Additional thoughts about Signature Bank’s taxi medallion loans:
For about the past 70 years New York taxi medallions were about the safest investment in the world. I even remember that from when I was a kid in NYC. The value of medallions only went up as there was a strictly limited number of New York cabs (about 11,000-12,000), and demand for cabs kept going up and up. The price for a medallion was well over a million dollars a couple of years ago. For one medallion! The right to have one cab!
Signature Bank, as a New York business bank, made a VERY conservative set of loans, loaning money on taxi medallions, mostly in NYC, but some in Chicago as well, for a few percent of their total loans.
Then a black swan event came along! It was called Uber, which put what are essentially un-licensed cab drivers on the street with no entry fee at all. The value of New York medallions dropped to about $600,000 from over a million, almost overnight.
The New York market has stabilized and SBNY sells their foreclosed medallions for $600,000 or more in auctions. Chicago, which was less regulated, has fallen off a cliff. SBNY has said, Okay, we’ll write down our Chicago loans to just $60,000 a medallion, which is all they are worth, post-Uber. They did that this quarter. The remaining exposure on Chicago medallions is only about one tenth of one percent of their total loans. NY medallions are 2% of total loans, and this percent is constantly falling as their loan book increases. Outside that 2% in medallion loans, they have $26 billion out on loans and less than 0.1% (a tenth of one percent) of that $26 billion is in non-accrual! Loans and deposits are growing rapidly, their efficiency ratio is even lower than branchless banks like Bofi, book value is growing very fast (up about 18% from a year ago).
They have weathered the unexpected black swan event very well.
Just my opinion.
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