ALEXANDRIA, Va.—As the last taxi medallion lending CU in New York City is merged out of existence, a new report reveals approximately nine months ago the NCUA board 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.
The decision was made by the board in April of 2018.
NCUA's regulation caps nonmember deposits at 20% 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, noted Keith Leggett, the former senior vice president and senior economist at the ABA, who was first to report the ruling.
“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,” stated Leggett.
As CUToday.info reported, PenFed recently acquired the troubled taxi-medallion CU in an emergency merger.
“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,” stated Leggett.
The credit union claimed that the denial of the exemption by the regional directors was another “example of retaliation” against the credit union, Leggett said.
Poor Financial Condition
Leggett stated that 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% 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,” stated Leggett.