First Jersey Credit Union (Wayne, NJ) was liquidated by the New Jersey Department of Banking and Insurance.
The Department appointed the National Credit Union Administration as liquidating agent. USALLIANCE Federal Credit Union of Rye, New York, immediately assumed most of First Jersey’s assets and loans and all member shares.
The New Jersey Department of Banking and Insurance made the decision to liquidate First Jersey Credit Union and discontinue its operations after determining the credit union was insolvent with no prospect for restoring viable operations on its own. At the end of 2017, First Jersey CU was critically undercapitalized with a net worth ratio of zero percent. (Read my February 11, 2018 blog post)
First Jersey Credit Union is the second federally insured credit union liquidation in 2018 and the first New Jersey credit union to be liquidated since 2015.
At the time of liquidation and subsequent purchase and assumption by USALLIANCE Federal Credit Union, First Jersey Credit Union served 9,045 members and had assets of almost $86 million, according to the credit union’s most recent Call Report.
Read the press release.
Wednesday, February 28, 2018
Research: There Are Six Distinct CU Business Models
Two researchers, John Stowe and David Stowe, identified that there are six strategic credit union groups, which are differentiated by their asset-liability management decisions.
Instead of using size, field of membership, or state versus federal charter to group credit unions, the paper, Credit Union Business Models, uses cluster analysis to group credit unions based on 41 common size balance sheet and income statement variables for 1,528 credit unions with at least $100 million in assets as of December 31, 2015. This sample of 1,528 credit unions represents almost 25 percent of all credit unions and almost 91 percent of all credit union assets.
The paper employed 16 asset variables, 9 liability-side variables, 7 revenue variables, and 9 expense variables to determine credit union clusters.
The authors found that there are six different credit union groups -- saver-oriented credit unions, traditional credit unions, auto lender credit unions, real estate lender credit unions, and other lenders. Traditional credit unions, which have investments and loans closer to the industry's overall mix, are divided into two clusters -- one with greater emphasis on real estate loans and regular shares and the other cluster has more investments.
The paper found that 67 credit unions are saver-oriented; 430 credit unions are traditional credit unions holding more investments; 192 credit unions would be identified as traditional credit unions with greater emphasis on real estate loans and regular shares; 388 credit unions are auto lenders; 403 credit unions are real estate lenders, and 48 credit unions are other lenders.
Interestingly 4 of the 5 credit unions with more than $10 billion in assets were classified as real estate lenders.
For more information about the characteristics of each of these groups, you can download the paper here.
Instead of using size, field of membership, or state versus federal charter to group credit unions, the paper, Credit Union Business Models, uses cluster analysis to group credit unions based on 41 common size balance sheet and income statement variables for 1,528 credit unions with at least $100 million in assets as of December 31, 2015. This sample of 1,528 credit unions represents almost 25 percent of all credit unions and almost 91 percent of all credit union assets.
The paper employed 16 asset variables, 9 liability-side variables, 7 revenue variables, and 9 expense variables to determine credit union clusters.
The authors found that there are six different credit union groups -- saver-oriented credit unions, traditional credit unions, auto lender credit unions, real estate lender credit unions, and other lenders. Traditional credit unions, which have investments and loans closer to the industry's overall mix, are divided into two clusters -- one with greater emphasis on real estate loans and regular shares and the other cluster has more investments.
The paper found that 67 credit unions are saver-oriented; 430 credit unions are traditional credit unions holding more investments; 192 credit unions would be identified as traditional credit unions with greater emphasis on real estate loans and regular shares; 388 credit unions are auto lenders; 403 credit unions are real estate lenders, and 48 credit unions are other lenders.
Interestingly 4 of the 5 credit unions with more than $10 billion in assets were classified as real estate lenders.
For more information about the characteristics of each of these groups, you can download the paper here.
Monday, February 26, 2018
McWatters Cites Accomplishments and Promises to Work Cooperatively with CUs
In a speech on February 26 at the Credit Union National Association's Government Affairs Conference, National Credit Union Administration (NCUA) Chairman McWatters highlighted the agencies accomplishments and promised continuing cooperation between NCUA and credit union stakeholders.
Chairman Mcwatters promised the attendees of continued inclusion, accountability, and transparency in the agency's decision-making.
He further reassured the audience that "[w]hile we may agree to disagree on certain issues, please understand your voices are heard."
Chairman McWatters commented that credit unions and community banks could work together in good faith to address common challenges facing Main Street financial institutions.
Accomplishments over the last year include closing the Temporary Corporate Credit Union Stabilization Fund four years early, payment of an equity distribution of $736 million to credit unions, and the avoidance of a premium assessment of $1.3 million. He also pointed out the restructuring efforts at the agency.
However, the speech did not break any new ground on forthcoming regulatory initiatives at NCUA.
Read the speech.
Chairman Mcwatters promised the attendees of continued inclusion, accountability, and transparency in the agency's decision-making.
He further reassured the audience that "[w]hile we may agree to disagree on certain issues, please understand your voices are heard."
Chairman McWatters commented that credit unions and community banks could work together in good faith to address common challenges facing Main Street financial institutions.
Accomplishments over the last year include closing the Temporary Corporate Credit Union Stabilization Fund four years early, payment of an equity distribution of $736 million to credit unions, and the avoidance of a premium assessment of $1.3 million. He also pointed out the restructuring efforts at the agency.
However, the speech did not break any new ground on forthcoming regulatory initiatives at NCUA.
Read the speech.
Sunday, February 25, 2018
Citadel FCU Is Title Sponsor of Country Music Festival
Citadel Federal Credit Union (Exton, PA) is the title sponsorship of a new, three-day country music festival coming to Chester County’s Brandywine Valley August 24-26, 2018.
Citadel Country Spirit USA, being held at Ludwig’s Corner Horse Show Grounds in Glenmoore, Pennsylvania, will feature more than 20 country music artists on two stages, including three top headliners.
The cost of the sponsorship was not disclosed.
Did Congress intend for the credit union tax exemption to be used to sponsor a country music festival?
Read the press release.
Citadel Country Spirit USA, being held at Ludwig’s Corner Horse Show Grounds in Glenmoore, Pennsylvania, will feature more than 20 country music artists on two stages, including three top headliners.
The cost of the sponsorship was not disclosed.
Did Congress intend for the credit union tax exemption to be used to sponsor a country music festival?
Read the press release.
Friday, February 23, 2018
Ukrainian Future CU Placed into Conservatorship
The Director of the Michigan Department of Insurance and Financial Services placed Ukrainian Future Credit Union, of Warren, Michigan, into conservatorship and appointed the National Credit Union Administration as conservator.
The Michigan Department of Insurance and Financial Services placed Ukrainian Future Credit Union into conservatorship because of unsafe and unsound practices at the credit union.
Ukrainian Future Credit Union is a federally insured, state-chartered credit union with 5,692 members and assets of $84.6 million, according to the credit union’s most recent Call Report.
Read the NCUA press release.
Read the Michigan Department of Insurance and Financial Services press release.
The Michigan Department of Insurance and Financial Services placed Ukrainian Future Credit Union into conservatorship because of unsafe and unsound practices at the credit union.
Ukrainian Future Credit Union is a federally insured, state-chartered credit union with 5,692 members and assets of $84.6 million, according to the credit union’s most recent Call Report.
Read the NCUA press release.
Read the Michigan Department of Insurance and Financial Services press release.
Credit Management Information System
A critical part of credit risk management is the ability to identify credit risk.
An article in the Federal Deposit Insurance Corporation's Supervisory Insights looks at credit management information systems. The article argues that a comprehensive credit management information system needs to employ forward-looking risk indicators, just not lagging risk indicators.
Lagging risk indicators include merics, such as charge-off rates, delinquency rates, and restructured loans.
According to the article, relying too heavily on "lagging risk indicators can result in inadequate risk identification and lead to decisions based on an incomplete understanding of the risks facing the institution."
Forward-looking indicators, however, proactively assess risks.
Examples of forward-looking risk indicators for retail loans include tracking production and portfolio trends by product, loan-to-value ratio, debt-to-income ratio, lien position, and credit scores.
The article has a table of forward-looking credit metrics for both commercial and retail loans.
To be effective, these reports need to be received on a timely basis, should include trend analysis, and should not rely to heavily on averages.
In conclusion, a forward-looking credit management information system is an important component of a strong governance structure.
Read the article.
An article in the Federal Deposit Insurance Corporation's Supervisory Insights looks at credit management information systems. The article argues that a comprehensive credit management information system needs to employ forward-looking risk indicators, just not lagging risk indicators.
Lagging risk indicators include merics, such as charge-off rates, delinquency rates, and restructured loans.
According to the article, relying too heavily on "lagging risk indicators can result in inadequate risk identification and lead to decisions based on an incomplete understanding of the risks facing the institution."
Forward-looking indicators, however, proactively assess risks.
Examples of forward-looking risk indicators for retail loans include tracking production and portfolio trends by product, loan-to-value ratio, debt-to-income ratio, lien position, and credit scores.
The article has a table of forward-looking credit metrics for both commercial and retail loans.
To be effective, these reports need to be received on a timely basis, should include trend analysis, and should not rely to heavily on averages.
In conclusion, a forward-looking credit management information system is an important component of a strong governance structure.
Read the article.
Thursday, February 22, 2018
State Bankers Associations: Time to Revisit CU Tax Exemption
State bankers associations wrote Senate Finance Committee Chairman Orrin Hatch (R - UT) on February 20th that taxpayers should no longer subsidize the nation’s largest credit unions, which effectively operate the same as taxpaying banks.
The letter came after Senator Hatch wrote the National Credit Union Administration last month raising concerns about whether credit union activities align with the purposes of the federal income tax exemption they enjoy.
While the credit union tax exemption was originally created to help institutions meet the credit needs of people of modest means with a common bond, the industry today has stretched the “common bond” requirements to allow credit unions to serve large, multistate regions, the associations said. They also pointed out that the number of credit unions with more than $1 billion in assets has more than doubled in the past decade, and that this group of almost 300 credit unions represents just 5 percent of the industry but enjoys 75 percent of the tax subsidy.
Noting that Congress missed a critical opportunity to address the treatment of credit unions in the new tax reform law, they urged Hatch -- the top tax policymaker in the Senate -- to revisit the tax exemption this year.
The letter stated that the tax code should not be used to pick winners and losers among similarly situated businesses. “There is no reason why the largest credit unions, which act and look just like the taxpaying banks they compete with, should be completely free of income taxation,” the associations wrote. “This creates a market distortion where the tax code effectively subsidizes one financial services entity (the largest credit unions) over another (the smaller community bank).”
Read the letter.
The letter came after Senator Hatch wrote the National Credit Union Administration last month raising concerns about whether credit union activities align with the purposes of the federal income tax exemption they enjoy.
While the credit union tax exemption was originally created to help institutions meet the credit needs of people of modest means with a common bond, the industry today has stretched the “common bond” requirements to allow credit unions to serve large, multistate regions, the associations said. They also pointed out that the number of credit unions with more than $1 billion in assets has more than doubled in the past decade, and that this group of almost 300 credit unions represents just 5 percent of the industry but enjoys 75 percent of the tax subsidy.
