Taxi Medallion Loans Provide a Bumpy Ride for Several NJ CUs

Several New Jersey credit unions continue to be affected by the disruption of the taxi industry by ride sharing companies. These credit unions either originated or participated in taxi medallion loans.

Aspire Federal Credit Union (Clark, NJ)

After posting a loss of almost $6.1 million for 2017, Aspire Federal Credit Union reported a loss of approximately $3.5 million for 2018. the credit union posted a loss of $1.95 million for the fourth quarter of 2018.

The fourth quarter loss was primary due to a 17.7 percent increase in provision for loan and lease losses. At the end of 2018, total provision for loan and lease losses was $3.87 million.

The $142.8 million credit union had approximately $7.3 million in commercial loans not secured by real estate -- presumably most, if not all, of these loans were to finance taxi medallions.

Due to the fourth quarter loss, the credit union's net worth fell from $9.9 million as of September 30 to just shy of $8 million at the end of 2018. Its net worth ratio over the same time period fell from 6.77 percent to 5.59 percent. As of the end of 2018, Aspire FCU was undercapitalized.

During the fourth quarter of 2018, fewer loans were delinquent. Delinquent loans fell by 23.2 percent during the quarter to $4.4 million. The percent of loans 60 days or more fell by 100 basis points to 4.07 percent.

Over half (52.4 percent) of the delinquent loans were commercial loans not secured by real estate. The percent of commercial loans non-real estate secured loans past due 60 days was 31.63 percent.

In addition, early delinquencies (loans 30 to 59 days past due) were $3.2 million -- up 20.5 percent from September 2018.

The credit union reported net charge-offs of $5.7 million at the end of 2018. The net charge-off rate was 4.91 percent at the end of 2018. Aspire wrote off almost $3.2 million in commercial real estate loans not secured by real estate during 2018.

Aspire's allowance for loan and lease losses account was $6.58 million. Its coverage ratio (allowance for loan and lease losses divided by delinquent loans) was 148.78 percent, which means it could write off all delinquent loans and still have some loan loss reserves left over.

First Financial Federal Credit Union (Freehold, NJ)

First Financial Federal Credit Union reported a loss of almost $2.38 million for 2018. The loss was due to provision for loan and lease losses of $3.9 million at the end of 2018.

First Financial had assets of $175.3 million at the end of 2018, down from nearly $190 million at the end of 2017.

At the end of 2018, the credit union reported $8.7 million in commercial loans not secured by real estate -- most, if not all, these loans were to finance taxi medallion participation loans. A year earlier, the credit union reported $16.16 million in non-real estate secured commercial loans.

During 2018, the credit union's net worth fell 20.5 percent to $9.2 million. Over the same time period, the credit union's net worth ratio fell from 6.09 percent to 5.24 percent. The credit union at the end of 2018 was undercapitalized.

Over the course of the year, delinquent loans fell from $6.27 million at the end of 2017 to $4.35 million at the end of 2018.

In addition, the delinquency rate on loans fell from 4.49 percent to 3.40 percent over the same time period.

At the end of 2018, $1.47 million in nonmember commercial loans not secured by real estate were 60 days or more past due. Roughly 16.90 percent of these loans were delinquent.

Net charge-offs were $3.31 million at the end of 2018. The net charge-off rate was 2.48 percent.

For 2018, the credit union wrote off $1.85 million in participation commercial loans not secured by real estate.

At the end of 2018, allowance for loan and lease losses was $3.92 million. The credit union's coverage ratio was 90.13 percent.

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

While United Teletech Financial Federal Credit Union posted a loss for 2018, it recorded a profit for the fourth quarter of 2018.

The credit union had a full year loss of almost $355 thousand; but a fourth quarter profit of $401 thousand. A year earlier, the credit union recorded a loss of $9.62 million.

The improvement in profitability was due to a decline in provisioning for loan and lease losses. Provision for loan and lease losses were down from $11.7 million for 2017 to $4.96 million for 2018.

However over the last year, assets at United Teletech Financial FCU fell from $319.8 million at the end of 2017 to $302 million at the end of 2018.

Its portfolio of commercial loans not secured by real estate dropped by 19.2 percent during 2018 to $20 million. Presumably most, if not all, of these loans were to finance taxi medallion participation loans.

As of December 31, 2018, the credit union's net worth was $22.8 million. Its net worth ratio was 7.54 percent at the end of 2018.

At the end of 2018, delinquent loans were down from the previous quarter, but up from a year ago. On December 31, 2018, delinquent loans were $13.97 million -- down 12.2 percent from September 2018, but up 67.4 percent from a year ago.

As of December 2018, the delinquency rate was 5.74 percent.

At the end of 2018, $8.48 million in nonmember commercial loans not secured by real estate were 60 days or more past due. Almost 61 percent of all delinquent loans were nonmember commercial loans.

In addition, the credit union reported that almost $8 million in early delinquency (30 to 59 days past due).

In the fourth quarter net charge-offs surged by 41.7 percent to $5.23 million. The net charge-off rate was 2.04 percent.

The credit union wrote off $3 million in taxi medallion participation loans during 2018.

Because net charge-offs rose more than provision for loan and lease losses during the fourth quarter, the credit union's allowance for loan and lease losses fell 15.1 percent to slightly less than $10.1 million. At the end of 2018, the coverage ratio was 72.03 percent.