Medallion Bank Reports 2023 Fourth Quarter and Full-Year Results and Declares Series F Preferred Stock Dividend
- 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
- Higher net charge-offs for recreation and home improvement loans
- Increased provision for credit losses compared to the previous year
Insights
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.
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.
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 of8.62% , compared to$44.4 million and9.19% 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 to1.68% 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 of8.84% , compared to$164.6 million and9.41% in 2022. - ROA and ROE were
3.74% and24.57% , respectively, compared to4.24% and26.45% 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 to1.01% 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 was16.24% 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
Recreation Lending Segment
- The Bank’s recreation loan portfolio grew
13% to$1.33 6 billion as of December 31, 2023, compared to$1.18 4 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 to64.9% at December 31, 2022. - Annualized net charge-offs were
4.2% of average recreation loans outstanding, compared to2.4% 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 to34.4% at December 31, 2022. - Annualized net charge-offs were
1.7% of average home improvement loans outstanding, compared to1.1% 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
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
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