WAYNE, N.J.—Problem loans, many of them secured by taxi medallions, have wiped out the net worth of First Jersey CU here, one analyst reports.
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, stated Keith Leggett, the former senior vice president and senior economist at the ABA.
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, according to the CU’s call report.
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%, down from 8.88% as of September 2017 and 7.82% from the previous year, Leggett said.
“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% of the commercial loans were delinquent,” said Leggett. “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% 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) increased from 79.97% at the end of 2016 to 170.12% at the end of 2017, Leggett said.
“This increase in the coverage ratio suggests that the credit union expects further losses from its loan portfolio,” Leggett stated.
Leggett also reported that the financials of two conserved New York City-area taxi medallion credit unions, LOMTO FCU and Melrose CU, continue to slide.
LOMTO posted 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, Leggett said.
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% to negative 20.21%, Leggett reported.
The net worth of Melrose CU fell by almost $111.7 million to minus $187.9 million at the close of 2017, as losses mount from defaulting taxi medallion loans. The $1.36 billion credit union's net worth ratio was negative 13.79% at the end of 2017, according to call report data.
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% decline in delinquent loans during the fourth quarter of 2017 to $474.4 million. As of December 31, 2017, the delinquency rate for Melrose was 33.15%,” Leggett said.
Due to the effect of ride sharing services on the New York City taxi industry, three New York City taxi medallion CUs have been conserved. In addition to NCUA last year placing LOMTO and Melrose into conservatorship, in September of 2015, taxi medallion lender, Montauk CU, was conserved and then later merged into Bethpage FCU.