Medallion Bank Reports 2023 Fourth Quarter and Full-Year Results and Declares Series F Preferred Stock Dividend

Rhea-AI Summary

Medallion Bank, a subsidiary of Medallion Financial Corp., reported strong results for the quarter and full-year ended December 31, 2023. The bank's net income was $21.9 million for the fourth quarter and $79.9 million for the full year. Net interest income was $48.9 million for the fourth quarter and $188.9 million for the full year. The total provision for credit losses was $36.5 million for the full year. The bank's total assets were $2.3 billion, and total capital was $351.8 million at December 31, 2023.

Positive

• Strong net income for both the fourth quarter and full year
• Healthy net interest income for both the fourth quarter and full year
• Significant growth in the total loan portfolio

Negative

• Higher net charge-offs for recreation and home improvement loans
• Increased provision for credit losses compared to the previous year

Financial Analyst

The reported increase in net income for both the quarter and the full year at Medallion Bank is a positive indicator of the company's profitability, which can be appealing to investors. The growth in the loan portfolio by 15% to $2.1 billion suggests an expanding business operation, potentially leading to increased interest from the market. However, the rise in the provision for credit losses and the higher annualized net charge-offs could raise concerns about the credit quality of the bank's loan portfolio and its risk management practices.

It's also worth noting the net interest margin (NIM) compression from 9.41% in 2022 to 8.84% in 2023, which might indicate a decrease in the bank's lending profitability. While NIM is still relatively high, a continued downward trend could affect future earnings. The Tier 1 leverage ratio at 16.24% is robust, reflecting a strong capital position, which could reassure stakeholders about the bank's resilience against potential losses.

Economist

Medallion Bank's results can be seen as a reflection of broader economic trends, such as interest rate fluctuations and consumer borrowing behavior. The growth in recreational vehicle and home improvement loans aligns with consumer spending shifts post-pandemic, as individuals invest more in leisure and home-based activities. However, the increase in loan loss provisions suggests that the bank is anticipating potential economic headwinds that could impact borrowers' ability to repay loans.

Moreover, the adoption of the Current Expected Credit Loss (CECL) model, which requires banks to estimate lifetime expected losses, could lead to more conservative lending practices, potentially affecting loan growth and the broader credit market. The reported growth rates of 13% and 21% for recreation and home improvement loans, respectively, may be tempered by this more cautious approach in the future.

Market Research Analyst

Medallion Bank's focus on niche markets like recreational vehicle and home improvement lending differentiates it from larger, more diversified financial institutions. This specialization could provide a competitive edge and attract customers seeking tailored financial products. However, this also exposes the bank to sector-specific risks, such as changes in consumer discretionary spending and the economic factors affecting the recreational and home improvement industries.

Additionally, the medallion loan recoveries contributing significantly to the bank's reduced provision for credit losses may not be a sustainable source of income, as they are recoveries of past losses rather than ongoing revenue. Investors should consider the bank's ability to maintain profitability without relying heavily on such non-recurring gains.

SALT LAKE CITY, Jan. 30, 2024 (GLOBE NEWSWIRE) -- Medallion Bank (Nasdaq: MBNKP, the “Bank”), an FDIC-insured bank providing consumer loans for the purchase of recreational vehicles, boats, and home improvements, along with loan origination services to fintech strategic partners, announced today its results for the quarter and full-year ended December 31, 2023. The Bank is a wholly owned subsidiary of Medallion Financial Corp. (Nasdaq: MFIN).

2023 Fourth Quarter Highlights

• Net income of $21.9 million, compared to $19.7 million in the prior year quarter.
• Net interest income of $48.9 million with a net interest margin of 8.62%, compared to $44.4 million and 9.19% in the prior year quarter.
• Total provision for credit losses was $9.7 million, compared to $8.4 million in the prior year quarter. Net medallion loan recoveries were $12.0 million, compared to $1.2 million during the prior year quarter.
• Annualized net charge-offs were 1.04% of average loans outstanding, compared to 1.68% in the prior year quarter. Net medallion loan recoveries reduced annualized net charge-offs by 226 basis points, compared to 27 basis points in the prior year quarter.