Noting that Congress missed a critical opportunity to address the treatment of credit unions in the new tax reform law, they urged Hatch -- the top tax policymaker in the Senate -- to revisit the tax exemption this year.
The letter stated that the tax code should not be used to pick winners and losers among similarly situated businesses. “There is no reason why the largest credit unions, which act and look just like the taxpaying banks they compete with, should be completely free of income taxation,” the associations wrote. “This creates a market distortion where the tax code effectively subsidizes one financial services entity (the largest credit unions) over another (the smaller community bank).”
Read the letter.
Wednesday, February 21, 2018
OIG: Setting of Normal Operating Level at 1.39 Percent Was Reasonable
The National Credit Union Administration (NCUA) Office of the Inspector General (OIG) determined that NCUA's process and basis for setting the Normal Operating Level (NOL) at 1.39 percent was reasonable.
The OIG was responding to a request from Callahan & Associates regarding the legality of transferring the funds of the Temporary Corporate Credit Union Stabilization Fund to the National Credit Union Share Insurance Fund (NCUSIF) and increasing the NOL of the NCUSIF from 1.30 percent to 1.39 percent.
The OIG limited its analysis to raising the NOL from 1.30 percent to 1.39 percent. The OIG stated that it was beyond its purview "to conduct a legal review of the Board's statutory authority."
The OIG reviewed applicable legislation and rationale for increasing the NOL to 1.39 percent. In addition, the OIG compared NCUA's rationale for increasing the NOL with the Federal Deposit Insurance Corporation's rationale for raising the Designated Reserve Ratio for the Deposit Insurance Fund in 2011.
The OIG pointed out that the decision to raise the NOL to 1.39 percent was to preserve public confidence in the NCUSIF, to prevent an impairment in credit unions' one percent NCUSIF capitalization deposit, and to ensure the NCUSIF can withstand a moderate recession without the equity ratio falling below 1.20 percent over a five-year period.
Read the letter.
The OIG was responding to a request from Callahan & Associates regarding the legality of transferring the funds of the Temporary Corporate Credit Union Stabilization Fund to the National Credit Union Share Insurance Fund (NCUSIF) and increasing the NOL of the NCUSIF from 1.30 percent to 1.39 percent.
The OIG limited its analysis to raising the NOL from 1.30 percent to 1.39 percent. The OIG stated that it was beyond its purview "to conduct a legal review of the Board's statutory authority."
The OIG reviewed applicable legislation and rationale for increasing the NOL to 1.39 percent. In addition, the OIG compared NCUA's rationale for increasing the NOL with the Federal Deposit Insurance Corporation's rationale for raising the Designated Reserve Ratio for the Deposit Insurance Fund in 2011.
The OIG pointed out that the decision to raise the NOL to 1.39 percent was to preserve public confidence in the NCUSIF, to prevent an impairment in credit unions' one percent NCUSIF capitalization deposit, and to ensure the NCUSIF can withstand a moderate recession without the equity ratio falling below 1.20 percent over a five-year period.
Read the letter.
Tuesday, February 20, 2018
Superior Choice CU to Acquire Dairyland State Bank
Superior Choice Credit Union (Superior, WI) has entered into a merger agreement with Dairyland State Bank (Bruce, WI).
Pending regulatory approval, the acquisition will create a combined financial institution that will have more than $480 million in assets. Closing is expected to occur in the third or fourth quarter of 2018.
Superior Choice Credit Union has almost $414 million in assets at the end of 2017. Dairyland State Bank has $78 million in assets.
Going forward, the combined credit union will be called Superior Choice Credit Union.
The terms of the deal were not disclosed.
Read more.
Pending regulatory approval, the acquisition will create a combined financial institution that will have more than $480 million in assets. Closing is expected to occur in the third or fourth quarter of 2018.
Superior Choice Credit Union has almost $414 million in assets at the end of 2017. Dairyland State Bank has $78 million in assets.
Going forward, the combined credit union will be called Superior Choice Credit Union.
The terms of the deal were not disclosed.
Read more.
Virtual Membership Meeting
Earlier this year, the Washington-state Division of Credit Unions issued an interpretive letter on virtual membership meeting.
The state credit union regulator stated that a Washington credit union may not conduct an annual membership meeting or special membership meeting as a virtual meeting without simultaneously conducting an in-person meeting.
However, the credit union regulator wrote that a virtual meeting can be conducted at the same time as an in-person meeting.
The letter noted that there are benefits associated with a virtual meeting, such as cost savings and greater membership participation; but virtual meetings also come with detrimental effects.
The state regulator pointed out that the Washington Credit Union Act requires a credit union's by-law to address the time and place of an annual meeting. In addition, a special meeting must be held in a reasonable location in the county that is the principal place of business for a credit union.
Read the interpretive letter.
The state credit union regulator stated that a Washington credit union may not conduct an annual membership meeting or special membership meeting as a virtual meeting without simultaneously conducting an in-person meeting.
However, the credit union regulator wrote that a virtual meeting can be conducted at the same time as an in-person meeting.
The letter noted that there are benefits associated with a virtual meeting, such as cost savings and greater membership participation; but virtual meetings also come with detrimental effects.
The state regulator pointed out that the Washington Credit Union Act requires a credit union's by-law to address the time and place of an annual meeting. In addition, a special meeting must be held in a reasonable location in the county that is the principal place of business for a credit union.
Read the interpretive letter.
Monday, February 19, 2018
Technology CU Provides a $23 Million Construction Loan
Technology Credit Union (San Jose, CA) will provide a $23 million construction loan to W.L. Butler, Inc.
The loan will finance the development of a 60-unit apartment building overlooking Central Park in San Mateo.
Read the press release.
The loan will finance the development of a 60-unit apartment building overlooking Central Park in San Mateo.
Read the press release.
Friday, February 16, 2018
NCUSIF Reserves Increased by $728.9 Million to $925.5 Million
The audited financial statement for the National Credit Union Share Insurance Fund (NCUSIF) reported a $728.9 million increase in reserves in 2017.
At the end of 2017, Insurance and Guarantee Program Liabilities (reserves) was $925.5 million to cover probable losses compared with $196.6 million for the previous year-end.
The overall increase in the Insurance and Guarantee Program Liabilities balance is due to the increase in the specific reserve of $815.7 million, partially offset by a decrease in the general reserve of $86.8 million.
At the end of 2017, specific reserves were $818.6, while general reserves were $106.9 million.
Specific reserves are identified for those credit unions where failure is probable and where additional information is available to make a reasonable estimate of losses associated with these credit unions. The general reserve reflects overall risk of loss due to potential credit union failures of federally insured credit unions taken as a whole.
In addition, the NCUSIF provided a guaranteed line-of-credit to a third-party lender, such as a corporate credit union. Total line-of-credit guarantees of credit unions as of December 31, 2017 were approximately $410.0 million -- $300 million to Melrose Credit Union and $110 million to LOMTO Federal Credit Union. The two insured credit unions have borrowed $206.0 million from the third-party lender under these lines-of-credit guarantees as of December 31, 2017. The NCUSIF reserved $9.0 million for these guaranteed lines-of-credit at the end of 2017.
However, the audited financial statements caution that actual losses could vary and may be materially different from the estimated losses recognized as of December 31, 2017.
The specific reserves are probably for two conserved credit unions that specialized in taxi medallion loans. Also, the audited financial statement notes that other other credit unions that participated in these loans are experiencing financial stress and warns that "[i]t is possible that some of these credit unions may fail, and these failures may increase the amount of losses absorbed by the Share Insurance Fund in the future. Although this exposure is limited, the NCUA must continue to manage and mitigate any potential risk from these institutions."
Read the audited financial statement.
At the end of 2017, Insurance and Guarantee Program Liabilities (reserves) was $925.5 million to cover probable losses compared with $196.6 million for the previous year-end.
The overall increase in the Insurance and Guarantee Program Liabilities balance is due to the increase in the specific reserve of $815.7 million, partially offset by a decrease in the general reserve of $86.8 million.
At the end of 2017, specific reserves were $818.6, while general reserves were $106.9 million.
Specific reserves are identified for those credit unions where failure is probable and where additional information is available to make a reasonable estimate of losses associated with these credit unions. The general reserve reflects overall risk of loss due to potential credit union failures of federally insured credit unions taken as a whole.
In addition, the NCUSIF provided a guaranteed line-of-credit to a third-party lender, such as a corporate credit union. Total line-of-credit guarantees of credit unions as of December 31, 2017 were approximately $410.0 million -- $300 million to Melrose Credit Union and $110 million to LOMTO Federal Credit Union. The two insured credit unions have borrowed $206.0 million from the third-party lender under these lines-of-credit guarantees as of December 31, 2017. The NCUSIF reserved $9.0 million for these guaranteed lines-of-credit at the end of 2017.
However, the audited financial statements caution that actual losses could vary and may be materially different from the estimated losses recognized as of December 31, 2017.
The specific reserves are probably for two conserved credit unions that specialized in taxi medallion loans. Also, the audited financial statement notes that other other credit unions that participated in these loans are experiencing financial stress and warns that "[i]t is possible that some of these credit unions may fail, and these failures may increase the amount of losses absorbed by the Share Insurance Fund in the future. Although this exposure is limited, the NCUA must continue to manage and mitigate any potential risk from these institutions."
Read the audited financial statement.
Thursday, February 15, 2018
Problem CUs Fell, NCUSIF Reserves Up Significantly, and NCUA Board Declares Dividend Distribution
The number of problem credit unions fell during the fourth quarter of 2017, according to the National Credit Union Administration (NCUA).
At the end of the fourth quarter of 2017, there were 196 problem credit unions. In comparison, there were 204 problem credit unions at the end of the third quarter.
A problem credit union has a composite CAMEL rating of 4 or 5.
Total assets and shares (deposits) in problem credit unions fell during the fourth quarter. Assets in problem credit unions were $9.6 billion at the end of the fourth quarter -- down from $10.2 billion at the end of the third quarter of 2017. Shares in problem credit unions decreased from $9.0 billion as of September 30 to $8.7 billion as of December 31.
NCUA reported that almost 89 percent of problem credit unions have less than $100 million in assets, while less than 2 percent have more than $500 million in assets.
At the end of the fourth quarter, 0.80 percent of total insured shares were in problem credit unions. At the end of the third quarter, 0.84 percent of total insured shares were in problem credit unions.
In a related news, reserves for the National Credit Union Share Insurance Fund (NCUSIF) increased from $286 million at the end of the third quarter of 2017 to $925.5 million at the end of 2017. There will be more to come on this increase in reserves, once NCUA releases its audited financial statements for the NCUSIF.
Despite the increase in NCUSIF reserves, NCUA Board declared a distribution from the NCUSIF of $735.7 million for December 2017, which will be paid in the third quarter of 2018. The merger of the Temporary Corporate Credit Union Stabilization Fund into the NCUSIF made the distribution possible. Otherwise, insured credit unions faced a premium of 12.2 basis points per insured shares to restore the NCUSIF to its prior normal operating level of 1.30 percent of insured shares.
