Medallion Financial (MFIN) - 2023 Q4 - Annual Results

Company Overview and Executive Summary The company reports record 2023 earnings driven by strong performance across all business segments Company Profile and Announcement Medallion Financial Corp announces its Q4 and full-year 2023 financial results - Medallion Financial Corp (MFIN) is a specialty finance company focused on originating and servicing consumer and commercial loans, and providing loan origination services to fintech strategic partners[2] Executive Commentary The company achieved record annual earnings in 2023 and highlights significant growth over the past three years - 2023 marked the highest annual total earnings and highest annual earnings per share in the company's history, with contributions from all business segments[5] - Over the past three years, Medallion Financial Corp generated $153 million in earnings, returned $36 million to shareholders through dividends and stock repurchases, and increased loans by 80%[5] Financial Performance Highlights The company reports significant year-over-year growth in net income for both Q4 and the full-year 2023 Fourth Quarter 2023 Financial Highlights Net income increased 9.2% in Q4 2023, driven by higher net interest income and a dividend increase Fourth Quarter 2023 Key Financial Highlights | Metric | Q4 2023 | Q4 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net income | $14.3M | $13.1M | +9.2% | | EPS | $0.60 | $0.57 | +5.3% | | Net interest income | $49.0M | $43.6M | +12.4% | | Net interest margin (net loans) | 8.50% | 8.86% | -0.36 pp | | Net interest margin (gross loans) | 8.20% | 8.59% | -0.39 pp | | Loan originations | $169.1M | $191.9M | -11.9% | | Credit loss provision | $10.8M | $9.0M | +20.0% | | Quarterly dividend per share | $0.10 | $0.08 (Q3 2023) | +25% | - The credit loss provision for Q4 2023 included a net benefit of $12.1 million related to taxi medallion recoveries[6] Full-Year 2023 Financial Highlights Full-year net income grew 25.8%, supported by increased net interest income and loan portfolio expansion Full-Year 2023 Key Financial Highlights | Metric | FY 2023 | FY 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net income | $55.1M | $43.8M | +25.8% | | EPS | $2.37 | $1.83 | +29.5% | | Net interest income | $188.1M | $160.4M | +17.3% | | Net interest margin (net loans) | 8.68% | 9.05% | -0.37 pp | | Net interest margin (gross loans) | 8.38% | 8.73% | -0.35 pp | | Loan originations | $960.0M | $983.9M | -2.4% | | Loans | $2.2B | $1.9B | +15.8% | | Credit loss provision | $37.8M | $30.1M | +25.6% | | Total assets | $2.6B | $2.26B | +15.0% | - The full-year credit loss provision included a net benefit of $26.3 million related to taxi medallion recoveries[6] Business Segment Performance The report details the performance of the Recreation, Home Improvement, Commercial, and Taxi Medallion lending segments Recreation Lending Segment The recreation loan portfolio grew to $1.3 billion despite a decrease in Q4 originations Recreation Lending Segment Performance (Q4 2023 vs. Q4 2022) | Metric | Q4 2023 | Q4 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Originations | $62.7M | $79.3M | -20.9% | | Recreation loans (year-end) | $1.3B | $1.2B | +8.3% | | % of total loans | 60% | 62% | -2 pp | | Net interest income (Q4) | $35.2M | $32.7M | +7.6% | | Average interest rate (year-end) | 14.79% | 14.28% | +0.51 pp | | Loans 90+ days past due | 0.70% | 0.64% | +0.06 pp | | Allowance for credit loss rate | 4.31% | 3.55% | +0.76 pp | Home Improvement Lending Segment The home improvement loan portfolio expanded 21% year-over-year to $760.6 million Home Improvement Lending Segment Performance (Q4 2023 vs. Q4 2022) | Metric | Q4 2023 | Q4 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Originations | $66.0M | $97.1M | -32.0% | | Home improvement loans (year-end) | $760.6M | $626.4M | +21.4% | | % of total loans | 34% | 33% | +1 pp | | Net interest income (Q4) | $11.7M | $10.1M | +15.8% | | Average interest rate (year-end) | 9.51% | 8.65% | +0.86 pp | | Loans 90+ days past due | 0.20% | 0.09% | +0.11 pp | | Allowance for credit loss rate | 2.76% | 1.81% | +0.95 pp | Commercial Lending Segment The commercial loan portfolio grew 23.6% to $114.8 million with a higher average interest rate Commercial Lending Segment Performance (Year-End 2023 vs. 2022) | Metric | FY 