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Taxi loans driving lenders to high profits

By
Catherine Curan
Published March 29, 2015, 1:23 a.m. ET

As the war between Uber and medallion cab drivers escalates on New York City streets, the credit unions behind the scenes are still making a mint on taxi medallion loans.

In addition to public company Medallion Financial, which released strong fourth-quarter earnings last month, four local credit unions — Melrose, Lomto, Montauk and Progressive — are the heavyweights of taxi medallion lending in New York. Last year, they had roughly 6,500 medallion loans worth about $2.4 billion outstanding, according to an analysis by Moebs Services for The Post.

These four credit unions have strong capital reserves and are still profiting handsomely on medallion loans, with delinquency levels at or near zero on those loans. The largest of the four, Queens-based Melrose, has assets of $2.1 billion and had 2,858 medallion loans, worth $1.5 billion, on its books in 2014. Melrose had no repossessions of taxi medallions last year.

“Taxi medallion credit unions are very well-run, with extremely low expenses and above-average income,” said Mike Moebs, CEO of Moebs Services.

But it’s clear the medallion industry is feeling financial heat from Uber. Last year, the price of a single NYC taxi medallion plunged from a high of $1.05 million in June 2013 to $800,000 in January. And the latest Taxi and Limousine Commission stats show that in February, a pair of medallions traded for $1.4 million, an average of $700,000 each.

Plunging medallion prices and ramped up competition are tarnishing medallions’ status as a safe-haven investment, according to Jefferies analyst Sean Darby.

“The arrival of ride-share ‘apps,’ Uber and increased supply has forced prices lower,” Darby wrote in a research note last month. “It may be time to … short taxi medallions in 2015.”

There are roughly 13,600 yellow cabs on city streets. Three-year loans with balloon payments due at the end of the term are common for medallions. When an owner refinances, he can cash out on an appreciating asset. Now falling values are closing off that option, just as new competition causes some borrowers to struggle.

Robert Familant, treasurer of Progressive Credit Union, said the lender modified loans after 9/11, when medallion values plunged nearly 30 percent.

“We work with borrowers,” he said.