million.

The percent of nonmember commercial loans not secured by real estate that were delinquent was 46.18 percent. The credit union reported $23.3 million in nonmember commercial loans not secured by real estate.

The credit union also reported $13 million in troubled debt restructured (TDR) commercial loans not real estate secured. Almost 45 percent of these TDR commercial loans were 60 days or more past due.

Net charge-offs were nearly $2.8 million as of September 2018, up from $1.7 million in June. About one-third of the net charge-offs were participations in commercial loans not secured by real estate.

While the credit union recorded a profit during the third quarter, the credit union had a year-to-date loss of $755,864 as of September 2018.

As a result of the third quarter profit, net worth increased by 3.1 percent during the third quarter to $22.4 million. The credit union's net worth ratio rose by 21 basis points to 7.22 percent at the end of September 2018.

The credit union saw a 3.1 percent decline in its allowance for loan and lease losses (ALLL) to $11.8 million. The combination of a sharp increase in delinquencies coupled with a decline in its ALLL caused the credit union's coverage ratio to fall from 131.89 percent as of June 2018 to 74.43 percent as of September 2018.

First Financial Federal Credit Union (Freehold, NJ)

First Financial FCU reported a year-to-date loss of $1.9 million as of September 2018. During the third quarter, the credit union reported a loss of almost $100 thousand.

Due to the third quarter loss, the credit union's net worth fell by 1.1 percent during the quarter to $9.65 million. Despite the decline in net worth, the credit union recorded an improvement in its net worth ratio from 5.10 percent as of June 2018 to 5.44 percent as of September 2018. The improvement in the net worth ratio arose from a $14.1 million reduction in assets during the third quarter 2018.

Over the last year, the credit union saw a 44.5 percent reduction in nonmember commercial loans not secured by real estate to $8.7 million as of September 2018. Presumably, these commercial loans not secured by real estate were to participate in tax medallion financing.

The $177 million credit union reported a decline in delinquencies during the third quarter. Delinquent loans fell by 9.4 percent during the most recent quarter to $4.8 million. As a result, the percent of loans that were 60 days or more past due fell by 28 basis points during the third quarter to 3.68 percent.

Delinquent nonmember commercial loans not secured by real estate tumbled by 28 percent in the latest quarter to $1.47 million at the end of the third quarter. This means 16.80 percent of these nonmember commercial loans were delinquent.

During the third quarter of 2018, troubled debt restructured commercial loans not secured by real estate increased by 19 percent to $7.1 million. Almost 21 percent of TDR commercial loans not secured by real estate were delinquent.

Net charge-offs as of September 2018 were $2.5 million, up 225 percent from the prior quarter. Almost $1.85 million in delinquent loans were nonmember commercial participation loans.

Due to net charge-offs increasing faster than provision for loan and lease losses during the third quarter, allowance for loan and lease losses fell to $3.5 million on September 30 from $4.9 million on June 30. Over the same time period, the credit union's coverage ratio declined from 92.61 percent to 73.40 percent.