Medallion Financial Corp. (Nasdaq:MFIN), a specialty finance
company that originates and services loans in various niche
industries, announced today its 2018 first quarter results.
2018 First Quarter Highlights
- Completed de-BDC process on April 2,
2018, and will begin reporting as a traditional finance company
starting in the second quarter of 2018
- Net decrease in net assets resulting
from operations of $14.9 million, or a loss of $0.62 per share
- Net investment income before income
taxes at Medallion Bank of $16.1 million, driven primarily by
Medallion Bank’s consumer lending segment
- Medallion Bank’s medallion portfolio
now represents just 17% of its investments, the lowest percentage
of investments for the Bank since its 2003 formation
- Medallion Bank’s net consumer lending
portfolio was $717 million as of March 31, 2018; representing 12%
of growth from the prior year, and 31% growth from the prior year
when including $127 million of receivables sold in the 2017 fourth
quarter
- Managed assets of $1.51 billion as of
March 31, 2018, including $1.2 billion related to Medallion
Bank
- Net interest margin of 0.32%, compared
to 0.58% in the prior-year period; and on a pro-forma basis
combined with Medallion Bank was 6.96%, compared to 6.59% in the
prior-year period
- Medallion Financial and Medallion Bank
recorded non-cash reserves and realized losses/charge-offs of $40.1
million and $22.6 million, respectively, on the medallion
portfolios
- Total medallion delinquencies over 90
days (inclusive of Medallion Bank) improved to $53.2 million as of
March 31, 2018, compared to $71.9 million in the prior quarter;
lowest amount since December 2015
- Wrote New York medallion and wheelchair
accessible medallion values down to $183,500 and $156,000,
respectively
- Net asset value per share of
$11.15
- Mezzanine lending division earned $2.3
million for the 2018 first quarter
“Our first quarter was characterized by continued strong
performance from our consumer and mezzanine lending segments,”
stated Andrew Murstein, President of Medallion Financial. “Our
consumer segment at Medallion Bank continues to be the main driver
for our Company, generating over $16 million in net investment
income before income taxes. We also took substantial additional
write-downs on our non-performing medallion loans and foreclosed
medallion assets, and wrote medallion values down to $183,500 for
New York medallions, and $156,000 for wheelchair accessible New
York medallions. Despite the significant reduction we took in terms
of medallion values, the Tier 1 capital to average assets leverage
ratio of Medallion Bank is over 15% as of April 30, 2018. While we
continue to reduce our medallion exposure, we remain hopeful that
medallion prices have bottomed out as the average New York City
medallion transfer price in April as reported by the TLC was over
$230,000 per medallion. In addition the New York City Council is
currently discussing and evaluating substantial changes to the taxi
and e-hail industry. While there are no guarantees that legislation
will pass, the changes could substantially help prices.
Furthermore, we believe another large medallion lender sold their
portfolio to a private investment firm. That is a big positive on
many fronts as it represents new capital coming into the industry
and a sign that the buyer presumably feels that prices may have
bottomed out. We are also in discussions to service medallion
portfolios for third parties, which would entail receiving
substantial fee income without balance sheet risk.”
“Notably, we were pleased that we have now completed the de-BDC
process and beginning in the 2018 second quarter will report as a
traditional finance company,” added Mr. Murstein. “We will begin
consolidating all of our non-investment company subsidiaries,
including Medallion Bank, and can report as one entity. Our
long-term strategy remains unchanged as we continue to focus
squarely on our consumer and mezzanine divisions while steadily
reducing our medallion lending exposure as we work to unlock value
for our shareholders.”
Medallion Bank
There has been renewed interest recently by third party
companies, including fintech firms, for buying part or all of
Medallion Bank, as well as partnering on new products, which could
result in additional value creation for the Bank. In addition, the
Company is evaluating other capital raise opportunities for the
Bank.
For the 2018 first quarter, Medallion Bank earned net interest
income of $23.3 million, up slightly from $23.2 million in the
prior-year period. Net investment income before taxes was $16.1
million, a 6% decrease from the prior-year period. Medallion Bank
recorded a net loss of $9.1 million, compared to net income of $4.3
million in the prior-year period. The net loss was primarily due to
recording increased charge-offs and reserves in the first quarter
of 2018 on the medallion portfolio compared to the prior-year
period.
Consumer Lending Segment
Medallion Bank’s net consumer loan portfolio was $716.8 million
as of March 31, 2018, a 12% increase compared to $642.1 million at
the end of the prior-year period, primarily as a result of
increased originations, and partially offset by the sale of
approximately $127 million in performing consumer loans in the 2017
fourth quarter. Including the loans sold, the consumer division
grew by approximately 31%. The average interest rate on the
portfolio was 14.86%, an increase from 14.79% one year ago.
Consumer loan delinquencies over 90 days as of March 31, 2018 were
0.40% versus 0.57% in the prior quarter.
Medallion Lending Segment
Medallion Bank’s net medallion loan portfolio as of March 31,
2018 was $157.7 million, a 33% reduction from $233.7 million a year
ago. This was the lowest amount of medallion loans that Medallion
Bank has had since September 2009. The average interest rate on the
portfolio was 4.34% versus 3.82% a year ago. Medallion loans
represented 17% of Medallion Bank’s investment portfolio compared
to 26% a year ago. As a percentage of assets, this is the lowest
level of medallion loans since the Bank’s formation in 2003. Total
medallion loan delinquencies over 90 days past due were $14.8
million as of March 31, 2018, compared to $12.2 million in the
prior quarter.
