NEW YORK—One analyst if forecasting even rougher waters ahead credit unions in New York City and Chicago that make taxi medallion loans.
Due to the impact of ride-sharing services such as Uber, taxi medallions continue to decline in value and taxicab operators continue to experience a drop in revenues, stated Keith Leggett, the former senior vice president and senior economist at the ABA, and author of the Credit Union Watch blog.
Data from New York City and Chicago show that taxi medallion prices are still falling and have not stabilized, he said.
“The New York City Taxi and Limousine Commission reported two medallion sales in March 2016 at $520,000 and $580,000. In October 2015, taxi medallions sold at $675,000 to $700,000. In Chicago, the transfer prices for taxi medallions ranged between $50,000 and $95,500 during the first quarter of 2016,” said Leggett on his blog. “In comparison, taxi medallions sold for $238,000 and $150,000 in October 2015. Unless borrowers bring additional outside equity to the table, these taxi medallion lending credit unions will have difficulty refinancing these loans when these loans mature.”
In addition, taxi medallion owner revenues are falling, which cannot support medallion values, asserted Leggett. According to a recent report by Morgan Stanley, management at Signature Bank stated that the average annual income that a taxi driver generates has declined 13.5% peak to current, from $52,000 to $45,000.
“This raises concerns that the cash flows will not be sufficient to repay these taxi medallion loans,” said Leggett. “All this indicates is that taxi medallion credit unions will need to increase provisions on these loans, as these credit unions are certain to write-off a significant portion of their taxi medallion loan portfolio. This will negatively impact the earnings at these credit unions, as well as net worth.”
Montauk Credit Union, which primarily made taxi medallion loans, was conserved by the state regulator in September and was merged into Bethpage FCU last month.