PURCHASE, N.Y.—Another CU is feeling the negative effects of taxi medallion loan participations.
Quorum Federal Credit Union is reporting an increase in delinquencies at the end of 2017, as non-performing taxi medallion loans partially impact the credit union's performance, reported Keith Leggett, the former senior vice president and senior economist at the American Bankers Association, on his blog.
“The credit union is reporting $64.4 million in commercial loans not secured by real estate. Presumably, most or all of these loans are collateralized by taxi medallions,” Leggett said.
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,” Leggett said.
While the growth in provisioning for losses declined, delinquencies at the $860-million credit union rose. Over the year, delinquencies increased by 56.2% to almost $54.7 million at the end of 2017. As of December 2017, 7.43% of all loans were delinquent, Leggett said.
In addition, early delinquencies (30-to-59 days past due) increased by 178% 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,” Leggett said.
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, Leggett said.
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%,” Leggett said.
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% at the end of 2016 to 62.48% as of December 2017, added Leggett.