The consumer and commercial lending segments continue to prosper. These divisions had an exceptional year as income before taxes from our mezzanine, home improvement and recreation lending divisions totaled $41.0 million for the nine months ended December 31. The Company recorded $23.0 million of net interest income in the fourth quarter and $72.5 million of net interest/investment income for the full year. We also recorded a net interest margin of 8.1% in the fourth quarter, and we look forward to building on this momentum.”
Mr. Murstein continued: “We also had some higher than typical expenses in the quarter as we recorded impairment charges against the intangible assets related to our sports holdings, and increased our collection expenses by 116% from the third quarter as we ramped up our collection efforts for delinquent medallion borrowers. When looking at the medallion portfolio, quarter after quarter, we continue to lower our loan exposure. At the end of 2018, taxi medallion loans comprised 16% of our net loans, compared to 28% at the end of 2017. We are confident we took the appropriate measures throughout the year to reduce the Company’s exposure while continuing our recovery efforts. We also had a few current borrowers who have elected to pay us off. For example, we received $9.6 million in payoffs in the fourth quarter from several borrowers who were able to leverage other personal assets as collateral. We charge off loans that are 120 days past due down to their medallion collateral value. If payments then come in at 121 days for instance, it is applied to reduce the principal balance of the loan. We aren’t recognizing any income until the loan is disposed of, or reduced to zero, or until a meaningful period of performance has occurred. In terms of the valuation of medallion collateral, we are optimistic that the marketplace continues to stabilize. We continue to monitor the legislative proposals and regulations proposed by the TLC, and once again, commend them for their continued efforts to support the hard-working taxi medallion owners and drivers. One recent proposal was by a NYC Council Member tobail-out individual medallion owners by calling for the Council to take immediate action to provide financial assistance to taxi and livery drivers. In addition, the latest proposed regulation that came out this week from both Mayor De Blasio and Governor Cuomo implementing congestion pricing is another positive for both the City and State of New York. It potentially also benefits the medallion industry, as it could lead to increased taxi usage as personal and commercial vehicles may no longer overwhelm the regulated zone. Taximeters may turn over more quickly, with less time being stuck in traffic. While there can be no guarantee that any of these proposals will pass, it’s a positive sign that City and State officials continue to try to take measures that could meaningfully help.”
Consumer Lending Segments
Medallion’s net consumer lending portfolio was $761.5 million as of December 31, 2018 compared to $741.8 million at the end of the prior quarter. Excluding the impact of $420 million of loans sold over the last three years, the consumer segments continued to grow in excess of 25% per year. Net interest income for the fourth quarter was $23.6 million. The average interest rate on the portfolio was 15.06% compared to 15.18% in the third quarter. Consumer loan delinquencies over 90 days past due as of December 31, 2018 were 0.55%, compared to 0.46% in the prior quarter.
Commercial Lending Segment
The Company’s net commercial lending portfolio as of December 31, 2018 was $64.1 million. The average interest rate on the portfolio was 13.6% compared to 11.9% a year ago on a managed basis. Net income for the fourth quarter was $1.6 million. The Company continues to focus on expanding its commercial loan activities by developing a more diverse borrower base, a wider geographic area of coverage, and by expanding targeted industries.
Medallion Lending Segment
The Company’s net medallion lending portfolio as of December 31, 2018 was $155.9 million, compared to $388.0 million at December 31, 2017 on a combined basis with Medallion Bank, a 60% decrease. The average interest rate on the medallion portfolio was 4.43% versus 4.36% a year ago on a combined basis with Medallion Bank. Total medallion delinquencies over 90 days were $15.7 million as of December 31, 2018, compared to $10.3 million in the preceding quarter, and $71.9 million in the prior year period. Medallion provision for loan losses was $3.4 million in the quarter, down from $13.3 million in the prior quarter and $29.7 million in the prior year period, recorded asnon-cash valuation adjustments and realized losses/charge-offs when combined with Medallion Bank. Taxi medallion loans comprised 16% of our net loans receivable as of December 31, 2018, compared to 28% of our managed net investment portfolio as of December 31, 2017.
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