Medallion Financial and Non-Bank Subsidiaries
For the 2018 first quarter, net decrease in net assets resulting
from operations was $14.9 million, or a loss of $0.62 per common
share, compared to a net increase in net assets resulting from
operations of $1.1 million, or $0.05 per diluted common share in
the prior-year period. Net investment loss before taxes for the
2018 first quarter was $3.6 million, compared to net investment
loss before income taxes of $1.3 million in the prior-year
period.
Medallion Financial’s net interest margin was 0.32% for the
quarter, compared to 0.58% in the prior year. On a pro-forma
combined basis with Medallion Bank, the 2018 first quarter net
interest margin was 6.96%, compared to 6.59% in the prior year,
reflecting the low cost of funds at Medallion Bank and its
higher-yielding loan portfolio.
Medallion Lending
Net medallion loans outstanding as of March 31, 2018 were $161.2
million, a reduction of 36% compared to $251.0 million a year ago,
primarily due to unrealized depreciation and realized losses
reflecting current medallion market conditions and portfolio
reductions. The average interest rate on the medallion portfolio
was 4.50% versus 4.02% a year ago. Total medallion delinquencies
over 90 days declined to $38.3 million as of March 31, 2018,
compared to $59.7 million in the prior quarter; this is the lowest
dollar amount of medallion delinquencies over 90 days since
December 2015.
The net managed medallion portfolio, which encompasses loans at
Medallion Bank, was $318.9 million at quarter end, a decline of 34%
from $484.7 million a year ago. Total medallion delinquencies over
90 days (inclusive of Medallion Bank) declined to $53.2 million as
of March 31, 2018, compared to $71.9 million in the prior quarter;
this is the lowest dollar amount of medallion delinquencies over 90
days since December 2015.
Commercial Lending
Commercial loans, net, as of March 31, 2018 were $93.6 million,
a 27% increase from $73.7 million a year ago, reflecting an
increase in mezzanine loans in the portfolio. Commercial loans
represented 15% of the investment portfolio, compared with 12% a
year ago. The average interest rate on the portfolio was 12.07%,
compared to 12.88% in the prior year.
For the 2018 first quarter, the Company’s mezzanine segment grew
its assets by 5% from a year ago to $91.2 million. Net increase in
net assets resulting from operations for the mezzanine lending
segment was $2.3 million compared to $1.1 million in the prior
year.
Conference Call Information
The Company is hosting a conference call to discuss the
financial results tomorrow May 15, 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
Tuesday, May 22, 2018, by telephone at (844) 512-2921 (toll-free)
or (412) 317-6671 (direct), passcode 13679966. 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 2017 Annual Report on Form 10-K.
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, (Dollars in
thousands, except per share data)
2018 2017
Total investment
income $ 4,033 $ 4,250
Total interest
expense 3,551 3,334
Net interest income 482
916
Total noninterest income 60
2 Salaries and benefits
2,349 765 Professional fees
723 692 Occupancy expense
243 265 Other operating expenses
793
503
Total operating expenses
4,108 2,225
Net
investment loss before income taxes (3,566 )
(1,307 ) Income tax benefit
336
872
Net investment loss after income taxes
(3,230 ) (435 )
Net realized
gains (losses) on investments, net of taxes
(26,319 ) 845 Net change
in unrealized appreciation on
Medallion Bank and other controlled
subsidiaries
29,115 8,124 Net change in unrealized (depreciation) on
investments
(6,318 ) (8,523 ) Income tax benefit
(provision)
(8,122 ) 1,100
Net unrealized appreciation on investments
14,675 701
Net
realized/unrealized gains (losses) on investments
(11,644 ) 1,546
Net
increase (decrease) in net assets resulting from operations
($14,874 ) $ 1,111
Net investment income (loss) after income taxes per
common share Basic
($0.13 ) ($0.02 ) Diluted
($0.13 )
($0.02 )
Net increase (decrease) in net assets resulting
from operations per common
share
Basic
($0.62 ) $ 0.05 Diluted
($0.62 ) $ 0.05
Weighted
average common shares outstanding Basic
24,154,879
23,892,942 Diluted
24,154,879
23,945,556
MEDALLION FINANCIAL CORP. CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands, except per share data)
March 31, 2018 December 31, 2017
Assets
Medallion loans, at fair value
$ 161,155 $ 208,279
Commercial loans, at fair value
93,620 90,188 Investment in
Medallion Bank and other controlled subsidiaries, at fair value
331,169 302,147 Equity investments, at fair value
9,458 9,521
Net investments
595,402 610,135 Cash and cash equivalents
10,956 12,690 Accrued interest receivable
417 547
Fixed assets, net
216 235 Investments other than securities
5,535 7,450 Other assets, net
4,184 4,465
Total assets
$ 616,710 $ 635,522
Liabilities Accounts payable and accrued expenses
$
3,634 $ 4,373 Accrued interest payable
3,582 3,831
Deferred and other tax liabilities, net
16,395 12,536 Funds
borrowed
320,662 327,623
Total
liabilities 344,273
348,363 Commitments and contingencies
- -
Total shareholders' equity (net assets)
272,437 287,159
Total liabilities and shareholders' equity
$ 616,710 $ 635,522 Number of
common shares outstanding
24,438,810 24,343,084 Net asset
value per share
$ 11.15 $
11.80 Total managed loans
$ 1,159,124 $
1,190,382 Total managed assets
1,506,564 1,592,985
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Company:Investors:Medallion
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