At the end of the fourth quarter of 2017, there were 196 problem credit unions. In comparison, there were 204 problem credit unions at the end of the third quarter.
A problem credit union has a composite CAMEL rating of 4 or 5.
Total assets and shares (deposits) in problem credit unions fell during the fourth quarter. Assets in problem credit unions were $9.6 billion at the end of the fourth quarter -- down from $10.2 billion at the end of the third quarter of 2017. Shares in problem credit unions decreased from $9.0 billion as of September 30 to $8.7 billion as of December 31.
NCUA reported that almost 89 percent of problem credit unions have less than $100 million in assets, while less than 2 percent have more than $500 million in assets.
At the end of the fourth quarter, 0.80 percent of total insured shares were in problem credit unions. At the end of the third quarter, 0.84 percent of total insured shares were in problem credit unions.
In a related news, reserves for the National Credit Union Share Insurance Fund (NCUSIF) increased from $286 million at the end of the third quarter of 2017 to $925.5 million at the end of 2017. There will be more to come on this increase in reserves, once NCUA releases its audited financial statements for the NCUSIF.
Despite the increase in NCUSIF reserves, NCUA Board declared a distribution from the NCUSIF of $735.7 million for December 2017, which will be paid in the third quarter of 2018. The merger of the Temporary Corporate Credit Union Stabilization Fund into the NCUSIF made the distribution possible. Otherwise, insured credit unions faced a premium of 12.2 basis points per insured shares to restore the NCUSIF to its prior normal operating level of 1.30 percent of insured shares.
Wednesday, February 14, 2018
Achieva CU to Acquire Preferred Community Bank
Achieva Credit Union (Dunedin, FL) signed a definitive agreement to acquire Preferred Community Bank (Fort Myers, FL).
The 116 million bank has three branches in Fort Myers, Lehigh Acres, and Cape Coral.
Under the terms of the merger agreement this will be a whole bank acquisition.
The transaction is expected to close later this year and is subject to Preferred Community Bank shareholder and regulatory approvals.
When the transaction is completed, this will be the second community bank acquired by Achieva Credit Union. Three years ago, the credit union acquired Calusa Bank.
Read the press release.
The 116 million bank has three branches in Fort Myers, Lehigh Acres, and Cape Coral.
Under the terms of the merger agreement this will be a whole bank acquisition.
The transaction is expected to close later this year and is subject to Preferred Community Bank shareholder and regulatory approvals.
When the transaction is completed, this will be the second community bank acquired by Achieva Credit Union. Three years ago, the credit union acquired Calusa Bank.
Read the press release.
Three More NY Credit Unions Reporting Problems from Taxi Medallion Loans
Three more New York credit unions -- Bay Ridge Federal Credit Union, Nassau Financial Federal Credit Union, and Town of Hempstead Employees Federal Credit Union -- are feeling the effect of Uber and other ride sharing apps on the taxi industry.
I would like to thank a reader for the tip that both Nassau Financial and Town of Hempstead Employees FCUs had exposure to taxi medallion loans.
Bay Ridge Federal Credit Union (Brooklyn, NY)
Bay Ridge FCU reported a loss of $4.3 million for 2017, as the credit union increased provision for loan and lease losses.
Provision for loan and lease losses increased from $1.7 million for 2016 to $6.5 million for 2017.
Its 2017 loss caused its net worth to drop from almost $19 million at the end of 2016 to $14.7 million as of December 2017. The $192.8 million credit union saw its net worth ratio fall 185 basis points over the same time period to 7.62 percent.
The credit union at the end of 2017 reported $72.7 million in outstanding commercial loans not secured by real estate. Presumably some of these commercial loans are secured by taxi medallions.
At the end of 2017, the credit union reported almost $7.4 million in delinquent loans -- down from the third quarter, but up from a year ago. At the end of 2017, 4.31 percent of its loans were 60 days or more past due.
The credit union is also reporting $8.6 million in early delinquencies (30-to-59 days past due) as of December 2017. This is up from $44,890 at the end of the third quarter of 2017.
A majority of the delinquent loans and early delinquencies were member commercial loans not secured by real estate. Delinquent commercial loans not secured by real estate were slightly less than $3.7 million at the end of 2017. Early delinquencies were almost $6.9 million.
Net charge-offs were $3.9 million for 2017 -- up from $427 thousand at the end of 2016. The net charge-off rate was 2.23 percent at the end of 2017, up from 0.25 percent from a year ago.
Troubled debt restructured (TDR) commercial loans not secured by real estate were $20.5 million as of December 2017. Almost 15 percent of these TDR loans are 60 days or more past due.
The credit union has $6.4 million in allowance for loan and lease losses, up from $3.8 million from a year ago. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 87.02 percent, up from 57.17 percent a year ago.
Key questions for the credit union's management and board are: What is the credit union's total exposure to taxi medallion loans and what is the price of taxi medallions the credit union is using to evaluate its portfolio?
Nassau Financial Federal Credit Union (Westbury, NY)
Nassau Financial FCU reported a loss of almost $8.9 million for 2017, as the credit union significantly increased its provision for loan and lease losses in 2017.
Provisions for loan and lease losses rose from $454,148 at the end of 2016 to almost $8.2 million at the end of 2017.
The $403 million credit union at the end of 2017 reported outstanding commercial loans not secured by real estate of $24.2 million. One suspect that some of these loans were to finance the purchase of taxi medallions.
The 2017 loss caused its net worth to drop from $38.3 million at the end of 2016 to $29.4 million at the end of 2017. Its net worth ratio over the same time period tumbled by 194 basis points to 7.30 percent.
The credit union is reporting $12.9 million in delinquent loans in its most current call report. Its delinquency rate was 4.77 percent.
A majority of the delinquent loans at the end of 2017 were nonmember commercial loans not secured by real estate at $7.4 million. Almost 31 percent of nonmember commercial loans not secured by real estate were past due.
In addition, troubled debt restructured commercial loans not secured by real estate were $8.2 million at the end of 2017, of which all were in non-accrual status.
The credit union significantly increased its allowance for loan and lease losses from about $1.4 million at the end of 2016 to $7.7 million at the end of 2017. The increase in its loan loss reserves caused its coverage ratio to climb from 11.23 percent on December 31, 2016 to 59.73 percent on December 31, 2017.
Town of Hempstead Employees Federal Credit Union (North Baldwin, NY)
Town of Hempstead Employees Federal Credit Union reported a loss of almost $919 thousand for 2017, after posting a profit for 2016.
The 2017 loss arose from a more than five-fold increase in 2017 provision for loan and lease losses compared to 2016 to $554,500 and a 33 percent increase in 2017 employee compensation and benefits to almost $2.8 million.
As the result of the 2017 loss, the $123 million credit union saw its net worth decline by 10.6 percent in 2017 to slightly less than $7.8 million. The credit union saw its net worth ratio fall from 7 percent to 6.31 percent. The credit union is now adequately capitalized.
The credit union is reporting outstanding commercial loans not secured by real estate of $7.1 million at the end of 2017, down from $9.6 million at the end of the third quarter of 2017. Presumably some of these commercial loans were to finance the purchase of taxi medallion loans. The credit union had $6.4 million commercial loan participations.
At the end of 2017, the credit union reported almost $1.4 million in delinquent loans, which means 2.11 percent of loans were delinquent.
However, the credit union saw an increase in the pipeline of early delinquencies. Loans 30-to-59 days past due grew by 321 percent during the fourth quarter of 2017 to approximately $1.1 million.
The credit union more than doubled its allowance for loan and lease losses during 2017 to almost $813 thousand. As a result, the credit union's coverage ratio rose from 48.46 percent in 2016 to 59.18 percent in 2017.
This means the credit union at the end of 2017 has a total buffer of net worth and allowance for loan and lease losses of $8.6 million to absorb expected and unexpected losses.
I would like to thank a reader for the tip that both Nassau Financial and Town of Hempstead Employees FCUs had exposure to taxi medallion loans.
Bay Ridge Federal Credit Union (Brooklyn, NY)
Bay Ridge FCU reported a loss of $4.3 million for 2017, as the credit union increased provision for loan and lease losses.
Provision for loan and lease losses increased from $1.7 million for 2016 to $6.5 million for 2017.
Its 2017 loss caused its net worth to drop from almost $19 million at the end of 2016 to $14.7 million as of December 2017. The $192.8 million credit union saw its net worth ratio fall 185 basis points over the same time period to 7.62 percent.
The credit union at the end of 2017 reported $72.7 million in outstanding commercial loans not secured by real estate. Presumably some of these commercial loans are secured by taxi medallions.
At the end of 2017, the credit union reported almost $7.4 million in delinquent loans -- down from the third quarter, but up from a year ago. At the end of 2017, 4.31 percent of its loans were 60 days or more past due.
The credit union is also reporting $8.6 million in early delinquencies (30-to-59 days past due) as of December 2017. This is up from $44,890 at the end of the third quarter of 2017.
A majority of the delinquent loans and early delinquencies were member commercial loans not secured by real estate. Delinquent commercial loans not secured by real estate were slightly less than $3.7 million at the end of 2017. Early delinquencies were almost $6.9 million.
Net charge-offs were $3.9 million for 2017 -- up from $427 thousand at the end of 2016. The net charge-off rate was 2.23 percent at the end of 2017, up from 0.25 percent from a year ago.
Troubled debt restructured (TDR) commercial loans not secured by real estate were $20.5 million as of December 2017. Almost 15 percent of these TDR loans are 60 days or more past due.
The credit union has $6.4 million in allowance for loan and lease losses, up from $3.8 million from a year ago. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 87.02 percent, up from 57.17 percent a year ago.
Key questions for the credit union's management and board are: What is the credit union's total exposure to taxi medallion loans and what is the price of taxi medallions the credit union is using to evaluate its portfolio?
Nassau Financial Federal Credit Union (Westbury, NY)
Nassau Financial FCU reported a loss of almost $8.9 million for 2017, as the credit union significantly increased its provision for loan and lease losses in 2017.
Provisions for loan and lease losses rose from $454,148 at the end of 2016 to almost $8.2 million at the end of 2017.
The $403 million credit union at the end of 2017 reported outstanding commercial loans not secured by real estate of $24.2 million. One suspect that some of these loans were to finance the purchase of taxi medallions.
The 2017 loss caused its net worth to drop from $38.3 million at the end of 2016 to $29.4 million at the end of 2017. Its net worth ratio over the same time period tumbled by 194 basis points to 7.30 percent.
The credit union is reporting $12.9 million in delinquent loans in its most current call report. Its delinquency rate was 4.77 percent.
A majority of the delinquent loans at the end of 2017 were nonmember commercial loans not secured by real estate at $7.4 million. Almost 31 percent of nonmember commercial loans not secured by real estate were past due.
In addition, troubled debt restructured commercial loans not secured by real estate were $8.2 million at the end of 2017, of which all were in non-accrual status.
