PURCHASE, N.Y.—The $874-million Quorum FCU here reported an increase in delinquent loans during the second quarter of 2017 driven by poor performing participation loans – of which most, if not all, were likely taxi medallion loans, reported Keith Leggett.
The credit union reported $49.6 million in delinquent loans, of which $39.2 million were participation loans, noted the former senior vice president and senior economist at the ABA on his Credit Union Watch blog.
The impact of ride sharing services on the taxi industry have sent medallion values plummeting in New York City. Medallions are required in order to legally drive a cab. Medallion values are reported to be at approximately half of their peak values. That has led many members to default on their medallion loans. Leggett has stated that the taxi medallion participations could total $3 billion across the nation.
According to Quorum's financial data, delinquent participation loans increased by 26% during the second quarter. As of June 30, 2017, the percent of participation loans that were 60 days or more past due was 35.08%. This was up from 27.36% at the end of the first quarter of 2017 and 14.12% from a year ago, Leggett stated.
“If all delinquent participation loans are taxi medallion participation loans, then the delinquency rate of taxi medallion participation loans was 54.3% as of June 30,” noted Leggett. “Additionally, the credit union reported $24.3 million in troubled debt restructured (TDR) business loans, as of June 30, 2017. TDR business loans in accrual status were $13.5 million, while almost $10.9 million of these loans were in nonaccrual status. Total TDR loans were $30.4 million.”
According to the credit union's financial performance report, 56.92% of TDR business loans not secured by real estate were delinquent. However, the credit union currently has a combined buffer of net worth and allowances for loan and lease losses of $97.1 million to absorb expected and unexpected losses, Leggett explained.