2023 | FY 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Commercial loans (year-end) | $114.8M | $92.9M | +23.6% | | Average interest rate (year-end) | 12.87% | 12.23% | +0.64 pp | Taxi Medallion Lending Segment Significant cash recoveries from taxi medallions reduced net assets by 51% to less than 0.5% of total assets - Collected $16.2 million cash on taxi medallion related assets during Q4 2023 and $45.2 million for the full year[8] - Net recoveries from taxi medallions contributed $0.33 per share for Q4 and $0.93 per share for the full year[8] Taxi Medallion Assets (Year-End 2023 vs. 2022) | Metric | FY 2023 | FY 2022 (implied) | Change (YoY) | | :--- | :--- | :--- | :--- | | Total net taxi medallion assets | $12.1M | $24.7M | -51% | | % of total assets | <0.5% | N/A | N/A | Capital Allocation and Dividends The company announced a 25% increase in its quarterly cash dividend Quarterly Dividend Declaration The Board of Directors declared a 25% increased quarterly dividend of $0.10 per share - The Board of Directors increased the quarterly dividend by 25% to $0.10 per share, payable on March 28, 2024, to shareholders of record on March 15, 2024[6][9] Consolidated Financial Statements The consolidated balance sheets and statements of operations show year-over-year growth in assets, equity, and net income Consolidated Balance Sheets Total assets grew 14.5% to $2.59 billion, driven by a 15.0% increase in net loans receivable Consolidated Balance Sheet Highlights (as of December 31) | Metric (in thousands) | 2023 | 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Cash, cash equivalents, and federal funds sold | $149,845 | $105,598 | +41.9% | | Net loans receivable | $2,131,651 | $1,853,108 | +15.0% | | Total assets | $2,587,827 | $2,259,879 | +14.5% | | Deposits | $1,866,657 | $1,607,110 | +16.1% | | Long-term debt | $235,544 | $214,320 | +9.9% | | Total liabilities | $2,176,053 | $1,889,355 | +15.2% | | Total stockholders' equity | $342,986 | $301,736 | +13.7% | | Book value per share | $14.63 | $13.08 | +11.9% | Consolidated Statements of Operations Full-year net income rose 25.6% to $55.1 million, primarily due to a 17.2% increase in net interest income Consolidated Statements of Operations Highlights (Years Ended December 31) | Metric (in thousands) | 2023 | 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total interest income | $251,040 | $196,621 | +27.7% | | Total interest expense | $62,946 | $36,185 | +73.9% | | Net interest income | $188,094 | $160,436 | +17.2% | | Provision for credit losses | $37,810 | $30,059 | +25.8% | | Total other income, net | $11,320 | $9,526 | +18.8% | | Total other expenses | $75,568 | $72,053 | +4.9% | | Income before income taxes | $86,036 | $67,850 | +26.8% | | Income tax provision | $24,910 | $17,963 | +38.7% | | Total net income attributable to Medallion Financial Corp | $55,079 | $43,840 | +25.6% | | Diluted net income per share | $2.37 | $1.83 | +29.5% | | Dividends declared per common share | $0.34 | $0.32 | +6.3% | Additional Information This section provides details on the upcoming investor conference call and outlines forward-looking statements Conference Call and Investor Information Details for the Q4 and full-year 2023 results conference call on February 21, 2024 are provided - A conference call to discuss fourth quarter and full-year financial results is scheduled for Wednesday, February 21, 2024, at 9:00 a.m. Eastern time[10][14] - The company has updated its quarterly supplement presentation, available at www.medallion.com[10](index=10&type=chunk) - A webcast replay will be available on the Company's IR website until the next quarter's results are announced[12] Forward-Looking Statements The press release contains forward-looking statements subject to risks and uncertainties detailed in the Form 10-K - The press release contains forward-looking statements involving risks and uncertainties related to business performance, cash flow, net interest income and expenses, earnings, and growth strategy[13] - Actual results may differ significantly from forward-looking statements due to factors such as the current economy, inflation, risk of recession, and the impact of pending SEC litigation[13] - Readers are advised to refer to the 'Risk Factors' section in Medallion's 2022 Annual Report on Form 10-K for a description of certain risks[13]