NEW YORK—Losses from taxi medallion loans to the National Credit Union Share Insurance Fund (NCUSIF) could jeopardize a 2018 distribution from the NCUSIF, one analyst is suggesting.
The Temporary Corporate Credit Union Stabilization Fund was closed on Oct. 1 and its funds, property and other assets and liabilities were transferred to the NCUSIF, from which distributions to credit unions are planned in 2018.
“According to a presentation at the New York Credit Union Association's Credit Union CEO Roundtable in May 2017, the estimated losses from taxi medallion loans to the NCUSIF could be between $200 million to $719 million,” said Keith Leggett, the former senior vice president and senior economist at the ABA, on his Credit Union Watch blog. “If losses from taxi medallion loans to the NCUSIF come in at the upper end of the range, it would be in the middle of the range of the projected NCUSIF distributions of $600 million to $800 million in 2018.”
Leggett noted that NCUA Chairman Mark McWatters cautioned during the September NCUA board meeting that a large increase in insurance losses could reduce or eliminate the projected distributions.
“As of September 2017, NCUA has only set aside $286 million in reserves for insurance losses, of which $20.1 million is for specific natural person credit unions. In the case of large losses from taxi medallion loans, this $286 million in reserves would not be sufficient to cover these losses. This means NCUA would need to significantly increase reserves to cover these insurance losses going forward,” Leggett said.
To maintain the new NCUSIF normal operating level at 1.39%, this would require either a reduction or elimination of the 2018 distribution, insisted Leggett.
Not commenting on the status of the two conserved New York City taxi medallion CUs--Melrose CU, located in Briarwood, N.Y., and LOMTO FCU, Woodside, N.Y.--NCUA said that speculation about the possible impact of losses at taxi medallion credit unions on a potential Share Insurance distribution next year is premature.
"NCUA has consistently cautioned that all projected distribution figures are point-in-time estimates," said spokesperson John Fairbanks, noting that when the board approved the closure of the Stabilization Fund at its September meeting, for example, Chairman Mark McWatters discussed a possible distribution.
"Please note, all of these figures are estimates. An economic downturn, a large increase in insurance losses, or other significant changes in the key drivers of the equity ratio could reduce or eliminate the projected distributions . . . the NCUA board has a duty to responsibly manage the Share Insurance Fund . . . Prudent administration of the Share Insurance Fund and the related protection it provides for member deposits are paramount and fundamental to maintaining a safe and sound national credit union system and public confidence in federal share insurance,” stressed McWatters during the meeting.
At that same meeting Board Member Rick Metsger warned about “clouds on the horizon” and pointed out that a distribution is possible, “barring an economic downturn or unexpected increase in insurance losses.” Metsger noted that "losses to the Share Insurance Fund are at historically low levels and are likely to increase due to institutions we already have in conservatorship,” adding, "We can’t ignore these risks. They are real.”