2023 Full-Year Highlights

• Net income of $79.9 million, compared to net income of $74.6 million in 2022.
• Net interest income of $188.9 million with a net interest margin of 8.84%, compared to $164.6 million and 9.41% in 2022.
• ROA and ROE were 3.74% and 24.57%, respectively, compared to 4.24% and 26.45% for 2022.
• Total provision for credit losses was $36.5 million, compared to $24.7 million in 2022. Net medallion loan recoveries reduced the total provision for credit losses by $18.1 million, compared to $5.1 million in 2022.
• Total net charge-offs were 1.52% of average loans outstanding, compared to 1.01% in 2022. Net medallion loan recoveries reduced total net charge-offs by 91 basis points, compared to 31 basis points in 2022.
• The total loan portfolio grew 15% to $2.1 billion.
• Total assets were $2.3 billion, total capital was $351.8 million, and the Tier 1 leverage ratio was 16.24% at December 31, 2023.
  

Donald Poulton, President and Chief Executive Officer of Medallion Bank, stated, “We had an excellent end to another great year, producing both record quarterly and annual earnings. Contributing to our fourth quarter results were $12.0 million of medallion loan recoveries that reduced our provision for credit losses. Those recoveries came as recreation and home improvement loan losses trended higher, as anticipated, to a level more comparable with pre-pandemic historic norms. We maintained tighter credit standards and slowed our asset growth rates, which finished 2023 at 13% for recreation loans and 21% for home improvement loans. Under the Current Expected Credit Loss (CECL) model, which we adopted in 2023, our allowance for credit losses is calculated based on lifetime expected losses and our reserve percentage increased by 39 basis points for the year. As we move through 2024, our team of talented employees remains focused on prudent growth, credit risk and balance sheet management. We look forward to having another strong year.”

Recreation Lending Segment

• The Bank’s recreation loan portfolio grew 13% to $1.336 billion as of December 31, 2023, compared to $1.184 billion at December 31, 2022.
• Net interest income was $36.2 million, compared to $33.4 million in the prior year quarter. For the year, net interest income was $140.3 million, compared to $124.5 million in 2022.
• Recreation loans were 63.6% of loans receivable as of December 31, 2023, compared to 64.9% at December 31, 2022.
• Annualized net charge-offs were 4.2% of average recreation loans outstanding, compared to 2.4% in the prior year quarter.
• The provision for credit losses was $14.8 million, compared to $7.3 million in the prior year quarter. For the year, the provision for credit losses was $44.6 million, compared to $22.8 million in 2022.
  

Home Improvement Lending Segment

• The Bank’s home improvement loan portfolio grew 21% to $760.6 million as of December 31, 2023, compared to $626.4 million at December 31, 2022.
• Net interest income was $12.2 million, compared to $10.5 million in the prior year quarter. For the year, net interest income was $46.6 million, compared to $38.9 million in 2022.
• Home improvement loans were 36.2% of loans receivable as of December 31, 2023, compared to 34.4% at December 31, 2022.
• Annualized net charge-offs were 1.7% of average home improvement loans outstanding, compared to 1.1% in the prior year quarter.
• The provision for credit losses was $6.9 million, compared to $2.7 million in the prior year quarter. For the year, the provision for credit losses was $17.6 million, compared to $7.6 million in 2022.
  

Series F Preferred Stock Dividend

On January 25, 2024, the Bank’s Board of Directors declared a quarterly cash dividend of $0.50 per share on the Bank’s Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, which trades on the Nasdaq Capital Market under the ticker symbol “MBNKP.” The dividend is payable on April 1, 2024, to holders of record at the close of business on March 15, 2024.

About Medallion Bank

Medallion Bank specializes in providing consumer loans for the purchase of recreational vehicles, boats, and home improvements, along with loan origination services to fintech strategic partners. The Bank works directly with thousands of dealers, contractors and financial service providers serving their customers throughout the United States. Medallion Bank is a Utah-chartered, FDIC-insured industrial bank headquartered in Salt Lake City and is a wholly owned subsidiary of Medallion Financial Corp. (Nasdaq: MFIN).

