Medallion Financial Corp. (Nasdaq:MFIN), a specialty finance
company that originates and services loans in various niche
industries, announced today its fourth quarter 2017 results.
Fourth Quarter 2017 Highlights
- Net increase in net assets resulting
from operations of $3.3 million, or $0.14 per diluted share
- Net investment income before income
taxes at Medallion Bank of $18.5 million, driven primarily by
Medallion Bank’s consumer lending segment
- Medallion Bank’s net consumer lending
portfolio held $684 million of receivables as of December 31, 2017;
29% growth from the prior year when including $221 million of
receivable sales in 2017
- Managed assets of $1.59 billion as of
December 31, 2017, including $1.07 billion at Medallion Bank
- Net interest margin of 1.62% compared
to 1.09% in the prior-year period; on a pro-forma combined basis
with Medallion Bank, it was 7.41%, compared to 6.81% in the
prior-year period
- Medallion Financial and Medallion Bank
recorded non-cash reserves and charge-offs of $15.8 million and
$16.0 million, respectively, on the medallion portfolio
- Total medallion delinquencies over 90
days (inclusive of Medallion Bank) declined to $71.9 million as of
December 31, 2017, compared to $118.1 million in the prior
quarter
- Net asset value per share of $11.80 as
of December 31, 2017
- Mezzanine lending division earned $4.2
million for the fourth quarter
- Net investment loss before income taxes
was $1.6 million for the fourth quarter of 2017, compared to net
investment loss before income taxes of $2.9 million for the
prior-year period. On a combined basis with Medallion Bank, net
investment income before income taxes was $17.1 million for the
fourth quarter of 2017, an increase from $14.9 million in the
prior-year period. The Company believes the combined figure is a
more appropriate indication of the Company’s operating capabilities
as it combines Medallion Bank with Medallion Financial, and is
before realized/unrealized appreciation/depreciation.
Full Year 2017 Highlights
- Medallion Bank recorded record net
investment income before income taxes of $71.5 million, driven by
its consumer lending segment.
- Mezzanine lending division generated
net increase in net assets resulting from operations of $11.8
million, a 46% increase from the prior year.
“We are very pleased with our fourth quarter results and with
the direction of the Company. 2017 saw us begin to make headway
from the challenges we’ve faced over the past couple of years, led
by excellent performances from our consumer segment and mezzanine
division,” stated Andrew Murstein, President of Medallion
Financial. “During the quarter, our consumer lending segment at
Medallion Bank successfully sold $127 million of performing
consumer loans at a premium, and for 2017 in total, the ongoing
success of the segment led to Medallion Bank generating over $70
million in net investment income before income taxes. Our mezzanine
segment also continues to perform very well, as we exited two
investments in the quarter and realized gains. Overall, in 2017, we
generated nearly $11.8 million in net investment income and gains
in our mezzanine segment.”
“On the medallion lending side, we continued to reduce the
estimated value of unrestricted New York City medallion collateral
in the fourth quarter and incurred additional unrealized
depreciation expense and charge-offs of $31.8 million for
non-performing medallion loans on a combined basis with Medallion
Bank,” added Mr. Murstein. “Our strategy has been very effective
and remains unchanged in 2018 – focus squarely on our consumer and
mezzanine divisions while steadily reducing our medallion lending
exposure.”
Medallion Bank
For the fourth quarter of 2017, Medallion Bank produced net
interest income of $25.1 million, a 7% increase compared to $23.4
million in the prior-year period. Net investment income before
taxes was $18.5 million, a 6% increase from the prior-year period.
Medallion Bank recorded a net loss of $6.7 million, compared to a
net loss of $12.9 million in the prior year. The lower net loss was
primarily due to recording lower charge-offs and reserves in the
fourth quarter of 2017 for medallion loans compared to the
prior-year period. In addition the Bank took a $7.4 million charge
related to a reduction of the Bank’s deferred tax asset caused by
the passage of the Tax Cuts and Jobs Act in December 2017.
Consumer Lending Segment
Medallion Bank’s net consumer loan portfolio was $683.5 million
as of December 31, 2017, a 2% decrease compared to $700.7 million
at the end of the prior-year period primarily as a result of the
sale of approximately $94 million in performing consumer loans in
the first quarter of 2017 and $127 million in performing consumer
loans in the fourth quarter of 2017. Including the loans sold, the
consumer division continues to grow by approximately 29% per year.
The average interest rate on the portfolio was 15.0%, an increase
from 14.3% one year ago. Consumer loan delinquencies over 90 days
as of December 31, 2017 were 0.57% versus 0.41% in the prior
quarter.
Medallion Lending Segment
Medallion Bank’s net medallion loan portfolio as of December 31,
2017 was $179.7 million, compared to $261.8 million at the end of
the prior year. The average interest rate on the portfolio was
4.30% versus 3.75% in the prior year. Medallion loans represent 20%
of Medallion Bank’s investment portfolio compared to 26% at the end
of the prior year. Total medallion loan delinquencies over 90 days
past due were $12.2 million as of December 31, 2017, compared to
$19.6 million in the prior quarter.
Medallion Financial and Non-Bank Subsidiaries
For the fourth quarter of 2017, net increase in net assets
resulting from operations was $3.3 million, or $0.14 per diluted
common share, compared to a net increase in net assets resulting
from operations of $7.1 million, or $0.29 per diluted common share,
in the prior-year period. Net investment loss before taxes for the
fourth quarter of 2017 was $1.6 million, compared to net investment
loss before income taxes of $2.9 million in the prior-year
period.