The credit union significantly increased its allowance for loan and lease losses from about $1.4 million at the end of 2016 to $7.7 million at the end of 2017. The increase in its loan loss reserves caused its coverage ratio to climb from 11.23 percent on December 31, 2016 to 59.73 percent on December 31, 2017.
Town of Hempstead Employees Federal Credit Union (North Baldwin, NY)
Town of Hempstead Employees Federal Credit Union reported a loss of almost $919 thousand for 2017, after posting a profit for 2016.
The 2017 loss arose from a more than five-fold increase in 2017 provision for loan and lease losses compared to 2016 to $554,500 and a 33 percent increase in 2017 employee compensation and benefits to almost $2.8 million.
As the result of the 2017 loss, the $123 million credit union saw its net worth decline by 10.6 percent in 2017 to slightly less than $7.8 million. The credit union saw its net worth ratio fall from 7 percent to 6.31 percent. The credit union is now adequately capitalized.
The credit union is reporting outstanding commercial loans not secured by real estate of $7.1 million at the end of 2017, down from $9.6 million at the end of the third quarter of 2017. Presumably some of these commercial loans were to finance the purchase of taxi medallion loans. The credit union had $6.4 million commercial loan participations.
At the end of 2017, the credit union reported almost $1.4 million in delinquent loans, which means 2.11 percent of loans were delinquent.
However, the credit union saw an increase in the pipeline of early delinquencies. Loans 30-to-59 days past due grew by 321 percent during the fourth quarter of 2017 to approximately $1.1 million.
The credit union more than doubled its allowance for loan and lease losses during 2017 to almost $813 thousand. As a result, the credit union's coverage ratio rose from 48.46 percent in 2016 to 59.18 percent in 2017.
This means the credit union at the end of 2017 has a total buffer of net worth and allowance for loan and lease losses of $8.6 million to absorb expected and unexpected losses.
Tuesday, February 13, 2018
Two More New Jersey CUs See Their 2017 Financial Performance Sink Due to Taxi Medallion Loans
The financial fortunes of two New Jersey credit unions have been adversely impacted by taxi medallion loans.
Aspire Federal Credit Union (Clark, NJ)
Aspire Federal Credit Union posted a loss of $6.1 million for 2017, after losing $1.6 million in 2016.
The $158 million credit union reported outstanding commercial loans not secured by real estate of $12.6 million. Presumably most of these loans were taxi medallion loans.
The 2017 loss is due to an increase in provision for loan and lease losses to address delinquent and charged off loans, especially loans secured by taxi medallions. Provision for loan and lease losses in 2017 were slightly more than $7.5 million compared to $4.1 million for 2016.
Due to the 2017 loss, the credit union's net worth tumbled by 34.5 percent to almost $11.5 million. Its net worth ratio fell by 285 basis points to 7.26 percent.
At the end of 2017, Aspire FCU reported almost $8.9 million in delinquent loans. The delinquency rate on all loans was 7.13 percent at the end of 2017 -- up 5.26 percent at the end of 2016.
Commercial loans not secured by real estate, presumably taxi medallion loans, accounted for a sizable portion of delinquent loans. Delinquent commercial loans not secured by real estate were just shy of $4.1 million. According to the credit union's Financial Performance Report, 32.22 percent of commercial loans not secured by real estate were 60 days or more past due.
In addition, troubled debt restructured (TDR) commercial loans not secured by real estate were almost $3.9 million, of which 25.84 percent were delinquent..
Net charge-offs were $3.4 million for 2017, of which $2 million were commercial loans not secured by real estate. The net charge-off rate was 2.58 percent at the end of 2017.
Allowance for loan and lease losses increased by approximately $4.1 million during 2017 to $8.4 million. Its coverage ratio (allowance for loan and lease losses divided by delinquent loans) was 94.99 percent at the end of 2017.
First Financial Federal Credit Union (Freehold, NJ)
It appears that defaulting commercial loan participations to nonmembers is weighing on the financial performance of First Financial FCU.
The $190 million credit union reported holding almost $16.2 million in commercial loan participations, presumably most of these loans were taxi medallion loans.
After posting a loss of $2.3 million for 2016, First Financial FCU reported a profit of $259,225 for 2017. However, the credit union reported a loss for the fourth quarter of $384,302.
The improvement in annual profitability was due to a decline in provision for loan and lease losses. Provision for loan and lease losses fell from $2.9 million at the end of 2016 to $1.6 million at the end of 2017.
This reduction in provision for loan and lease losses comes at a time the credit union is reporting an increase in delinquencies.
Delinquent loans increased by almost $1.5 million during 2017 to just below $6.3 million at the end of 2017. Almost $2 million of the delinquent loans were nonmember commercial loans not secured by real estate. The credit union reported that 12.3 percent of these nonmember commercial loans not secured by real estate were delinquent at the end of 2017.
Additionally, the credit union reported $$7.4 million in troubled debt restructured (TDR) commercial loans not secured by real estate. Almost 20 percent of these TDR loans were past due. Furthermore, there was $1.1 million in TDR commercial loans not secured by real estate that are 30-to-59 days past due.
First Financial charged off almost of $1.1 million of these nonmember commercial loan participations (net of recoveries).
At the end of 2017, the credit union's net worth was $11.57 million. The credit union was adequately capitalized with a net worth ratio of 6.09 percent.
The credit union's allowance for loan and lease losses balance was unchanged over the last year at $3.3 million. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 53.03 percent at the end of 2017, down from 69.32 percent at the end of 2016.
At the end of 2017, the credit union has a total buffer (net worth plus allowance for loan and lease losses) of almost $15 million to absorb expected and unexpected losses.
Aspire Federal Credit Union (Clark, NJ)
Aspire Federal Credit Union posted a loss of $6.1 million for 2017, after losing $1.6 million in 2016.
The $158 million credit union reported outstanding commercial loans not secured by real estate of $12.6 million. Presumably most of these loans were taxi medallion loans.
The 2017 loss is due to an increase in provision for loan and lease losses to address delinquent and charged off loans, especially loans secured by taxi medallions. Provision for loan and lease losses in 2017 were slightly more than $7.5 million compared to $4.1 million for 2016.
Due to the 2017 loss, the credit union's net worth tumbled by 34.5 percent to almost $11.5 million. Its net worth ratio fell by 285 basis points to 7.26 percent.
At the end of 2017, Aspire FCU reported almost $8.9 million in delinquent loans. The delinquency rate on all loans was 7.13 percent at the end of 2017 -- up 5.26 percent at the end of 2016.
Commercial loans not secured by real estate, presumably taxi medallion loans, accounted for a sizable portion of delinquent loans. Delinquent commercial loans not secured by real estate were just shy of $4.1 million. According to the credit union's Financial Performance Report, 32.22 percent of commercial loans not secured by real estate were 60 days or more past due.
In addition, troubled debt restructured (TDR) commercial loans not secured by real estate were almost $3.9 million, of which 25.84 percent were delinquent..
Net charge-offs were $3.4 million for 2017, of which $2 million were commercial loans not secured by real estate. The net charge-off rate was 2.58 percent at the end of 2017.
Allowance for loan and lease losses increased by approximately $4.1 million during 2017 to $8.4 million. Its coverage ratio (allowance for loan and lease losses divided by delinquent loans) was 94.99 percent at the end of 2017.
First Financial Federal Credit Union (Freehold, NJ)
It appears that defaulting commercial loan participations to nonmembers is weighing on the financial performance of First Financial FCU.
The $190 million credit union reported holding almost $16.2 million in commercial loan participations, presumably most of these loans were taxi medallion loans.
After posting a loss of $2.3 million for 2016, First Financial FCU reported a profit of $259,225 for 2017. However, the credit union reported a loss for the fourth quarter of $384,302.
The improvement in annual profitability was due to a decline in provision for loan and lease losses. Provision for loan and lease losses fell from $2.9 million at the end of 2016 to $1.6 million at the end of 2017.
This reduction in provision for loan and lease losses comes at a time the credit union is reporting an increase in delinquencies.
Delinquent loans increased by almost $1.5 million during 2017 to just below $6.3 million at the end of 2017. Almost $2 million of the delinquent loans were nonmember commercial loans not secured by real estate. The credit union reported that 12.3 percent of these nonmember commercial loans not secured by real estate were delinquent at the end of 2017.
Additionally, the credit union reported $$7.4 million in troubled debt restructured (TDR) commercial loans not secured by real estate. Almost 20 percent of these TDR loans were past due. Furthermore, there was $1.1 million in TDR commercial loans not secured by real estate that are 30-to-59 days past due.
First Financial charged off almost of $1.1 million of these nonmember commercial loan participations (net of recoveries).
At the end of 2017, the credit union's net worth was $11.57 million. The credit union was adequately capitalized with a net worth ratio of 6.09 percent.
The credit union's allowance for loan and lease losses balance was unchanged over the last year at $3.3 million. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 53.03 percent at the end of 2017, down from 69.32 percent at the end of 2016.
At the end of 2017, the credit union has a total buffer (net worth plus allowance for loan and lease losses) of almost $15 million to absorb expected and unexpected losses.
Monday, February 12, 2018
CU Tax Expenditure Is Almost $35.8 Billion over Next 10 Fiscal Years
The tax expenditure associated with the exemption of credit union income from corporate income taxes is estimated at $35.759 billion between fiscal year 2018 and fiscal year 2027, according to the 2019 Budget released on February 12, 2019.
Delinquencies and Charge-Offs Increase in 2017 at Taxi Medallion Lender Progressive CU
Delinquencies and net charge-offs at taxi medallion lender Progressive Credit Union (New York, NY) rose in 2017.
At the end of 2017, delinquent loans were $84.5 million, up from $74.2 million at the end of the third quarter and $66.5 million at the end of 2016. The delinquency rate has risen from 11.45 percent at the end of 2017 to 19.01 percent at the end of 2017.
Net charge-offs increased from $37.4 million at the end of 2016 to $63.3 million at the end of 2017. The net charge-off rate went from 6.32 percent to 12.34 percent over the same time period.
In addition, the $485.9 million credit union reported troubled debt restructured commercial loans not secured by real estate at almost $128 million. At the end of 2017, 33.50 percent of the TDR commercial loans not secured by real estate were 60 days or more past due.
The credit union reported a loss of $81.9 million for 2017, after reporting a loss of $57.4 million for 2016. The 2017 loss can be attributed to an almost $75 million in provision for loan and lease losses.
As a result of the 2017 loss, the credit union's net worth fell by 42 percent over the year to $113.1 million as of December 31, 2017. Over the year, the credit union's net worth ratio dropped from 32.96 percent to 23.26 percent.
Between December 2016 and December 2017, the allowance for loan and lease losses increased by $11.7 million to $82.8 million. Its coverage ratio was 97.95 percent at the end of 2017, slightly lower than 107 percent a year earlier.
At the end of 2017, the credit union has a total buffer (net worth and allowance for loan and lease losses) of almost $196 million to absorb expected and unexpected losses.
