Medallion Financial Corp. (Nasdaq:MFIN), a commercial finance
company that originates and services loans in various niche
industries, announced today its 2018 second quarter results.
Effective April 2, 2018, Medallion Financial Corp. withdrew its BDC
election, and now operates as a commercial finance company
following the reporting conventions of bank holding companies,
beginning with the 2018 second quarter. A major component of this
change is that we will now consolidate wholly-owned or controlled
subsidiaries, particularly Medallion Bank, that were previously
treated as unconsolidated portfolio investment companies.
2018 Second Quarter Highlights
- Total assets reached $1.53 billion as
of June 30, 2018
- Medallion loans are at the lowest level
since 2003
- Net interest income before the
provision for loan losses was $24.7 million, reflecting primarily
the contributions of the consumer lending segments
- Net loss was $14.6 million, or $0.60
per share, a slight improvement from the first quarter, and
included a charge of $6.7 million to establish a general reserve on
medallion loans less than 90 days past due
- Net interest margin was 8.57% in the
2018 second quarter, compared to 6.64% in the prior year period on
a combined basis with Medallion Bank
- Medallion’s net consumer lending
portfolio was $790.7 million, and grew 10% from the prior
quarter
- Earnings from Medallion’s consumer and
commercial segments totaled $8.9 million in the quarter
- Provision for medallion loan losses was
$24.8 million for the 2018 second quarter, down significantly from
$62.7 million in the first quarter
- 90 day plus medallion loan
delinquencies were 4.5% of gross medallion loans, down to $12
million, a significant improvement from $112 million one year
ago
“We are pleased to present the Company as a consolidated entity
this quarter and to be able to report as a bank holding company
only for accounting purposes, beginning with the 2018 second
quarter,” stated Andrew Murstein, President of Medallion Financial.
“We continue to highlight the strength of our consumer and
commercial lending segments as we remain focused on the strategy we
laid out in 2017. Net interest income was $24.7 million, providing
a solid foundation for our future growth.”
“When looking at our taxi medallion portfolio, we remain
cautiously optimistic that prices have reached the floor, as we
valued our nonperforming New York City medallion collateral at
$181,000 and wheelchair accessible medallion collateral at
$154,000. We reported the lowest delinquency rate as a percentage
of the portfolio since the fourth quarter of 2015. As previously
commented, we commend the New York City Council for passing a
for-hire vehicle reform package which included, among other things,
capping ride-hailing services and giving authority to the TLC to
set minimum pay standards for those drivers. We hope such measures
should not only level the playing field between taxis and
ride-hailing services but also alleviate the congestion that has
left our streets in a state of gridlock. In the last few years we
have reserved or charged off over $300 million of medallion loans.
Our goal, as the market further stabilizes and hopefully improves,
is to recover as much of that amount as possible.”
Consumer Lending Segments
Medallion’s net consumer lending portfolio was $790.7 million as
of June 30, 2018, a 10% increase compared to $716.8 million at the
end of the prior quarter. Including the loans sold in both 2016 and
2017, the consumer segments continue to grow in excess of 30% per
year. The average interest rate on the portfolio was 14.80%, up
slightly from the 2017 second quarter. Consumer loan delinquencies
over 90 days past due as of June 30, 2018 were 0.32% versus 0.40%
in the prior quarter.
Medallion Lending Segment
The Company’s net medallion lending portfolio as of June 30,
2018 was $258.1 million compared to $452.7 million at June 30,
2017, on a combined basis with Medallion Bank, a 43% decrease. The
average interest rate on the medallion portfolio was 4.48% versus
4.31% on a combined basis with Medallion Bank in the prior year
period. Total medallion delinquencies over 90 days were $12.4
million as of June 30, 2018, compared to $112.4 million from the
prior year period on a combined basis with Medallion Bank. The
decline reflects the charge-offs of certain loans and their
movement to loan collateral in process of foreclosure, in addition
to the netting of reserves against principal as of April 2, 2018,
in connection with the change in reporting status. Medallion
provision for loan losses was $24.8 million in the quarter, down
significantly from $62.7 million in the prior quarter.
Larry Hall, Chief Financial Officer, stated, “We continue to
move away from our medallion lending and focus on our more
profitable lines of business in consumer and mezzanine lending. As
of June 30, 2018, total medallion loan exposure has been reduced
substantially to $258 million, down from a high of approximately
$650 million three years ago. Net medallion loans now represent
just 16.8% of total assets. We have also been in discussion with
one of our lenders to make certain structural changes to our
facility. If we are successful, we would be able to deconsolidate
the trust that owns various medallion loans from our overall
results, which would eliminate a significant amount of medallion
exposure from our balance sheet, and allow for the recapture of
approximately $20 million in reserves associated with medallion
loans that the Company is not liable for. That would then further
reduce our total medallion exposure to approximately $205 million,
a 26% reduction from June 30, 2018. While we are hopeful we can
accomplish this, there can be no guarantees that this restructuring
closes and that we would achieve this positive result.”