For more information, visit www.medallionbank.com 

Please note that this press release contains forward-looking statements that involve risks and uncertainties relating to business performance, cash flow, costs, sales, net investment income, earnings, returns and growth. These statements are often, but not always, made through the use of words or phrases such as “remain,” “anticipate” or the negative version of this word or other comparable words or phrases of a future or forward-looking nature, such as “look forward.” These statements may relate to our future earnings, returns, capital levels, sources of funding, growth prospects, asset quality and pursuit and execution of our strategy. Medallion Bank’s actual results may differ significantly from the results discussed in such forward-looking statements. For a description of certain risks to which Medallion Bank is or may be subject, please refer to the factors discussed under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in Medallion Bank’s Form 10-K for the year ended December 31, 2022, and in its Quarterly Reports on Form 10-Q, filed with the FDIC. Medallion Bank’s Form 10-K, Form 10-Qs and other FDIC filings are available in the Investor Relations section of Medallion Bank’s website. Medallion Bank’s financial results for any period are not necessarily indicative of Medallion Financial Corp.’s results for the same period.  

Company Contact:
Investor Relations
212-328-2176
InvestorRelations@medallion.com 

MEDALLION BANK STATEMENTS OF OPERATIONS (UNAUDITED)
		For the Three Months Ended December 31,								For the Years Ended December 31,
(In thousands)			2023				2022				2023				2022
Total interest income		$	63,253			$	51,774			$	236,667			$	187,272
Total interest expense			14,401				7,361				47,785				22,667
Net interest income			48,852				44,413				188,882				164,605
Provision for credit losses			9,717				8,409				36,457				24,709
Net interest income after provision for loan losses			39,135				36,004				152,425				139,896
Other income (loss)
Write-downs of loan collateral in process of foreclosure and other assets			(70	)			(49	)			(373	)			(582	)
Other non-interest income			909				280				2,475				1,237
Total other income (loss)			839				231				2,102				655
Non-interest expense
Salaries and benefits			4,997				4,430				19,001				15,086
Loan servicing			2,903				2,571				11,626				10,843
Collection costs			1,492				1,445				5,965				5,385
Regulatory fees			692				797				3,176				2,418
Professional fees			631				446				2,243				1,754
Occupancy and equipment			206				209				830				793
Other			1,099				1,154				4,555				4,248
Total non-interest expense			12,020				11,052				47,396				40,527
Income before income taxes			27,954				25,183				107,131				100,024
Provision for income taxes			6,011				5,460				27,279				25,386
Net income		$	21,943			$	19,723			$	79,852			$	74,638

MEDALLION BANK BALANCE SHEETS (UNAUDITED)
(In thousands)		December 31, 2023				December 31, 2022
Assets
Cash and federal funds sold		$	110,043			$	74,078
Investment securities, available-for-sale			54,282				48,492
Loans, inclusive of net deferred loan acquisition costs			2,100,338				1,822,737
Allowance for losses			(79,283	)			(61,630	)
Loans, net			2,021,055				1,761,107
Loan collateral in process of foreclosure			4,165				10,381
Fixed assets and right-of-use lease assets, net			8,140				6,600
Deferred tax assets			12,761				9,241
Accrued interest receivable and other assets			51,610				40,928
Total assets		$	2,262,056			$	1,950,827
Liabilities and Shareholders’ Equity
Liabilities
Deposits and other funds borrowed		$	1,866,657			$	1,607,110
Accrued interest payable			4,029				2,422
Income tax payable			21,219				23,165
Other liabilities			17,509				10,614
Due to affiliates			849				861
Total liabilities			1,910,263				1,644,172
Shareholder’s Equity
Series E Preferred stock			26,303				26,303
Series F Preferred stock			42,485				42,485
Common stock			1,000				1,000
Additional paid in capital			77,500				77,500
Accumulated other comprehensive loss, net of tax			(4,529	)			(4,183	)
Retained earnings			209,034				163,550
Total shareholders’ equity			351,793				306,655
Total liabilities and shareholders’ equity		$	2,262,056			$	1,950,827

 

FAQ

What was Medallion Bank's net income for the full year 2023?

Medallion Bank's net income for the full year 2023 was $79.9 million.

What was the net interest income for Medallion Bank in the fourth quarter of 2023?

The net interest income for Medallion Bank in the fourth quarter of 2023 was $48.9 million.

What was the total provision for credit losses for Medallion Bank in 2023?

The total provision for credit losses for Medallion Bank in 2023 was $36.5 million.

What were the total assets and total capital of Medallion Bank at December 31, 2023?

The total assets of Medallion Bank were $2.3 billion, and total capital was $351.8 million at December 31, 2023.