At the end of 2017, delinquent loans were $84.5 million, up from $74.2 million at the end of the third quarter and $66.5 million at the end of 2016. The delinquency rate has risen from 11.45 percent at the end of 2017 to 19.01 percent at the end of 2017.
Net charge-offs increased from $37.4 million at the end of 2016 to $63.3 million at the end of 2017. The net charge-off rate went from 6.32 percent to 12.34 percent over the same time period.
In addition, the $485.9 million credit union reported troubled debt restructured commercial loans not secured by real estate at almost $128 million. At the end of 2017, 33.50 percent of the TDR commercial loans not secured by real estate were 60 days or more past due.
The credit union reported a loss of $81.9 million for 2017, after reporting a loss of $57.4 million for 2016. The 2017 loss can be attributed to an almost $75 million in provision for loan and lease losses.
As a result of the 2017 loss, the credit union's net worth fell by 42 percent over the year to $113.1 million as of December 31, 2017. Over the year, the credit union's net worth ratio dropped from 32.96 percent to 23.26 percent.
Between December 2016 and December 2017, the allowance for loan and lease losses increased by $11.7 million to $82.8 million. Its coverage ratio was 97.95 percent at the end of 2017, slightly lower than 107 percent a year earlier.
At the end of 2017, the credit union has a total buffer (net worth and allowance for loan and lease losses) of almost $196 million to absorb expected and unexpected losses.
Sunday, February 11, 2018
First Jersey Credit Union Is Critically Undercapitalized
Problem loans wiped out the net worth of First Jersey Credit Union (Wayne, NJ).
The credit union had slightly less than $10.4 million in commercial loans not secured by real estate. presumably most or all were secured by taxi medallions.
The $85.8 million credit union reported a fourth quarter loss of $3.1 million and a 2017 loss of $8.9 million.
As a result of the loss, the credit union reported net worth of zero at the end of 2017, down from $8 million at the end of 2016.
The credit union reported a provision for loan and lease losses of almost $6.8 million for 2017, up from $4.6 million at the end of 2016.
First Jersey had $3.4 million in delinquent loans, down from $5.6 million from the third quarter of 2017 and $5.7 million from a year ago. The delinquent loan ratio was 5.83 percent, down from 8.88 percent as of September 2017 and 7.82 percent from the previous year.
A majority of the delinquent loans were member commercial loans not secured by real estate. As of December 2017, $2.1 million of these loans were 60 days or more past due. In other words, 20.7 percent of the commercial loans were delinquent.
Net charge-offs were $2.4 million at the end of 2017, of which $2 million was member commercial loans not secured by real estate.
Troubled debt restructured (TDR) commercial loans not secured by real estate were $3.9 million at the end of 2017. At the end of 2017, 12.33 percent of TDR commercial loans were delinquent.
The increase in provision for loan losses relative to net charge-offs caused allowance for loan and lease losses to post a year-over-year increase from $4.5 million to $5.8 million. As a result, the coverage ratio (allowance for loan and lease losses divided by delinquent loans) to increase from 79.97 percent at the end of 2016 to 170.12 percent at the end of 2017.
This increase in the coverage ratio suggests that the credit union expects further losses from its loan portfolio.
The credit union had slightly less than $10.4 million in commercial loans not secured by real estate. presumably most or all were secured by taxi medallions.
The $85.8 million credit union reported a fourth quarter loss of $3.1 million and a 2017 loss of $8.9 million.
As a result of the loss, the credit union reported net worth of zero at the end of 2017, down from $8 million at the end of 2016.
The credit union reported a provision for loan and lease losses of almost $6.8 million for 2017, up from $4.6 million at the end of 2016.
First Jersey had $3.4 million in delinquent loans, down from $5.6 million from the third quarter of 2017 and $5.7 million from a year ago. The delinquent loan ratio was 5.83 percent, down from 8.88 percent as of September 2017 and 7.82 percent from the previous year.
A majority of the delinquent loans were member commercial loans not secured by real estate. As of December 2017, $2.1 million of these loans were 60 days or more past due. In other words, 20.7 percent of the commercial loans were delinquent.
Net charge-offs were $2.4 million at the end of 2017, of which $2 million was member commercial loans not secured by real estate.
Troubled debt restructured (TDR) commercial loans not secured by real estate were $3.9 million at the end of 2017. At the end of 2017, 12.33 percent of TDR commercial loans were delinquent.
The increase in provision for loan losses relative to net charge-offs caused allowance for loan and lease losses to post a year-over-year increase from $4.5 million to $5.8 million. As a result, the coverage ratio (allowance for loan and lease losses divided by delinquent loans) to increase from 79.97 percent at the end of 2016 to 170.12 percent at the end of 2017.
This increase in the coverage ratio suggests that the credit union expects further losses from its loan portfolio.
Saturday, February 10, 2018
Taxi Medallion Lender LOMTO Posts $51 Million Loss for 2017
Non-performing taxi medallion loans caused LOMTO Federal Credit Union (Woodside, NY) to post a loss of almost $51.2 million for 2017, after recording a 2016 loss of $18.6 million.
The 2017 loss was due to almost $50.4 million in provision for loan and lease losses. In comparison, provision for loan and lease losses at the end of 2016 was $17.1 million.
As a result of the loss, the $185.5 million credit union's net worth tumbled from $13.7 million at the end of 2016 to minus $37.5 million at the end of 2017. Over the same time period the credit union's net worth ratio fell from 5.79 percent to negative 20.21 percent.
The credit union reported almost $19 million in delinquent loans at the end of 2017 -- down 51.5 percent from the third quarter of 2017. The delinquency rate fell from 21.58 percent to 12.44 percent during the quarter.
Additionally, the credit union is reporting almost $9.8 million in early delinquent loans (30-to-59 days past due).
LOMTO FCU reported net charge-offs of $46.8 million for 2017 -- up from $11.2 million from 2016. The net charge-off rate was 25.44 percent at the end of 2017, up from 4.90 percent at the end of 2016.
Troubled debt restructured commercial loans not secured by real estate were $13.9 million at the end of 2017, of which 52.27 percent were at least 60 days or more past due.
The credit union is reporting allowance for loan and lease losses of $32.2 million at the end of 2017 -- down from $38.2 million at the end of the third quarter of 2017, but up from $25.2 million at the end of 2016. The credit union, as of December 31, 2017, is reporting a coverage ratio (allowance for loan and lease losses divided by delinquent loans) of 169.48 percent.
During the fourth quarter of 2017, LOMTO experienced a 21.5 percent deposit outflow to $160.2 million.
To meet its liquidity needs, LOMTO tapped its lines of credit at one or more corporate credit union. At the end of 2017, LOMTO had borrowed $65 million.
The 2017 loss was due to almost $50.4 million in provision for loan and lease losses. In comparison, provision for loan and lease losses at the end of 2016 was $17.1 million.
As a result of the loss, the $185.5 million credit union's net worth tumbled from $13.7 million at the end of 2016 to minus $37.5 million at the end of 2017. Over the same time period the credit union's net worth ratio fell from 5.79 percent to negative 20.21 percent.
The credit union reported almost $19 million in delinquent loans at the end of 2017 -- down 51.5 percent from the third quarter of 2017. The delinquency rate fell from 21.58 percent to 12.44 percent during the quarter.
Additionally, the credit union is reporting almost $9.8 million in early delinquent loans (30-to-59 days past due).
LOMTO FCU reported net charge-offs of $46.8 million for 2017 -- up from $11.2 million from 2016. The net charge-off rate was 25.44 percent at the end of 2017, up from 4.90 percent at the end of 2016.
Troubled debt restructured commercial loans not secured by real estate were $13.9 million at the end of 2017, of which 52.27 percent were at least 60 days or more past due.
The credit union is reporting allowance for loan and lease losses of $32.2 million at the end of 2017 -- down from $38.2 million at the end of the third quarter of 2017, but up from $25.2 million at the end of 2016. The credit union, as of December 31, 2017, is reporting a coverage ratio (allowance for loan and lease losses divided by delinquent loans) of 169.48 percent.
During the fourth quarter of 2017, LOMTO experienced a 21.5 percent deposit outflow to $160.2 million.
To meet its liquidity needs, LOMTO tapped its lines of credit at one or more corporate credit union. At the end of 2017, LOMTO had borrowed $65 million.
Friday, February 9, 2018
Net Worth of Taxi Medallion Lender Melrose CU Was Minus $187.9 Million
During the fourth quarter of 2017, the net worth of Melrose Credit Union (Briarwood, NY) fell by almost $111.7 million to minus $187.9 million, as losses mount from defaulting taxi medallion loans.
The $1.36 billion credit union's net worth ratio was negative 13.79 percent at the end of 2017.
Melrose reported a 2017 loss of $290.2 million, as the credit union reported full-year provision for loan and lease losses of almost $280.8 million.
The insolvent credit union saw a 29 percent decline in delinquent loans during the forth quarter of 2017 to $474.4 million. As of December 31, 2017, the delinquency rate for Melrose was 33.15 percent, down from 4001 percent at the end of the third quarter.
Most of the loans ($456.2 million) that were past due were member commercial loans not secured by real estate.
The decline in delinquent loans was due to the credit union writing off problem taxi medallion loans. Net charge-offs were $195.6 million for 2017. Between the third quarter of 2017 and the fourth quarter of 2017, the average charge-off rate went from 0.16 percent to 12.30 percent, respectively.
Troubled debt restructured (TDR) commercial loans not secured by real estate dropped during the fourth quarter by 20.5 percent to $240 million. As of December 2017, the delinquency rate on these TDR commercial loans was 67.54 percent.
At the end of 2017, the credit union had an allowance for loan and lease losses of $237.6 million. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 50.09 percent.
At the end of November 2017, the National Credit Union Insurance Fund had reserves of $286.8 million, of which only $20.9 million was for specific natural person credit unions.
The $1.36 billion credit union's net worth ratio was negative 13.79 percent at the end of 2017.
Melrose reported a 2017 loss of $290.2 million, as the credit union reported full-year provision for loan and lease losses of almost $280.8 million.
The insolvent credit union saw a 29 percent decline in delinquent loans during the forth quarter of 2017 to $474.4 million. As of December 31, 2017, the delinquency rate for Melrose was 33.15 percent, down from 4001 percent at the end of the third quarter.
Most of the loans ($456.2 million) that were past due were member commercial loans not secured by real estate.
The decline in delinquent loans was due to the credit union writing off problem taxi medallion loans. Net charge-offs were $195.6 million for 2017. Between the third quarter of 2017 and the fourth quarter of 2017, the average charge-off rate went from 0.16 percent to 12.30 percent, respectively.
Troubled debt restructured (TDR) commercial loans not secured by real estate dropped during the fourth quarter by 20.5 percent to $240 million. As of December 2017, the delinquency rate on these TDR commercial loans was 67.54 percent.
At the end of 2017, the credit union had an allowance for loan and lease losses of $237.6 million. Its coverage ratio (allowance for loan and lease losses to delinquent loans) was 50.09 percent.
At the end of November 2017, the National Credit Union Insurance Fund had reserves of $286.8 million, of which only $20.9 million was for specific natural person credit unions.
