MBNKP Medallion Bank

Medallion Bank (Nasdaq: MBNKP, “the Bank” or the “Company”) initially reported results for the quarter and year ended December 31, 2019 on January 30, 2020. Recently, and just prior to the filing of the Bank’s 2019 audited financial statements, additional information was identified about three borrower relationships that represented 43 medallion loans aggregating $24.1 million. These loans were categorized as performing, and therefore had a general allowance for credit losses allocation of $4.9 million as of year-end. The Bank’s financial results as of and for the periods ended December 31, 2019 were initially reported on that basis. However, upon consideration of the additional information about these loans, the Bank determined to categorize these loans as impaired loans and classified these loans as troubled debt restructurings (“TDR”). While calculating the impairment amount, the Bank also determined that 13 medallion loans already classified as TDRs should be treated similarly. The net effect of these adjustments was an additional $3.4 million provision for credit losses for the periods ended December 31, 2019, and an increase in the total TDR amount of $24.1 million. Additional information on 2019 results and information relating to COVID-19 will be in the 2019 Form 10-K, which the Bank expects to file later today.

The remainder of this release and the tables at the end of this release have been updated to reflect these events.

2019 Fourth Quarter Highlights

• Net income was $6.7 million, compared to $2.4 million in the 2018 quarter
• Net interest income was $27.7 million, compared to $24.4 million in the prior year period
• Provision for loan losses was $9.8 million, compared to $11.2 million in 2018
• Net charge-offs were 3.19% of average loans outstanding, compared to 6.90% in the 2018 quarter
• Total assets were $1.20 billion as of December 31, 2019
• The tier 1 leverage ratio was 19.35% as of December 31, 2019

2019 Full Year Highlights

• Net income was $20.4 million, up from $5.7 million in the prior year
• Return on average assets was 1.85%, compared to 0.54% in 2018
• Provision for loan losses was $42.5 million, compared to $50.7 million in the prior year
• Net charge-offs were 4.30% of average loans outstanding, compared to 5.60% in 2018
• The recreation loan portfolio grew 20% in 2019
• The home improvement loan portfolio grew 35% in 2019
• The medallion loan portfolio decreased from $153.1 million to $107.7 million, or 30%, during 2019
• Net interest income was $104.2 million, compared to $98.2 million in the prior year, driven by loan growth in the consumer loan portfolios

Donald Poulton, President and Chief Executive Officer of Medallion Bank, stated, “The Bank had a productive fourth quarter. We will now report our earnings in conjunction with filing our quarterly Call Report. This was the Bank’s second straight quarter of strong net income, which helped to produce a 1.85% return on average assets for the year. Our results reflect consistent performance from our recreation and home improvement lending segments as we continue to liquidate the remaining medallion loan portfolio. With more than $227 million of equity, we are positioned for prudent asset growth.”

Recreation Lending Segment

The Bank’s recreation loan portfolio was $722.4 million as of December 31, 2019, compared to $599.7 million at December 31, 2018. Net interest income for the fourth quarter was $22.8 million, compared to $20.1 million in the prior year period. Recreation loans were 66.9% of the Bank’s loans as of December 31, 2019.

Home Improvement Lending Segment

The Bank’s home improvement loan portfolio was $247.6 million as of December 31, 2019, compared to $183.5 million at December 31, 2018. Net interest income for the fourth quarter was $4.5 million, compared to $3.4 million in the prior year period. Home improvement loans were 22.9% of the Bank’s loans receivable as of December 31, 2019.

Medallion Lending Segment

The Banks’s medallion loan portfolio was $107.7 million as of December 31, 2019, compared to $153.1 million at December 31, 2018. Medallion loan delinquencies 90 days or more past due were $0.3 million as of December 31, 2019, compared to $14.2 million at December 31, 2018. Medallion loan delinquencies 30 days or more past due were $10.3 million as of December 31, 2019, compared to $20.5 million at December 31, 2018. The medallion loan portfolio provision for loan losses was $13.1 million in 2019 compared to $30.6 million in 2018. Medallion loans were 9.0% of the Bank’s total assets as of December 31, 2019, compared to 15.0% at December 31, 2018.

About Medallion Bank

Medallion Bank is a Utah-chartered, FDIC-insured industrial bank headquartered in Salt Lake City, Utah. Medallion Bank specializes in providing consumer loans for the purchase of recreational vehicles, boats, and home improvements. Medallion Bank is a wholly owned subsidiary of Medallion Financial Corp., a finance company that originates and services loans in various industries.

