WAYNE, N.J.—Two New Jersey credit unions with exposure to taxi medallion loans experienced additional deterioration in their financial performance, one analyst is reporting.
The $91-million First Jersey Credit Union here recorded a year-to-date loss of $5.8 million at the end of the third quarter. The loss was tied to a $4.6-million year-to-date increase in provision for loan and lease losses, reported Keith Leggett, the former senior vice president and senior economist at the ABA, on his Credit Union Watch blog.
“As a result of the loss, the credit union's net worth fell to slightly less than $2.2 million. At the end of the third quarter, the credit union was significantly undercapitalized with a net worth ratio of 2.40%, down from 3.80% as of June 2017,” Leggett said.
The credit union reported $5.6 million in delinquent loans—down from $6.3 million from the previous quarter. The percent of loans 60 days or more past due was 8.88% as of the most recent financial performance report. Delinquent loans as a percent of net worth were 256.29%, Leggett said.
“Delinquent commercial loans not secured by real estate – presumably taxi medallion loans – were almost $4.6 million as of September. The delinquency rate on these loans was 35.05%,” Leggett said.
In addition, troubled debt restructured commercial loans were nearly $4.7 million.
The credit union reported a September 2017 net charge-offs of $2.3 million, of which $2 million was commercial loans. The net charge-off rate was 4.60%; but the net charge-off rate for commercial loans was 17.54% -- up from 4.37% from a year ago, Leggett said.
Due to the increase in provision for loan and lease losses, the allowance for loan and lease losses was $6.8 million. The coverage ratio was 121.64% as of September 2017, up from 114.63% on June 2017.
Over the last year, assets at the credit union shrunk by $34.2 million. During the last quarter, assets fell by $10.4 million, Leggett said.
Aspire FCU, Clark, N.J., reported a year-to-date loss of $5.8 million as the credit union seeks to build reserves to cover bad taxi medallion loans, said Leggett. The $161-million credit union reported almost a doubling of provisions during the third quarter from $3.4 million to $6.7 million.
As a result of the loss, the credit union's net worth fell from $17.5 million at the end of 2016 to $11.7 million as of September 2017. The credit union's net worth ratio dropped by 283 basis points to 7.28%.
Delinquent loans rose during the last quarter from $8.2 million to $9.2 million. The delinquency rate on loans rose 106 basis points to 7.21%, Leggett stated.
“Commercial loans not secured by real estate – presumably taxi medallion loans – accounted for almost half of the delinquent loans ($4.5 million). The percentage of these commercial loans 60 days or more past due was 34.52%,” Leggett said.
The credit union is reporting net charge-offs of $2.8 million as of September 2017. The net charge-off rate was 2.80%. Troubled debt restructured commercial loans were approximately $3.9 million at the end of the third quarter of 2017.
Due to the increase in provisions for loan and lease losses, the credit union's allowance for loan and lease losses jumped from $4.3 million at the end of 2016 to $8.2 million as of September 2017. The credit union's coverage ratio was 88.73% -- up from 58.64% at the end of 2016, Leggett said.