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US credit unions' net charge-offs reach highest level since 2010

Net charge-offs at U.S. credit unions reached $1.67 billion in the last quarter of 2017, the highest amount since the first quarter of 2010. This "bad debt," which credit unions write off as unlikely to be paid back, grew 27.0% year over year. Net charge-offs represented 0.70% of average loans, the highest ratio since the fourth quarter of 2012.

Net charge-offs for vehicle loans, unsecured credit cards and other consumer loans increased substantially from the previous year. The first mortgage loan category was one of the few bright spots, declining 44.5% to $21.3 million.

Fourth-quarter 2017 net charge-offs at Woodside, N.Y.-based Lomto FCU represented 83.06% of its average loans, the highest of any U.S. credit union. Lomto was placed into conservatorship by the National Credit Union Administration in June 2017. Lomto reported a net loss of $12.6 million in the most recent quarter, and has had a loss in all but one of the last 11 quarters.

Another New York credit union, Briarwood-based Melrose CU, had net charge-offs to average loan ratio of about 50%. Melrose has been under NCUA conservatorship since February 2017. Melrose specialized in taxi medallion lending, which has lost significant value in recent years because of competition with ride-sharing companies like Uber Technologies Inc. and Lyft Inc.

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