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, and growth. These statements are often, but not always, made through the use of words or phrases such as “will” and “continue” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These statements relate to future public announcements of our earnings, expectations regarding medallion loan portfolio liquidation and the potential for future asset growth. Medallion Bank’s actual results may differ significantly from the results discussed in such forward-looking statements. In addition, Medallion Bank’s financial results for any period are not necessarily indicative of Medallion Financial Corp.’s results for the same period. 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 the offering circular attached as Exhibit 99.1 to Medallion Bank’s Form 10 filed with the FDIC. The Bank’s Form 10 and other FDIC filings are available in the Investor Relations section of the Bank’s website.

MEDALLION BANKSTATEMENTS OF INCOME(UNAUDITED)

For the Three Months Ended December 31, 2019

Year Ended December 31, 2019

(Dollars in thousands)

As Reported

Adjustment

As Revised

As Reported

Adjustment

As Revised

Total interest income

$

33,846

 

$

33,846

 

$

126,723

 

$

126,723

 

Total interest expense

 

6,112

 

 

6,112

 

 

22,521

 

 

22,521

 

Net interest income

 

27,734

 

 

-

 

 

27,734

 

 

104,202

 

 

-

 

 

104,202

 

  Provision for loan losses

 

6,349

 

 

3,442

 

 

9,791

 

 

39,050

 

 

3,442

 

 

42,492

 

Net interest income after provision for loan losses

 

21,385

 

 

(3,442

)

 

17,943

 

 

65,152

 

 

(3,442

)

 

61,710

 

  Other income (loss) Write-downs of loan collateral in process of foreclosure

 

(134

)

 

(134

)

 

(2,543

)

 

(2,543

)

Gain on sale of loans

 

-

 

 

-

 

 

-

 

 

-

 

Other non-interest income

 

17

 

 

17

 

 

305

 

 

305

 

Total non-interest income (loss), net

 

(117

)

 

-

 

 

(117

)

 

(2,238

)

 

-

 

 

(2,238

)

  Non-interest expense Loan servicing

 

2,725

 

 

2,725

 

 

10,610

 

 

10,610

 

Salaries and benefits

 

2,259

 

 

2,259

 

 

8,806

 

 

8,806

 

Collection costs

 

1,636

 

 

1,636

 

 

5,519

 

 

5,519

 

Professional fees

 

770

 

 

770

 

 

2,722

 

 

2,722

 

Regulatory fees

 

526

 

 

526

 

 

1,722

 

 

1,722

 

Occupancy and equipment

 

173

 

 

173

 

 

576

 

 

576

 

Other

 

832

 

 

832

 

 

3,527

 

 

3,527

 

Total non-interest expense

 

8,921

 

 

-

 

 

8,921

 

 

33,482

 

 

-

 

 

33,482

 

  Income before income taxes

 

12,347

 

 

(3,442

)

 

8,905

 

 

29,432

 

 

(3,442

)

 

25,990

 

Provision for income taxes

 

3,119

 

 

(913

)

 

2,206

 

 

6,457

 

 

(913

)

 

5,544

 

  Net income

$

9,228

 

$

(2,529

)

$

6,699

 

$

22,975

 

$

(2,529

)

$

20,446

 

MEDALLION BANKBALANCE SHEETS(UNAUDITED)

December 31, 2019

(Dollars in thousands)

As Reported

Adjustment

As Revised

Assets Cash and federal funds sold

$

50,237

 

$

50,237

 

Investment securities, available-for-sale

 

48,998

 

 

48,998

 

Loans, inclusive of net deferred loan acquisition costs

 

1,079,553

 

 

1,079,553

 

Allowance for loan losses

 

(56,443

)

 

(3,442

)

 

(59,885

)

Loans, net

 

1,023,110

 

 

(3,442

)

 

1,019,668

 

Loan collateral in process of foreclosure

 

30,639

 

 

30,639

 

Fixed assets and right-of-use assets, net

 

3,852

 

 

3,852

 

Deferred tax assets

 

10,506

 

 

913

 

 

11,419

 

Accrued interest receivable and other assets

 

28,417

 

 

28,417

 

Total assets

$

1,195,759

 

$

(2,529

)

$

1,193,230

 

  Liabilities and Shareholders' Equity Funds borrowed

$

951,651

 

$

951,651

 

Accrued interest payable

 

2,096

 

 

2,096

 

Income taxes payable

 

2,144

 

 

2,144

 

Other liabilities

 

9,308

 

 

(151

)

 

9,157

 

Due to affiliates

 

1,041

 

 

1,041

 

Total liabilities

 

966,240

 

 

(151

)

 

966,089

 

  Total shareholders' equity

 

229,519

 

 

(2,378

)

 

227,141

 

Total liabilities and shareholders' equity

$

1,195,759

 

$

(2,529

)

$

1,193,230

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200330005632/en/

Alex E. Arzeno Investor Relations 212-328-2168 InvestorRelations@medallion.com