Taxi Medallion Loan Participations Continue To Drag On CU’s Bottom Line

TINTON FALLS, N.J.—Taxi medallion participation loans continued to be a drag on the performance of United Teletech Financial FCU, as medallion values have fallen due to the impact of ride sharing services, one analyst is reporting.
“The credit union may have up to $24.76 million in outstanding taxi medallion participation loans as of Dec. 31, 2017,” reported Keith Leggett, the former senior vice president and senior economist at the American Bankers Association, on his blog.
The $319.8-million CU reported a 2017 loss of $9.6 million – up from a loss of $1.64 for 2016, on its call report.
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, Leggett said.
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%.
“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,” Leggett said. “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,” Leggett said.
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% to 123.74% over the same time period, Leggett said.