Commercial Lending Segment
The Company’s net commercial lending portfolio as of June 30,
2018 was $79.9 million. The average interest rate on the portfolio
was 13.8% compared to $12.9% in the prior year. Net interest income
for the second quarter was $1.7 million. The segment’s pipeline
remains strong and the Company expects continued growth in its loan
portfolio in the second half of 2018.
Conference Call Information
The Company is hosting a conference call to discuss the second
quarter financial results on Tuesday, August 14, 2018 at 8:30 a.m.
Eastern time.
If you have a question for management that you would like
answered on the call, please submit your question to
investorrelations@medallion.com prior to the start of the
call.
The dial-in number for the conference call is (877) 407-0789
(toll-free) or (201) 689-8562 (direct). Please dial the number 10
minutes prior to the scheduled start time. A live webcast of the
conference call will also be available on Medallion Financial’s
website at http://www.medallion.com/investors.html.
A replay will be available following the end of the call through
Tuesday, August 21, 2018, by telephone at (844) 512-2921
(toll-free) or (412) 317-6671 (direct), passcode 13682492. A
webcast replay of the call will be available at
http://www.medallion.com/ for one year following the call.
* * *
About Medallion Financial Corp.
Medallion Financial Corp. is a commercial finance company that
originates and services loans in various industries, and its
wholly-owned subsidiary, Medallion Bank, also originates and
services consumer loans. The Company has lent approximately $7
billion to small businesses since its initial public offering in
1996.
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. Medallion’s actual results may differ
significantly from the results discussed in such forward-looking
statements. Factors that might cause such a difference include, but
are not limited to, those factors discussed under the heading “Risk
Factors,” in Medallion’s 2017 Annual Report on Form 10-K.
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Bank Holding Company Accounting (Dollars in
thousands, except per share data)
For the Three Months Ended
June 30, 2018 Interest and fees on loans
$ 32,026
Medallion lease income
30 Interest and dividends on
investment securities
588
Total interest income 32,644
Interest on deposits
4,200 Interest on
short-term borrowings
1,859 Interest on long-term debt
1,866 Total interest
expense 7,925 Net interest
income 24,719 Provision for loan losses
30,576 Net interest loss after
provision for loan losses (5,857
) Other income (loss) Sponsorship
and race winnings
5,228 Impairment of equity investments
(474 ) Write-down of loan collateral in process of
foreclosure
(96 ) Other income
220 Total other income
4,878 Other expenses Salaries and
employee benefits
5,639 Race team related expenses
2,540 Professional fees
2,246 Loan servicing fees
1,128 Collection costs
837 Travel, meals and
entertainment
603 Rent expense
591 Regulatory fees
582 Amortization of intangible assets
361 Other
expenses
2,399 Total other
expenses 16,926 Loss
before income taxes (17,905 )
Income tax benefit
4,021 Net
loss after taxes (13,884 ) Less: income
attributable to the noncontrolling interest
763 Total net income (loss)
attributable to Medallion Financial Corp. $
(14,647 ) Basic and diluted
net loss per share
$ (0.60
) Weighted average common shares
outstanding Basic and diluted
24,230,815
MEDALLION FINANCIAL CORP. CONSOLIDATED BALANCE SHEET
(UNAUDITED) Bank Holding Company
Accounting
(Dollars in thousands, except share and
per share data)
June 30, 2018
Assets Cash
$ 10,344 Federal funds sold
25,237 Equity investments
10,773 Investment
securities
44,717 Loans
1,150,123 Allowance for
losses
(21,425
)
Net loans receivable
1,128,698
Accrued interest receivable
7,360 Property and
equipment, net
1,128 Loan collateral in process of
foreclosure
60,052 Goodwill and intangible assets
211,123 Deferred tax assets and other tax receivables, net
3,460 Other assets
31,637
Total assets $
1,534,529 Liabilities Accrued
interest payable
$ 4,246 Deposits
896,402
Short-term borrowings
179,692 Other liabilities
19,025 Long-term debt
150,248
Total liabilities
1,249,613 Commitments and
contingencies
— Total
stockholders’ equity 257,680
Non-controlling interest in consolidated subsidiaries
27,236 Total equity
284,916 Total liabilities and
equity $ 1,534,529
Number of shares outstanding
24,438,823 Book value
per share $ 10.54
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Company:Medallion Financial
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