Significantly Undercapitalized Altier CU Affected by Bad Taxi Medallion Participation Loans

Altier Credit Union (Tempe, AZ) reported a deterioration in its financial performance, as taxi medallion participation loans weighed on its operation.

This credit union was brought to my attention by a reader.

In a 2012 comment letter to the National Credit Union Administration, Altier commented that its portfolio was "comprised of indirect lending, taxi medallions and manufactured housing." (Read the comment letter).

The $193 million credit union reported a year-to-date loss of $9.2 million, as the credit union recorded a provision for loan and lease losses during the first 3 quarters of 2017 of $9.1 million.

As a result of the loss, the credit union's net worth fell from $13.7 million at the end of 2016 to less than $4.5 million as of September 2017. The credit union's net worth ratio declined from 7.23 percent to 2.31 percent over the same time period. The credit union was significantly undercapitalized at the end of the third quarter.

The credit union is reporting almost $13 million in commercial loans, presumably taxi medallion participation loans. The credit union had $16.1 million in outstanding participation loans.

As of September 2017, $3.8 million in loans were 60 days or more past due, of which $3.3 million were participation loans. While the overall delinquency rate at Altier Credit Union was 2.68 percent, the delinquency rate on participation loans was 20.61 percent and the delinquency rate on commercial loans was 25.45 percent.

In addition, the credit union charged off $1.15 million in commercial loans through the first 3 quarters of 2017.

Furthermore, troubled debt restructured commercial loans not secured by real estate were approximately $7.4 million as of September 2017.

The increase in provision for loan and lease losses caused the credit union's allowance for loan and lease losses account to increase from almost $2 million at the end of 2016 to $9.8 million. The credit union's coverage ratio (allowance for loan and lease losses divided by delinquent loans) was 254.23 percent as of September 2017.