Medallion Financial Corp 8-K, filed Apr 28, 2023
Medallion Financial Corp (MFIN)
About this 8-K
Medallion Financial Corp filed this 8-K on April 28, 2023.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 7.01 | Regulation FD Disclosure. |
Medallion Bank, a wholly owned subsidiary of Medallion Financial Corp. (the “Company”), issued a press release to the news media announcing, among other things, Medallion Bank’s results for the quarter ended March 31, 2023.
A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The information in the press release is being furnished, not filed, pursuant to Item 7.01. Accordingly, the information in the press release will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
The following exhibits are being filed with this Current Report on Form 8-K:
| 99.1 | Medallion Bank press release, dated April 28, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: April 28, 2023
| MEDALLION FINANCIAL CORP. | ||
| By: | /s/ Anthony N. Cutrone | |
| Name: Anthony N. Cutrone | ||
| Title: Chief Financial Officer | ||
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Exhibit 99.1
FOR IMMEDIATE RELEASE:
MEDALLION BANK REPORTS 2023 FIRST QUARTER RESULTS AND DECLARES SERIES F PREFERRED STOCK DIVIDEND
SALT LAKE CITY, UT – April 28, 2023 – 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 ended March 31, 2023. The Bank is a wholly owned subsidiary of Medallion Financial Corp. (Nasdaq: MFIN).
2023 First Quarter Highlights
| • | Record quarterly net income of $21.4 million, compared to $18.8 million in the prior year quarter. |
| • | Net interest income of $44.3 million with a net interest margin of 9.05%, compared to $37.2 million and 9.66% in the prior year quarter. |
| • | Provision for credit losses was $3.9 million, compared to a $2.1 million provision for loan losses in the prior year quarter. |
| • | Annualized net charge-offs were 2.5% of average loans outstanding, compared to 0.7% in the prior year quarter. |
| • | Annualized ROA and ROE were 4.36% and 28.38%, respectively, compared to 4.82% and 28.55% for the prior year period. |
| • | The total loan portfolio grew 26.4% from March 31, 2022 to $1.9 billion as of March 31, 2023. |
| • | Total assets were $2.1 billion and the Tier 1 leverage ratio was 16.43% at March 31, 2023. |
Donald Poulton, President and Chief Executive Officer of Medallion Bank, stated, “We are happy with the start to the year and continue to position ourselves for the future. In the first quarter, recurring loan losses in our home improvement portfolio fell from fourth quarter levels, and a large portion of our recreation portfolio charge-offs were non-recurring and related to our adoption of CECL. We also had material medallion loan settlements and recoveries this quarter that reduced provision and boosted earnings. Medallion loan recoveries are difficult to predict, and we expect variability for the rest of 2023. Last but not least, given the recent banking environment, we are fortunate that our deposits are concentrated in brokered deposits that have no right of voluntarily withdrawals. Our deposits are also acquired to fund our loan growth, which differs from a typical bank that acquires assets to use its available deposits. A consequence of this is a relatively small investment portfolio and related unrealized gains or losses. We believe our business model to be resilient under a wide variety of conditions.”
Recreation Lending Segment
| • | The Bank’s recreation loan portfolio grew 20.5% to $1.2 billion as of March 31, 2023, compared to $1.0 billion at March 31, 2022. |
| • | Net interest income was $32.8 million, compared to $28.3 million in the prior year quarter. |
| • | Recreation loans were 64.3% of loans receivable as of March 31, 2023, compared to 67.4% at March 31, 2022. |
| • | Annualized net charge-offs were 3.33% of average recreation loans outstanding, compared to 1.07% in the prior year quarter. Charge-offs included $2.5 million in loans to borrowers in bankruptcy, reflecting a change in charge-off practices following our adoption of the CECL accounting standard. |
| • | The provision for recreation credit losses was $7.8 million, compared to a $1.7 million provision for loan losses in the prior year quarter. The provision was elevated in part due to the non-recurring bankruptcy charge-offs. |
Home Improvement Lending Segment
| • | The Bank’s home improvement loan portfolio grew 41.4% to $669.6 million as of March 31, 2023, compared to $473.5 million at March 31, 2022. |
| • | Net interest income was $10.8 million, compared to $8.8 million in the prior year quarter. |
| • | Home improvement loans were 35.5% of loans receivable as of March 31, 2023, compared to 31.7% at March 31, 2022. |
| • | The provision for home improvement credit losses was $3.1 million, compared to a $1.2 million provision for loan losses in the prior year quarter. |
| • | Annualized net charge-offs were 0.80% of average home improvement loans outstanding, compared to annualized net charge-offs of 0.55% in the prior year quarter. |
Current Expected Credit Loss Accounting Standard Adoption on January 1
On January 1, 2023, we formally adopted the Current Expected Credit Loss accounting standard (Topic 326), otherwise known as CECL. Our calculation of the CECL transition amount on that date was an $11.6 million increase in our allowance for credit losses. This was an increase in the combined recreation and home improvement loan allowance of approximately 22%, and was recorded in retained earnings with no impact on net income. Because all medallion loans have specific reserves, the medallion loan allowance was not affected. With the adoption of CECL, our provisions for credit losses during the first quarter reflect an earlier recognition of credit losses than under the incurred loss accounting standard. We also elected to phase in the regulatory capital effects of the CECL transition amount, which reduced the capital impact by $6.2 million and increased our Tier 1 leverage ratio by 32 basis points.
