My Warning on Signature Bank’s Medallion Exposure on April 22, 2015

When I commented on the article below:

 

The Story Doesn’t Say It All: Hidden Risks Of Signature Bank’s Taxi Medallion Lending Operation

By Dynamic Averaging
Seeking Alpha
Dec. 1, 2014

I commented on the article on April 22, 2015
and included the text from the Q1 earnings call relevant to taxi medallions

Looks like your forecasted trouble for medallion loans is beginning. See transcript from earnings call:

 Question from: Steven Alexopoulos – JPMorgan

 That’s helpful. And then just finally, I think I have to ask a question on the tax in [taxi] medallions somebody was going to, can you talked Erik maybe where the balances were at quarter end, maybe split it up by market talk about any pressure you might be seeing there I don’t know if that was what contributed to the watch list and NPAs? Thanks.

 Eric Howell – EVP, Corporate and Business Development

 It did a little bit there is truly difference between the New York market and Chicago market, which are the two markets that we really are active in. Currently in New York we have a 1005 medallion loans total is $632 million.

 Out of those 1005 loans we have nine that are delinquent, seven of those are 30 days and two are 60 days. Those are very normal numbers of delinquency. In fact we had nine a year ago and we had very similar numbers in the prior years as well. A lot of those are medical related reasons why people go delinquent and we’re really not at all concerned about that.

 Utilization in New York remains high at 93% to 94%. Our LTVs in New York are at approximately 77% currently and our debt service coverage is right around 1.3 times.

 And those are based on the latest lowest values which is 900,000 for a corporate medallion and 800,000 for a personal medallion. So we feel pretty good about New York, the cash flows are strong there and we’re really not seeing really many issues there.

 Chicago is a little bit different story. Clearly it’s a more volatile environment politically. So we’re keeping a very close eye there and we’ve effectively backed away from that market lending wise as well as really New York for that matter. Cash flows have been affected there by a lease cap reduction about $595 per week, so that’s affecting the cash flows a bit there.

 Currently in Chicago we have 753 medallion loans totaling $174 million approximately $32 million is pass due and $3 million is on non-accrual. And we did take a charge-off of about $590,000 in the first quarter on 11 medallion loans. But we’re actively working with the owners and drivers there to restructure those credits we’ve seen utilization down to about 85%, but we still do have a LTV at 92% and that’s based on a value of $250,000. One of the good things to note in the last quarter in Chicago is that there were five sales three at $270,000 and two at $290,000.

 So we’re using a $250,000 value and that’s giving us a 92% LTV and our debt service coverage is right around 1.2 times. So we still feel that we’re going to come out okay in the Chicago area, but we are keeping a very close eye on it and we’re really actively managing through that portfolio at this point.

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