Signature Bank in New York is in talks to sell all or parts of its $603 million taxi medallion loan portfolio.
The $40 billion-asset bank has seen an increase of interest from potential buyers of taxi medallion loans, CEO Joseph DePaolo said Wednesday at the Morgan Stanley Financial Services conference in New York. That’s a change from as recently as three months ago, when buyers were scarce, he said.
The rise of online ride-calling apps such as Lyft and Uber has walloped the taxi industry in recent years. That development has reduced the value of a medallion, which gives the holder the legal right to operate for-hire yellow cabs.
Private-equity funds and other investors have shown heightened interest in acquiring distressed taxi medallion loans at steep discounts, DePaolo said. Signature sold a taxi medallion loan for $500,000 to an unnamed buyer last month, and the bank is in talks with other potential buyers.
“We’re working on some bulk sales. We continue to sell individually,” DePaolo said. “We’re hopefully entertaining offers to exit the portfolio.”
Signature held about $603 million of taxi medallion loans at March 31, according to a regulatory filing. About 34% of those loans were classified as nonaccruing.
At the same time, the taxi medallion market has appeared to stabilize recently, partly because of new regulations that make it easier for bank to renegotiate loan terms.
Still, some banks are trying to reduce their exposure to the taxi loan market, or leave it completely. Ken Zerbe, an analyst at Morgan Stanley, on Wednesday told DePaolo that he would “be fine” with Signature writing off its entire taxi medallion portfolio and taking a loss of $200 million to $300 million.
Eric Howell, Signature’s executive vice president of corporate and business development, said the bank weighs its estimate of a taxi medallion’s future cash flow with the current market for medallion sales. That calculation would determine whether the bank would write off a specific taxi medallion loan, he said.
Other taxi medallion lenders in the New York area have also recently exited the market or have announced plans to do so. The $1.7 billion-asset Melrose Credit Union in Briarwood, N.Y., which had the vast majority of its loans to taxi medallion owners, was recently placed into conservatorship. And the $4.5 billion-asset ConnectOne Bancorp in Englewood Cliffs, N.J., said at an investor conference in May that it was seeking to exit the business.