CUNA Letter Fails to Address Non-Disclosure of Executive Pay at FCUs
A letter by the Credit Union National Association (CUNA) to Senator Hatch (R - UT) fails to address why federal credit unions should not be required to disclose senior executive compensation. The letter also discusssd how credit unions have evolved over time.
CUNA wrote Senator Hatch on February 6 in response to Senator Hatch's January 31 letter to National Credit Union Administration (NCUA). See my January 31 blog post on Senator Hatch's letter.
Senator Hatch noted that federal credit unions, unlike most tax-exempt organizations, do not file an informational return with the Internal Revenue Service, which includes information on senior management compensation. Senator Hatch wrote that in 2006, the Government Accountability Office (GAO) recommended that the NCUA require federal credit unions to disclose senior executive compensation; but NCUA failed to implement this recommendation. Hatch pointed out that such disclosures would ensure that federal credit unions were a good steward of their tax benefit. In other words, the taxpayer subsidy is not being diverted to excessive pay but rather towards the public policy mission of credit unions.
But CUNA's letter does not directly address the topic of disclosure of executive pay (see page 2 of the letter -- link below).
Instead CUNA states that credit unions need to be able to attract and retain quality talent. Further, credit unions, unlike publicly-traded banks, cannot issue stock or stock options as part of their executive compensation packages. Therefore, when evaluating executive compensations packages, these factors should be taken into consideration.
Additionally, CUNA states that executive pay is determined by credit union boards, who are accountable to the members, and that credit unions are closely supervised and examined by federal and state regulators.
However, if credit union boards were accountable to their members, then NCUA would not have proposed a rule requiring merger-related compensation to be disclosed to members.
CUNA's letter failed to provide a cogent argument as to why federal credit unions should not be required to disclose executive compensation.
Read the letter.
CUNA wrote Senator Hatch on February 6 in response to Senator Hatch's January 31 letter to National Credit Union Administration (NCUA). See my January 31 blog post on Senator Hatch's letter.
Senator Hatch noted that federal credit unions, unlike most tax-exempt organizations, do not file an informational return with the Internal Revenue Service, which includes information on senior management compensation. Senator Hatch wrote that in 2006, the Government Accountability Office (GAO) recommended that the NCUA require federal credit unions to disclose senior executive compensation; but NCUA failed to implement this recommendation. Hatch pointed out that such disclosures would ensure that federal credit unions were a good steward of their tax benefit. In other words, the taxpayer subsidy is not being diverted to excessive pay but rather towards the public policy mission of credit unions.
But CUNA's letter does not directly address the topic of disclosure of executive pay (see page 2 of the letter -- link below).
Instead CUNA states that credit unions need to be able to attract and retain quality talent. Further, credit unions, unlike publicly-traded banks, cannot issue stock or stock options as part of their executive compensation packages. Therefore, when evaluating executive compensations packages, these factors should be taken into consideration.
Additionally, CUNA states that executive pay is determined by credit union boards, who are accountable to the members, and that credit unions are closely supervised and examined by federal and state regulators.
However, if credit union boards were accountable to their members, then NCUA would not have proposed a rule requiring merger-related compensation to be disclosed to members.
CUNA's letter failed to provide a cogent argument as to why federal credit unions should not be required to disclose executive compensation.
Read the letter.
Thursday, February 8, 2018
Virginia Credit Union Buys Naming Rights to Outdoor Amphitheater
Virginia Credit Union, Inc. (North Chesterfield, VA) has bought the naming rights to the outdoor amphitheater at the Richmond Raceway with 6,000 covered seats.
The name of the new venue is Virginia Credit Union Live!.
The terms of the agreement were not disclosed.
Read the story.
The name of the new venue is Virginia Credit Union Live!.
The terms of the agreement were not disclosed.
Read the story.
Wednesday, February 7, 2018
Consumer Credit at CUs Grew in December
The Federal Reserve is reporting that outstanding consumer credit at credit unions grew during December; but at a slower pace than in November, according to the G.19 report.
Outstanding consumer credit increased by almost $4.3 billion to $425 billion in December. However, consumer credit at credit unions increased by $6.1 billion in November.
Outstanding revolving credit expanded by $1.3 billion to $58 billion in December.
Non-revolving credit rose from $363.9 billion in November to $367 billion in December.
Read the G.19 Report.
Outstanding consumer credit increased by almost $4.3 billion to $425 billion in December. However, consumer credit at credit unions increased by $6.1 billion in November.
Outstanding revolving credit expanded by $1.3 billion to $58 billion in December.
Non-revolving credit rose from $363.9 billion in November to $367 billion in December.
Read the G.19 Report.
Quorum FCU's Saw 56.2 Percent Increase in Delinquent Loans in 2017
Quorum Federal Credit Union (Purchase, NY) is reporting an increase in delinquencies at the end of 2017, as non-performing taxi medallion loans partially impact the credit union's performance.
The credit union is reporting $64.4 million in commercial loans not secured by real estate. Presumably, most or all of these loans are colateralized by taxi medallions.
The credit union posted a profit of $1.8 million at the end of 2017, after recording a loss of $6.7 million for 2016.
The improvement in earnings was due to a reduction in provision for loan and lease losses in 2017 compared to 2016. The credit union recorded a $10.1 decline in provision to loan and lease losses in 2017 to $14.4 million.
While the growth in provisioning for losses declined, delinquencies at the $860 million credit union rose. Over the year, delinquencies increased by 56.2 percent to almost $54.7 million at the end of 2017. As of December 2017, 7.43 percent of all loans were delinquent.
In addition, early delinquencies (30-to-59 days past due) increased by 178 percent during the fourth quarter of 217 to $11.6 million.
The credit union is reporting at the end of 2017 that $41.5 million of the $54.7 million in delinquent loans were participation loans.
The credit union is reporting troubled debt restructured (TDR) commercial loans not secured by real estate of $23.4 million at the end of 2017. Approximately $13.9 million of these TDR commercial loans not secured by real estate were 60 days or more past due.
The credit union posted a small increase in net worth for 2017 to $67.3 million. This small increase in net worth coupled with a $41.6 million shrinkage in asset size caused Quorum's 2017 net worth ratio to increase by 57 basis points from a year ago to 7.82 percent.
During 2017, allowance for loan and lease losses rose by $6.3 million to $34.15 million. However, because delinquencies grew at a faster rate than reserves for loan losses, the credit union's coverage ratio slipped from 79.51 percent at the end of 2016 to 62.48 percent as of December 2017.
I will be interested in reading Quorum's 2017 Annual Report, when it is released as it will provide more clarity about the actual performance of its taxi medallion participation portfolio and its assessment of the value of taxi medallion loans at the end of 2017.
The credit union is reporting $64.4 million in commercial loans not secured by real estate. Presumably, most or all of these loans are colateralized by taxi medallions.
The credit union posted a profit of $1.8 million at the end of 2017, after recording a loss of $6.7 million for 2016.
The improvement in earnings was due to a reduction in provision for loan and lease losses in 2017 compared to 2016. The credit union recorded a $10.1 decline in provision to loan and lease losses in 2017 to $14.4 million.
While the growth in provisioning for losses declined, delinquencies at the $860 million credit union rose. Over the year, delinquencies increased by 56.2 percent to almost $54.7 million at the end of 2017. As of December 2017, 7.43 percent of all loans were delinquent.
In addition, early delinquencies (30-to-59 days past due) increased by 178 percent during the fourth quarter of 217 to $11.6 million.
The credit union is reporting at the end of 2017 that $41.5 million of the $54.7 million in delinquent loans were participation loans.
The credit union is reporting troubled debt restructured (TDR) commercial loans not secured by real estate of $23.4 million at the end of 2017. Approximately $13.9 million of these TDR commercial loans not secured by real estate were 60 days or more past due.
The credit union posted a small increase in net worth for 2017 to $67.3 million. This small increase in net worth coupled with a $41.6 million shrinkage in asset size caused Quorum's 2017 net worth ratio to increase by 57 basis points from a year ago to 7.82 percent.
During 2017, allowance for loan and lease losses rose by $6.3 million to $34.15 million. However, because delinquencies grew at a faster rate than reserves for loan losses, the credit union's coverage ratio slipped from 79.51 percent at the end of 2016 to 62.48 percent as of December 2017.
I will be interested in reading Quorum's 2017 Annual Report, when it is released as it will provide more clarity about the actual performance of its taxi medallion participation portfolio and its assessment of the value of taxi medallion loans at the end of 2017.
Tuesday, February 6, 2018
Fed Grants Conditional Approval to Pot-Focused CU Serving
The Wall Street Journal is reporting that the Federal Reserve Bank of Kansas City has granted conditional approval to a Colorado credit union to serve marijuana businesses.
To win the approval of the Federal Reserve Bank of Kansas City, Four Corner Credit Union had to modify its business plan to only serve individuals and companies that support legalized marijuana, not state-licensed dispensaries.
Four Corner Credit Union sued the Federal Reserve Bank of Kansas City three years ago.
However, before the credit union becomes fully operational, it will have to obtain deposit insurance. The National Credit Union Administration has previously rejected Fourth Corner’s application.
Read the story (subscription required).
To win the approval of the Federal Reserve Bank of Kansas City, Four Corner Credit Union had to modify its business plan to only serve individuals and companies that support legalized marijuana, not state-licensed dispensaries.
Four Corner Credit Union sued the Federal Reserve Bank of Kansas City three years ago.
However, before the credit union becomes fully operational, it will have to obtain deposit insurance. The National Credit Union Administration has previously rejected Fourth Corner’s application.
Read the story (subscription required).
NY Credit Unions with Exposure to Bad Taxi Medallion Loans
Below is information on the performance of several New York credit unions in 2017 that have some exposure to taxi medallion loans. This information should help inform credit union members about the relative performance of their institutions.
G.P.O. Federal Credit Union (New Hartford, NY)
G.P.O. FCU charged off over half of its commercial loan participations in 2017, as the credit union took steps to clean up its non-performing taxi medallion portfolio.
At the end of the third quarter, the credit union reported holding $13.7 million in commercial loan participations, presumably taxi medallion loans. At the end of 2017, the credit union reported holding $7.8 million in participation loans.
at the end of the third quarter of 2017, the credit union reported almost $5.77 million in delinquent commercial participation loans or 42.11 percent of its participation portfolio. At the end of the fourth quarter of 2017, the credit union reported zero delinquent participation loans.
In addition, troubled debt restructured commercial participation loans fell by almost 51 percent during the fourth quarter of 2017 to $1.24 million.
The credit union reported $4.8 million in net charge-offs of commercial participation loans during the fourth quarter of 2017. Total 2017 net charge-offs of commercial participation loans was $6.7 million. Commercial loan participations accounted for most of the credit union's $7.6 million in net charge-offs.
Goning forward, the credit union appears to be in good shape to address any additional problems associated with its commercial loan participations. The credit union has $23.5 million in net worth. its net worth ratio was 9.19 percent at the end of 2017. Also, the credit union has $3.4 million in allowance for loan and lease losses, as a result the credit union has a coverage ratio of 382 percent.