Series F Preferred Stock Dividend
On April 27, 2023, 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 July 3, 2023, to holders of record at the close of business on June 15, 2023.
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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
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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 “continue,” “expect,” or “believe,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature, such as “continuing.” 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. In addition, 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
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| MEDALLION BANK STATEMENTS OF OPERATIONS (UNAUDITED)
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| For the Three Months Ended March 31, | ||||||||
| (In thousands) |
2023 | 2022 | ||||||
| Total interest income | $ | 52,934 | $ | 41,345 | ||||
| Total interest expense | 8,600 | 4,154 | ||||||
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| Net interest income | 44,334 | 37,191 | ||||||
| Provision for credit losses | 3,859 | 2,144 | ||||||
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| Net interest income after provision for loan losses | 40,475 | 35,047 | ||||||
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| Other income (loss) | ||||||||
| Write-downs of loan collateral in process of foreclosure and other assets |
(252 | ) | (386 | ) | ||||
| Other non-interest income |
284 | 156 | ||||||
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| Total other income (loss) | 32 | (230 | ) | |||||
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| Non-interest expense | ||||||||
| Salaries and benefits |
4,392 | 3,505 | ||||||
| Loan servicing |
2,815 | 2,669 | ||||||
| Collection costs |
1,458 | 1,158 | ||||||
| Regulatory fees |
682 | 451 | ||||||
| Professional fees |
667 | 411 | ||||||
| Occupancy and equipment |
202 | 244 | ||||||
| Other |
1,101 | 894 | ||||||
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| Total non-interest expense | 11,317 | 9,332 | ||||||
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| Income before income taxes | 29,190 | 25,485 | ||||||
| Provision for income taxes | 7,765 | 6,701 | ||||||
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| Net income |
$ | 21,425 | $ | 18,784 | ||||
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MEDALLION BANK
BALANCE SHEETS
(UNAUDITED)
| (In thousands) |
March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||||
| Assets | ||||||||||||
| Cash and federal funds sold |
$ | 113,258 | $ | 74,078 | $ | 83,248 | ||||||
| Investment securities, available-for-sale |
48,529 | 48,492 | 47,075 | |||||||||
| Loans, inclusive of net deferred loan acquisition costs |
1,887,627 | 1,822,737 | 1,493,762 | |||||||||
| Allowance for losses |
(65,661 | ) | (61,630 | ) | (52,955 | ) | ||||||
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| Loans, net |
1,821,966 | 1,761,107 | 1,440,807 | |||||||||
| Loan collateral in process of foreclosure |
9,610 | 10,381 | 18,781 | |||||||||
| Fixed assets and right-of-use lease assets, net |
6,983 | 6,600 | 4,454 | |||||||||
| Deferred tax assets |
9,788 | 9,241 | 7,693 | |||||||||
| Accrued interest receivable and other assets |
48,500 | 40,928 | 39,461 | |||||||||
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| Total assets | $ | 2,058,634 | $ | 1,950,827 | $ | 1,641,519 | ||||||
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| Liabilities and Shareholders’ Equity | ||||||||||||
| Liabilities | ||||||||||||
| Deposits and other funds borrowed |
$ | 1,695,300 | $ | 1,607,110 | $ | 1,332,112 | ||||||
| Accrued interest payable |
2,455 | 2,422 | 1,584 | |||||||||
| Income tax payable |
28,294 | 23,165 | 22,243 | |||||||||
| Other liabilities |
18,212 | 10,613 | 11,927 | |||||||||
| Due to affiliates |
618 | 862 | 651 | |||||||||
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| Total liabilities | 1,744,879 | 1,644,172 | 1,368,517 | |||||||||
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| Total shareholders’ equity | 313,755 | 306,655 | 273,002 | |||||||||
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| Total liabilities and shareholders’ equity |
$ | 2,058,634 | $ | 1,950,827 | $ | 1,641,519 | ||||||
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