LOMTO Federal Credit Union (Woodside, NY) reported a loss of almost $18.4 million for the full year of 2016 as problem taxi medallion loans undermined the financial performance of the credit union..
The loss can be attributed to an increase in provisions for loan and lease losses in 2016. The credit union reported provisions for loan and lease losses were almost $16.8 million for 2016.
As a result of the loss, the credit union's net worth plummeted from $32.3 million at the end of 2015 to less than $13.9 million at the end of 2016.
The credit union's net worth ratio was 5.87 percent as of December 31, 2016 -- down from 12.25 percent a year ago and 8.40 percent as of September 30, 2016. This means that LOMTO FCU was undercapitalized at the end of 2016.
The $236 million credit union reported delinquent loans of $30.9 million at the end of 2016 -- up from $30.4 million as of September 2016 and $6.4 million as of December 2015, respectively.
The credit union's delinquency ratio increased during the quarter to 14.36 percent at the end of 2016. In comparison, the delinquency rate was 13.43 percent as of September 2016 and 2.65 percent at the end of 2015.
Also, delinquent loans were more than double the credit union's net worth at 222.86 percent.
In addition, the pipeline of early delinquencies (30 to 59 days past due) grew during the fourth quarter from $7.7 million to $10.9 million.
The credit union saw an surge in net charged off loans during the third quarter. Net charge-offs went from $3.4 million at the end of the third quarter of 2016 to $11.2 million at the end of 2016. As of the end of 2016, the net charge-off rate was 4.90 percent.
During the fourth quarter, troubled debt restructured (TDR) loans fell by almost $10.7 million to $23.1 million at LOMTO FCU. The ratio of TDR loans to total loans was 10.72 percent and the ratio of TDR loans to net worth was 166.46 percent.
The credit union stated that its allowance for loan and lease losses (ALLL) was almost $24.9 million at the end of 2016. As a result, the credit union had a coverage ratio (ALLL to delinquent loans) of 80.41 percent. However, its coverage ratio may be overstated as roughly $8.8 million of ALLL is meant to cover potential losses associated with TDR loans.
Given the deteriorating financial performance of LOMTO FCU, the credit union should be under a formal enforcement order or conservatorship with the National Credit Union Administration.