Medallion Financial said the financial institution recorded its best earnings through nine months of a calendar year since the company went public 27 years ago.
The bank reported $11.2 million in third-quarter 2023 profits. Through the first nine months of 2023, Medallion Financial has earned $40.8 million in profits.
Strong earnings were driven by continued success in its Recreation Lending segment. As of Sept. 30, 2023, recreation loans grew 15% from a year ago to $1.3 billion.
President and Chief Operating Officer Andrew Murstein said the heightened loan origination was due to its target customer.
“Our target customer is still being active in purchasing towable RVs, small boats and single project home improvements,” Murstein said. “These all have active markets today, compared to the higher-end cruiser RVs, yachts, a multi-project or whole house remodels, which have significantly higher costs and may be more susceptible to a slowdown.”
Murstein said because Medallion’s average origination loan is around $25,000, the bank funds manageable purchases for consumers.
“A prime or near-prime borrower is more focused on the payment levels than the rates,” Murstein said. “In addition, we continue to see some industry players scale back or exit these business lines, which helps us.”
Murstein said the dealers and contractors who work with Medallion know the bank provides great service and will be around for years. The relationships help Medallion gain dealer business referrals.
Chief Financial Officer Anthony Cutrone said the company is averaging interest rates of 16.25% on recreation loans, up from 14.75% rates in the third quarter of 2022. Cutrone said the bank has passed along interest rate increases to consumers as it looks to tighten consumer lending credit.
Cutrone said sub-prime loans comprised 66% of the bank’s recreation portfolio at the end of 2018. The regulatory standard for sub-prime lending is a 660 FICO score or lower.
At the end of the third quarter of 2023, Cutrone said sub-prime loans comprise 38% of the recreation portfolio.
Murstein said, “As we look to the future, we will continue to take proactive steps to raise our credit standards and increase pricing.”
Murstein said the company was optimistic in its 2024 outlook, given the strong loan demand Medallion has seen in its RV and marine lending.
“Overall,” he said, “I would say we are bullish on the year ahead.”
