Signature Bank wrote off nearly half of its taxi-medallion loan portfolio on Thursday, the latest sign of the cab industry’s unyielding woes.
Manhattan-based Signature charged off $129 million worth of medallion loans, leaving it with $149 million left. The bank values the remaining medallions at $160,000 each, a bit lower than prevailing market rates and an indication of further bleak times ahead. Signature’s move may force other area lenders to write down the value of taxi loans and take big earnings hits.
The taxi world’s troubles have led to the failure of four area credit unions and caused many banks to take big losses. The situation at Signature isn’t so dire because the bank has capital to withstand heavy losses in its taxi portfolio.
Nevertheless, those losses are taking a toll, with Signature reporting a nearly $100 million decline in first-quarter earnings, due entirely to the deterioration of its taxi portfolio. The company’s stock price fell by 3%.
“We know we’ve said this before but we do feel we’ve put this behind us now,” Chief Executive Joseph DePaolo said in a conference call, referring to the problematic taxi loans.
Signature, which has $44 billion in assets, focuses on serving small businesses and most of its branches are tucked away in office buildings, rather than on street level. The bank went public in 2004 and over the next decade its stock returned 10 times more than the S&P 500 and double that of the next-best-performing bank, the parent of California’s Silicon Valley Bank. But lately things have gotten tougher for Signature, with the stock shedding 6% over the past two years even as bank stocks have risen 60% overall.
An analyst asked DePaolo Thursday if he had considered selling to a larger bank. DePaolo pointed to Signature opening an office in San Francisco as a sign of more growth opportunities.
“There’s no reason for a sale of the institution,” he said.