Ocean Financial Federal Credit Union (Oceanside, NY)
Ocean Financial Federal Credit Union went from posting a profit in 2016 to a loss in 2017 to address problem loans.
The credit union at the end of 2017 had $6.2 million in commercial loan participations, presumably taxi medallion loans.
The credit union reported a profit of $954,476 for 2016. However, the credit union recorded a loss of $3.4 million for 2017, as the credit union significantly increased its provision for loan and lease losses.
Ocean Financial FCU had $658 thousand in provision for loan and lease losses for 2016. in 2017, provision for loan and lease losses increased by 558 percent to $4.33 million with most of the increase coming in the fourth quarter.
The increase in provision for loan and lease losses is due to an uptick in delinquencies. The credit union reported a 19.9 percent increase in delinquencies during the fourth quarter to $6.8 million. At the end of 2017, 3.57 percent of all loans were past due.
In addition, more than half of the delinquent loans ($3.6 million were nonmember commercial loans not secured by real estate. In other words, 57.77 percent of thee loans were at least 60 days or more past due.
Ocean Financial further reported that troubled debt restructured commercial loans were $6.2 million at the end of 2017. This corresponds to the amount of commercial loan participations.
The loss caused the credit union's net worth to drop by 12.2 percent between the end of 2016 and the end of 2017 to $24.5 million. Its net worth ratio over the same time period declined by 102 basis points to 7.83 percent.
Due to the increase in provision for loan and lease losses in the 4th quarter, the credit union saw 131.5 percent increase in its allowance for loan and lease losses to $5.2 million. As a result, the credit union's coverage ratio went from 39.9 percent to 77.06 percent.
Going forward, it appears that the the credit union will be able to handle losses from its taxi medallion portfolio.
N Y Team Federal Credit Union (Hicksville, NY)
Delinquent loans, presumably taxi medallion participation loans, appear to have adversely impacted the performance of N Y Team FCU in 2017.
It appears that the credit union had $2.6 million in commercial loan participations, which are most likely taxi medallion loans.
The $36 million credit union reported a 2017 loss of $334,702, after posting a loss of $688,060 in 2016. The 2017 loss can be attributed to $824,570 provision for loan and lease losses.
Delinquent loans were $2.7 million in 2017 -- of which $2.3 million are associated with nonmember commercial loans that are not secured by real estate.
Approximately 87 percent of nonmember commercial loans not secured by real estate were at least 60 days or more delinquent.
N Y Team reported almost $1.3 million in troubled debt restructured (TDR) commercial loans at the end of 2017. TDR loans were 49.64 percent of the credit union's net worth.
Due to the 2017 loss, the credit union's net worth dropped from almost $2.9 million at the end of 2016 to $2.56 million as of December 31, 2017. As a result, the net worth ratio fell over the same time period from 8.07 percent to 7.12 percent.
The credit union was reporting allowance for loan and lease losses of almost $1.5 million as of December 31, 2017. However, it appears that the credit union may be under-reserved with a coverage ratio of 55.27 percent at the end of 2017. But this was better than the 2016 coverage ratio of 33.94 percent.
Van Cortlandt Cooperative Federal Credit Union (Bronx, NY)
Van Cortlandt Cooperative Credit Union was adversely impacted by non-performing non-member commercial loans not secured by real estate. Presumably, these loans were taxi medallion participations.
At the end of 2017, the $70.7 million credit union reported holding $10.6 in nonmember commercial loan participations.
After posting a loss on $3.2 million for 2016, the credit union had a 2017 loss of $603,157. The loss can be partially attributed to almost $1.3 million in provision for loan and lease losses to cover potential charge-offs of non-performing loans.
Delinquent loans were $8.8 million at the end of 2017. In other words, 30.60 percent of all loans were at least 60 days or more past due. Delinquent loans were 139.95 percent of the credit union's net worth.
Most of the delinquent loans were nonmember commercial loans not secured by real estate. Delinquent nonmember commercial loans not secured by real estate were $8.6 million. The delinquency rate on these loans was 81.20 percent.
In addition, almost $6.7 million of these loans were troubled debt restructured (TDR) loans. TDR loans were 23.24 percent of all loans and 106.28 percent of net worth, respectively.
Due to its 2017 loss, the credit union's net worth ratio fell from 9.82 percent at the end of 2016 to 8.89 percent at the end of 2017.
Furthermore, the credit union reported an almost $1 million increase in its allowance for loan and lease losses during 2017 to $4.4 million. Its coverage ratio was 50.01 percent as of December 2017.
The credit union has a combined net worth and allowance for loan and lease losses buffer of $10.7 million to absorb expected and unexpected losses.
G.P.O. Federal Credit Union (New Hartford, NY)
G.P.O. FCU charged off over half of its commercial loan participations in 2017, as the credit union took steps to clean up its non-performing taxi medallion portfolio.
At the end of the third quarter, the credit union reported holding $13.7 million in commercial loan participations, presumably taxi medallion loans. At the end of 2017, the credit union reported holding $7.8 million in participation loans.
at the end of the third quarter of 2017, the credit union reported almost $5.77 million in delinquent commercial participation loans or 42.11 percent of its participation portfolio. At the end of the fourth quarter of 2017, the credit union reported zero delinquent participation loans.
In addition, troubled debt restructured commercial participation loans fell by almost 51 percent during the fourth quarter of 2017 to $1.24 million.
The credit union reported $4.8 million in net charge-offs of commercial participation loans during the fourth quarter of 2017. Total 2017 net charge-offs of commercial participation loans was $6.7 million. Commercial loan participations accounted for most of the credit union's $7.6 million in net charge-offs.
Goning forward, the credit union appears to be in good shape to address any additional problems associated with its commercial loan participations. The credit union has $23.5 million in net worth. its net worth ratio was 9.19 percent at the end of 2017. Also, the credit union has $3.4 million in allowance for loan and lease losses, as a result the credit union has a coverage ratio of 382 percent.
Ocean Financial Federal Credit Union (Oceanside, NY)
Ocean Financial Federal Credit Union went from posting a profit in 2016 to a loss in 2017 to address problem loans.
The credit union at the end of 2017 had $6.2 million in commercial loan participations, presumably taxi medallion loans.
The credit union reported a profit of $954,476 for 2016. However, the credit union recorded a loss of $3.4 million for 2017, as the credit union significantly increased its provision for loan and lease losses.
Ocean Financial FCU had $658 thousand in provision for loan and lease losses for 2016. in 2017, provision for loan and lease losses increased by 558 percent to $4.33 million with most of the increase coming in the fourth quarter.
The increase in provision for loan and lease losses is due to an uptick in delinquencies. The credit union reported a 19.9 percent increase in delinquencies during the fourth quarter to $6.8 million. At the end of 2017, 3.57 percent of all loans were past due.
In addition, more than half of the delinquent loans ($3.6 million were nonmember commercial loans not secured by real estate. In other words, 57.77 percent of thee loans were at least 60 days or more past due.
Ocean Financial further reported that troubled debt restructured commercial loans were $6.2 million at the end of 2017. This corresponds to the amount of commercial loan participations.
The loss caused the credit union's net worth to drop by 12.2 percent between the end of 2016 and the end of 2017 to $24.5 million. Its net worth ratio over the same time period declined by 102 basis points to 7.83 percent.
Due to the increase in provision for loan and lease losses in the 4th quarter, the credit union saw 131.5 percent increase in its allowance for loan and lease losses to $5.2 million. As a result, the credit union's coverage ratio went from 39.9 percent to 77.06 percent.
Going forward, it appears that the the credit union will be able to handle losses from its taxi medallion portfolio.
N Y Team Federal Credit Union (Hicksville, NY)
Delinquent loans, presumably taxi medallion participation loans, appear to have adversely impacted the performance of N Y Team FCU in 2017.
It appears that the credit union had $2.6 million in commercial loan participations, which are most likely taxi medallion loans.
The $36 million credit union reported a 2017 loss of $334,702, after posting a loss of $688,060 in 2016. The 2017 loss can be attributed to $824,570 provision for loan and lease losses.
Delinquent loans were $2.7 million in 2017 -- of which $2.3 million are associated with nonmember commercial loans that are not secured by real estate.
Approximately 87 percent of nonmember commercial loans not secured by real estate were at least 60 days or more delinquent.
N Y Team reported almost $1.3 million in troubled debt restructured (TDR) commercial loans at the end of 2017. TDR loans were 49.64 percent of the credit union's net worth.
Due to the 2017 loss, the credit union's net worth dropped from almost $2.9 million at the end of 2016 to $2.56 million as of December 31, 2017. As a result, the net worth ratio fell over the same time period from 8.07 percent to 7.12 percent.
The credit union was reporting allowance for loan and lease losses of almost $1.5 million as of December 31, 2017. However, it appears that the credit union may be under-reserved with a coverage ratio of 55.27 percent at the end of 2017. But this was better than the 2016 coverage ratio of 33.94 percent.
Van Cortlandt Cooperative Federal Credit Union (Bronx, NY)
Van Cortlandt Cooperative Credit Union was adversely impacted by non-performing non-member commercial loans not secured by real estate. Presumably, these loans were taxi medallion participations.
At the end of 2017, the $70.7 million credit union reported holding $10.6 in nonmember commercial loan participations.
After posting a loss on $3.2 million for 2016, the credit union had a 2017 loss of $603,157. The loss can be partially attributed to almost $1.3 million in provision for loan and lease losses to cover potential charge-offs of non-performing loans.
Delinquent loans were $8.8 million at the end of 2017. In other words, 30.60 percent of all loans were at least 60 days or more past due. Delinquent loans were 139.95 percent of the credit union's net worth.
Most of the delinquent loans were nonmember commercial loans not secured by real estate. Delinquent nonmember commercial loans not secured by real estate were $8.6 million. The delinquency rate on these loans was 81.20 percent.
In addition, almost $6.7 million of these loans were troubled debt restructured (TDR) loans. TDR loans were 23.24 percent of all loans and 106.28 percent of net worth, respectively.
Due to its 2017 loss, the credit union's net worth ratio fell from 9.82 percent at the end of 2016 to 8.89 percent at the end of 2017.
Furthermore, the credit union reported an almost $1 million increase in its allowance for loan and lease losses during 2017 to $4.4 million. Its coverage ratio was 50.01 percent as of December 2017.
The credit union has a combined net worth and allowance for loan and lease losses buffer of $10.7 million to absorb expected and unexpected losses.
Sunday, February 4, 2018
United Teletech Financial Hit by Bad Taxi Medallion Participation Loans
Taxi medallion participation loans continued to be a drag on the performance of United Teletech Financial Federal Credit Union (Tinton Falls, NJ), as medallion values continue to fall.
The credit union may have up to $24.76 million in outstanding taxi medallion participation loans as of December 31, 2017.
The $319.8 million reported a 2017 loss of $9.6 million -- up from a loss of $1.64 for 2016.
