Taxi Medallion Lending CU's Request for Renewal and Extension of Nonmember Deposit Exemption Denied in 2018

The National Credit Union Administration (NCUA) Board on April 10, 2018 upheld a Regional Director's denial of a taxi medallion lending credit union's request for a renewal and extension of an exemption from the nonmember deposit cap.

NCUA's regulation caps nonmember deposits at 20 percent of total shares or $3 million, whichever is greater. But a credit union can seek an exemption from the nonmember deposit limit from the Regional Director.

While the credit union was unnamed in the document, the evidence suggests the credit union appealing the regional director's decision was Progressive Credit Union.

As background, the credit union in 2015 was granted a two-year exemption from the nonmember deposit cap, which would expire at the end of 2017. The credit union in July 2017 sought an additional two-year exemption, but the Regional Director proposed extending the exemption until June 1, 2018 to give the credit union time to develop a plan to end its reliance on costly and volatile nonmember deposits, as a primary source of liquidity. The credit union appealed the denial and the Board heard the case on March 14, 2018.

The credit union claimed that the denial of the exemption by the Regional Directors was another example of retaliation against the credit union.

According to the document, the credit union was not in sound financial condition.

• It had a composite CAMEL rating of 4 due to its declining financial health. 
• The credit union was experiencing a steep decline in its net worth.
• The Regional Director expressed concerns about volatility on the liability side of the credit union's balance sheet, as nonmember deposits were 30 percent of the credit union's deposit base. All of the nonmember deposits were from credit unions. 
• The credit union used an allowance for loan and lease methodology that may not reflect current market conditions with regard to medallions.
• The credit union showed an unwillingness to diversify its business model.

Region 1 contended that the credit union was in denial about the scope and depth of its problems.

Read the denial.