If Medallion Bank was fully combined with Medallion Financial,
net investment income before taxes for the fourth quarter of 2017
would have been $17.1 million, compared to $14.9 million in the
prior-year period.
Medallion Financial’s net interest margin was 1.62% for the
fourth quarter of 2017, which included $1.8 million of unrecorded
interest and dividend income received as a result of the successful
exit of a long-time investment, compared to 1.09% in the prior
year. On a pro-forma combined basis with Medallion Bank, fourth
quarter 2017 net interest margin was 7.41%, compared to 6.81% in
the prior year, reflecting the low cost of funds at Medallion Bank
and its higher-yielding loan portfolio.
Medallion Lending
Medallion loans outstanding, net, as of December 31, 2017 were
$208.3 million, a reduction of 22% compared to $266.8 million at
the end of the prior year, primarily due to unrealized depreciation
reflecting current medallion market conditions and portfolio
reductions. The average interest rate on the medallion portfolio
was 4.41% versus 4.01% in the prior year. Total medallion
delinquencies over 90 days declined to $59.7 million as of December
31, 2017, compared to $98.4 million in the prior quarter.
The net managed medallion portfolio, which encompasses loans at
Medallion Bank, was $388.0 million at quarter end, a decline of 27%
from $528.6 million a year ago. Total medallion delinquencies over
90 days (inclusive of Medallion Bank) declined to $71.9 million as
of December 31, 2017, compared to $118.1 million in the prior
quarter.
Commercial Lending
Commercial loans, net, as of December 31, 2017 were $90.2
million, an 8% increase from $83.6 million at the end of the prior
year, primarily reflecting an increase in mezzanine loans in the
portfolio. Commercial loans represented 15% of the investment
portfolio, compared with 13% in the prior year. The average
interest rate on the portfolio was 12.02%, compared to 13.05% in
the prior year.
For the fourth quarter of 2017, the Company’s mezzanine segment
grew its assets, which includes its loan portfolio, by 3% from the
prior year to $90.6 million. Net increase in net assets resulting
from operations for the commercial lending segment was $4.2 million
compared to $2.4 million in the prior year.
Conference Call Information
The Company is hosting a conference call to discuss the
financial results tomorrow, March 2, 2018, at 8:30 am Eastern.
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
Friday, March 9, 2018, by telephone at (844) 512-2921 (toll-free)
or (412) 317-6671 (direct), passcode 13676286. 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 specialty finance company that
originates and services loans in various industries, and its
wholly-owned portfolio company, Medallion Bank, also originates and
services consumer loans. The Company and its subsidiaries have lent
approximately $7 billion to small businesses since the Company’s
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 2016 Annual Report on Form 10-K.
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended December 31, (Dollars in
thousands, except per share data)
2017 2016
Total investment income $6,020 $4,997
Total interest expense 3,486 3,365
Net interest income 2,534 1,632
Total noninterest income 85
243 Salaries and benefits
2,422 2,954
Professional fees
744 1,005 Occupancy expense
267 264
Goodwill impairment
- 5,099 Other operating expenses
793 612
Total operating expenses
4,226 9,834
Net investment
loss before income taxes (1,607 ) (7,959 ) Income
tax (provision)
(1,296 ) 10,047
Net
investment loss after income taxes (2,903 )
2,088
Net realized gains (losses) on
investments, net of taxes (31,574 ) 80
Net change in unrealized appreciation on
Medallion Bank and other controlled
subsidiaries
(1,606 ) 85,900 Net change in unrealized appreciation
on investments
33,005 (25,449 ) Income tax benefit
6,423 (55,563 )
Net unrealized appreciation
(depreciation) on investments 37,822 4,888
Net realized/unrealized gains (losses) on investments
6,248 4,968
Net increase
(decrease) in net assets resulting from operations
$3,345 $7,056
Net investment income
(loss) after income taxes per common share Basic
($0.12
) ($2.03 ) Diluted
($0.12 ) ($2.03 )
Net increase (decrease) in net assets resulting
from operations per common
share
Basic
$0.14 $0.29 Diluted
$0.14 $0.29
Weighted average common shares outstanding Basic
23,930,854 23,937,945 Diluted
24,185,539
24,011,963
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share
data)
December 31, 2017 December 31, 2016
Assets Medallion loans, at fair value
$208,279
$266,816 Commercial loans, at fair value
90,188 83,634
Investment in Medallion Bank and other controlled subsidiaries, at
fair value
302,147 293,360 Equity investments, at fair value
9,521 8,468
Net investments 610,135
652,278 Cash and cash equivalents
12,690 20,962
Accrued interest receivable
547 769 Fixed assets, net
235 267 Investments other than securities
7,450 9,510
Other assets, net
4,465 5,591
Total assets
$635,522 $689,377
Liabilities Accounts
payable and accrued expenses
$ 4,373 $ 5,425 Accrued
interest payable
3,831 2,883 Deferred and other tax
liabilities, net
12,536 45,900 Funds borrowed
327,623
349,073
Total liabilities 348,363
403,281 Commitments and contingencies
- -
Total shareholders' equity (net assets)
287,159 286,096
Total liabilities and
shareholders' equity $635,522 $689,377
Number of common shares outstanding
24,343,084 24,024,821
Net asset value per share
$11.80 $11.91 Total
managed loans
$1,190,382 $1,341,968 Total managed assets
1,592,985 1,631,875
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Investors:ICR212-328-2176InvestorRelations@medallion.com
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