The 2017 loss was due to the jump in provision for loan and lease losses in 2017. The credit union stated in its 2016 Annual Report that it "continued to assess and reserve capital for any exposure it may have to loan participation for taxi medallions in New York City." As a result, the credit union reported $11.7 million in provision for loan and lease losses in 2017 -- up from $4.9 million in 2016.
Due to the 2017 loss, the credit union's net worth fell by $8.5 million to $23.1 million. The net worth ratio plummeted by 208 basis points to 7.23 percent.
The credit union reported $8.3 million in delinquent loans at the end of 2017. Approximately, $2.3 million of the delinquent loans were non-member commercial loans not secured by real estate
Moreover, the credit union reported holding $12.35 million in troubled debt restructured commercial loans not secured by real estate at the end of 2017.
The credit union had $6.3 million in net charge-offs for 2017, of which almost $2 million for nonmember commercial loans not secured by real estate, presumably taxi medallion participation loans.
The increase in provision for loan and lease losses caused the credit union to build its allowance for loan and lease losses from almost $4.9 million at the end of 2016 to $10.3 million at year-end 2017. This caused the coverage ratio to increase from 44.41 percent to 123.74 percent over the same time period.
The credit union may have to increase provision for loan losses this year. Flushing Financial Corporation in its January 30 earnings release stated that it cut its carrying value for its taxi medallion portfolio by over 50 percent to an average carrying value of $164,000 per New York City taxi medallion loan.
The credit union may have up to $24.76 million in outstanding taxi medallion participation loans as of December 31, 2017.
The $319.8 million reported a 2017 loss of $9.6 million -- up from a loss of $1.64 for 2016.
The 2017 loss was due to the jump in provision for loan and lease losses in 2017. The credit union stated in its 2016 Annual Report that it "continued to assess and reserve capital for any exposure it may have to loan participation for taxi medallions in New York City." As a result, the credit union reported $11.7 million in provision for loan and lease losses in 2017 -- up from $4.9 million in 2016.
Due to the 2017 loss, the credit union's net worth fell by $8.5 million to $23.1 million. The net worth ratio plummeted by 208 basis points to 7.23 percent.
The credit union reported $8.3 million in delinquent loans at the end of 2017. Approximately, $2.3 million of the delinquent loans were non-member commercial loans not secured by real estate
Moreover, the credit union reported holding $12.35 million in troubled debt restructured commercial loans not secured by real estate at the end of 2017.
The credit union had $6.3 million in net charge-offs for 2017, of which almost $2 million for nonmember commercial loans not secured by real estate, presumably taxi medallion participation loans.
The increase in provision for loan and lease losses caused the credit union to build its allowance for loan and lease losses from almost $4.9 million at the end of 2016 to $10.3 million at year-end 2017. This caused the coverage ratio to increase from 44.41 percent to 123.74 percent over the same time period.
The credit union may have to increase provision for loan losses this year. Flushing Financial Corporation in its January 30 earnings release stated that it cut its carrying value for its taxi medallion portfolio by over 50 percent to an average carrying value of $164,000 per New York City taxi medallion loan.
Saturday, February 3, 2018
Georgia United Becomes Official CU of Georgia Tech Athletics
Georgia United Credit Union (Duluth, GA) announced an expanded partnership with the Georgia Tech Athletic Association as the Official Credit Union of Georgia Tech athletics.
The sponsorship includes a co-branded debit card initiative, financial education program for student-athletes, and community service initiatives.
The renewed partnership will include in-venue signage and video features during home football, basketball and baseball games. Additional promotional opportunities include radio commercials and digital billboard ads.
The price of the sponsorship was not disclosed.
Read more.
The sponsorship includes a co-branded debit card initiative, financial education program for student-athletes, and community service initiatives.
The renewed partnership will include in-venue signage and video features during home football, basketball and baseball games. Additional promotional opportunities include radio commercials and digital billboard ads.
The price of the sponsorship was not disclosed.
Read more.
Friday, February 2, 2018
Taxi Medallion Participation Loans Hit Connecticut and Rhode Island CUs
It appears that nonperforming taxi medallion loans affected the 2017 performance of 360 Federal Credit Union (Windsor Locks, CT) and Postal Government Employees Credit Union (Providence, RI).
360 Federal Credit Union
The credit union is reporting at the end of 2017 that it held almost $11.4 million in commercial participation loans, presumably these loans were taxi medallion loans. This is down from $14.6 million at the end of 2016. These commercial loans at the end of 2017 represented 7.05 percent of all loans.
360 Federal Credit Union reported a loss of almost $3.12 million for 2017. In comparison, the credit union reported a loss of nearly $736 thousand for 2016.
The significant increase in the 2017 loss was due to $4.4 million in provision for loan and lease losses.
As a result of the loss, the $224 million credit union saw its net worth fall from $23.2 million at the end of 2016 to $20.1 million on December 31, 2017. The credit union's net worth ratio fell from 10.45 percent at the end of 2016 to 8.95 percent at the end of 2017.
This increase in provision for loan and lease losses was to address $3.1 million in delinquent loans, of which $2.3 million were commercial loans to non-members not secured by real estate.
While the delinquency rate for its entire loan portfolio was 1.95 percent at the end of 2017, the delinquency rate on commercial participation loans of 20.38 percent.
The credit union reported that troubled debt restructured commercial loans more than doubled from $1.15 million at the end of 2016 to almost $2.5 million at the end of 2017.
The credit union is also reporting that net participation loan charge-offs of $673,461. This translates into a net charge-off rate for participation loans of 5.19 percent.
The increase in provision for loan and lease losses helped to build the credit union's allowance for loan and lease losses by almost $3 million during 2017 to $5.5 million. The credit union has a coverage ratio (allowance for loan and lease losses divided by delinquent loans) of 175.30 percent, which means that it is over-reserved.
The credit union has a total buffer (net worth plus allowance for loan and lease losses) of $25.6 million, which appears to be sufficient to absorb problems coming from its taxi medallion loans.
Postal Government Employees Credit Union
It appears that Postal Government Employees Credit Union used the fourth quarter to clean up its balance sheet with regard to commercial loan participations, which were most likely taxi medallion loans.
At the end of the third quarter, the credit union reported holding 6 purchased commercial loans or participations to non-members at a value of $3.3 million, of which all were delinquent. At the end of 2017, the credit union reported holding only one loan valued at $339 thousand.
The credit union saw an 85.4 percent decline in delinquent loans during the fourth quarter of 2017, as net charge-offs increased by almost $2.6 million to approximately $2.7 million. Net charged-off participation loans rose zero at the end of the third quarter to almost $2.6 million at the end of 2017.
To enable the credit union to charge-off these loans in the fourth quarter, the $45 million credit union increased provisions almost 19 fold from the end of 2016 to nearly $1.2 million.
As a result, the credit union went from posting a profit for 2016 to a loss of $820,249 for 2017.
The credit union's net worth fell from $5.2 million at the end of 2016 to $4.4 million. The net worth ratio fell 193 basis points over the same time period to 9.79 percent.
360 Federal Credit Union
The credit union is reporting at the end of 2017 that it held almost $11.4 million in commercial participation loans, presumably these loans were taxi medallion loans. This is down from $14.6 million at the end of 2016. These commercial loans at the end of 2017 represented 7.05 percent of all loans.
360 Federal Credit Union reported a loss of almost $3.12 million for 2017. In comparison, the credit union reported a loss of nearly $736 thousand for 2016.
The significant increase in the 2017 loss was due to $4.4 million in provision for loan and lease losses.
As a result of the loss, the $224 million credit union saw its net worth fall from $23.2 million at the end of 2016 to $20.1 million on December 31, 2017. The credit union's net worth ratio fell from 10.45 percent at the end of 2016 to 8.95 percent at the end of 2017.
This increase in provision for loan and lease losses was to address $3.1 million in delinquent loans, of which $2.3 million were commercial loans to non-members not secured by real estate.
While the delinquency rate for its entire loan portfolio was 1.95 percent at the end of 2017, the delinquency rate on commercial participation loans of 20.38 percent.
The credit union reported that troubled debt restructured commercial loans more than doubled from $1.15 million at the end of 2016 to almost $2.5 million at the end of 2017.
The credit union is also reporting that net participation loan charge-offs of $673,461. This translates into a net charge-off rate for participation loans of 5.19 percent.
The increase in provision for loan and lease losses helped to build the credit union's allowance for loan and lease losses by almost $3 million during 2017 to $5.5 million. The credit union has a coverage ratio (allowance for loan and lease losses divided by delinquent loans) of 175.30 percent, which means that it is over-reserved.
The credit union has a total buffer (net worth plus allowance for loan and lease losses) of $25.6 million, which appears to be sufficient to absorb problems coming from its taxi medallion loans.
Postal Government Employees Credit Union
It appears that Postal Government Employees Credit Union used the fourth quarter to clean up its balance sheet with regard to commercial loan participations, which were most likely taxi medallion loans.
At the end of the third quarter, the credit union reported holding 6 purchased commercial loans or participations to non-members at a value of $3.3 million, of which all were delinquent. At the end of 2017, the credit union reported holding only one loan valued at $339 thousand.
The credit union saw an 85.4 percent decline in delinquent loans during the fourth quarter of 2017, as net charge-offs increased by almost $2.6 million to approximately $2.7 million. Net charged-off participation loans rose zero at the end of the third quarter to almost $2.6 million at the end of 2017.
To enable the credit union to charge-off these loans in the fourth quarter, the $45 million credit union increased provisions almost 19 fold from the end of 2016 to nearly $1.2 million.
As a result, the credit union went from posting a profit for 2016 to a loss of $820,249 for 2017.
The credit union's net worth fell from $5.2 million at the end of 2016 to $4.4 million. The net worth ratio fell 193 basis points over the same time period to 9.79 percent.
Thursday, February 1, 2018
Tax Foundation:Lawmakers Should Regularly Review CU Tax Exemption
Yesterday, I wrote about Senator Hatch writing the National Credit Union Administration about credit unions operating outside their tax-exempt purpose.
In related news, the Tax Foundation has called on Congress to regularly review the credit union tax exemption to ensure that credit unions are fulfilling their original purpose.
The Tax Foundation cited an Internal Revenue Service (IRS) document from 1979, which identified three reasons for the credit union tax exemption -- "help unbanked, lower-income people; restrict their customer base; and avoid high-risk, high-return investments."
The Tax Foundation states if credit unions "have strayed from their intended function and now resemble other taxed financial institutions, their exemption would represent a disparity across similar economic activities" and should be an area for potential tax reform.
Read the story.
In related news, the Tax Foundation has called on Congress to regularly review the credit union tax exemption to ensure that credit unions are fulfilling their original purpose.
The Tax Foundation cited an Internal Revenue Service (IRS) document from 1979, which identified three reasons for the credit union tax exemption -- "help unbanked, lower-income people; restrict their customer base; and avoid high-risk, high-return investments."
The Tax Foundation states if credit unions "have strayed from their intended function and now resemble other taxed financial institutions, their exemption would represent a disparity across similar economic activities" and should be an area for potential tax reform.
Read the story.
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