Friday, August 12, 2016

Estimated NCUSIF Losses from Taxi Medallion Loans

What will be the impact of losses from taxi medallion loans on the National Credit Union Share Insurance Fund (NCUSIF)?

The level of losses to the NCUSIF depends on your loss assumptions on taxi medallion loans.

Earlier this year, research by Morgan Stanley estimated a base case cumulative loss rate on taxi medallion loans of 25 percent. Morgan Stanley assumed a worst case loss rate scenario of 50 percent and a mid-range loss rate scenario of 38 percent.

Applying these scenarios to the three New York City taxi medallion lending credit unions will provide estimates of the potential loss to the NCUSIF from taxi medallion loans.

This analysis is static. It only looks at the equity and allowance for loan and lease losses (ALLL) for the three credit unions as of June 2016 and determines if equity and ALLL are sufficient to cover the estimated losses on the taxi medallion portfolio at these three credit unions.

This analysis does not look at credit unions that have participated in taxi medallion loans.

Under the base case scenario, the loss to the NCUSIF appears to be manageable at $7.4 million. Only one credit union would fail, as its losses on medallion loans would exceed its equity plus ALLL. Another credit union would be crippled and likely merged.

Under the worst case scenario, the aggregate loss to the NCUSIF from taxi medallion loans would approach $400 million with two credit unions placed into receivership.

See the table below (click image to enlarge).


  1. The MS scenario is optimistic.
    $7.4M would be miraculous.

  2. Maybe we should pay out trade association dues to folks like you, Keith.
    We did a board meeting recently with someone else we should give our trade association dues to.
    He is an advisor to credit unions.
    You and he have told us more about what we need to know about the recent past, current and future of banking than all the CUNA and Nafcu conferences I've been to.
    There is next to nothing about this medallion risk.
    The advisor provided us research about the industry that was so useful to our strategic planning that we had to stay longer to absorb it all. Information we should have already known, yet we are $1B assets and have smart managers.
    There's a whole world out there that credit unions aren't tapping into.
    Guess we better plan for assessments.
    Maybe we stop paying dues so we can pay for assessments.

  3. All three would fail under your third scenario because the allowance has to be replenished for remaining loans. Losses to the NCUSIF depend in part on how much funny business is going on in filling out the call reports. I'm guessing it's worse than it looks here. And it will be interesting to see how this plays out with NCUA and if they and the state will take action quickly, as they should.

    1. Right. Maybe the press will uplift the story and force congress to ask about it.
      NCUA has no boss and acts like it to our detriment, once again.

  4. The time to "act quickly" was probably 18-24 months ago.
    FDIC. Acts quickly.
    NCUA acts out of self interest. Apparently NY State as well.
    And we get to pay the freight.

    1. Just read in cu journal that ncua mouthpiece says there is $7.4B in medallion loans in credit unions.
      How can it be that much?
      How can the losses be ncua projected 7.4 million.
      More deception.
      How did they let this happen?
      We expect losses to be severe and to pay assessments.
      Who is ncua s boss??



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