Medallion Financial Corp. (Nasdaq: MFIN, “Medallion” or the
“Company”), a finance company that originates and services loans in
various consumer and commercial niche industries, announced today
its 2018 fourth quarter results. Effective April 2, 2018, Medallion
Financial Corp. withdrew its BDC election, and now operates as a
finance company following the reporting conventions of bank holding
companies, for the nine months ended December 31, 2018. A major
component of this change is that we now consolidate wholly-owned or
controlled subsidiaries, particularly Medallion Bank, which were
previously treated as unconsolidated portfolio investment
companies.
2018 Fourth Quarter Highlights
- Net income was $9.2 million, or $0.38
per share, compared to a net loss of $4.7 million, or $0.19 per
share, in the third quarter, highest quarterly profit since
September 2004
- Total assets were $1.38 billion as of
December 31, 2018
- Medallion Bank’s Tier 1 leverage ratio
at quarter-end improved to 15.85%
- Net interest income before the
provision for loan losses was $23.0 million, reflecting primarily
the contributions of the consumer lending segments
- Net income from Medallion’s commercial
segment was $1.6 million for the fourth quarter
- Net interest margin was 8.07% in the
2018 fourth quarter, compared to 7.41% in the prior year period on
a combined basis with Medallion Bank
- 90 day plus medallion loan
delinquencies were $15.7 million or 8.9% of gross medallion loans,
down from $71.9 million or 15.9% in the 2017 fourth quarter when
combined with Medallion Bank
- The provision for medallion loan losses
was $3.4 million in the 2018 fourth quarter, reflecting the
reversal of $8.2 million of reserves as a result of the
deconsolidation of Trust III, compared to $13.3 million in the
third quarter, $24.7 million in the second quarter, and $62.7
million in the first quarter (when combined with Medallion Bank),
recorded as non-cash valuation adjustments and realized
losses/charge-offs
- In November, the Company successfully
deconsolidated the Trust III facility, which resulted in a recorded
gain to earnings and tangible book value of approximately $19.2
million after taxes and eliminated $63.2 million of medallion loans
and loans in process of foreclosure from the Company’s balance
sheet, along with $98.5 million of debt and payables that Trust III
owed to its lender while remaining as a fee based servicer of the
loans in Trust III
2018 Full Year and Nine-Month Highlights
- Medallion Bank's net interest income
for full year 2018 was $98.2 million
- Net interest margin for nine months
ended December 31, 2018 was 8.19%
- Income before taxes for nine months
ended December 31, 2018 from the Company’s consumer lending
segments was $37.5 million
- Net managed medallion portfolio reduced
from $388 million to $156 million, or 60%, year over year
Andrew Murstein, President of Medallion, stated, “We ended 2018
with a strong fourth quarter and positive year end results and
continued to successfully navigate the headwinds on the medallion
side throughout the year. We are pleased we were able to deliver on
our three main objectives laid out in our 2018 strategy: reduce the
Company’s medallion exposure, grow our consumer segments and
deconsolidate the Trust III facility. In addition, the Company
successfully withdrew its BDC election and now operates as a
non-investment company, consolidating all wholly-owned or
controlled subsidiaries, including Medallion Bank, providing a more
transparent financial presentation. Taking a step back and looking
at what the Company has accomplished over the last three years, we
reduced our net medallion portfolio 76% from $641 million at the
end of 2015 to $156 million at the end 2018. In addition, we have
greatly reduced our bank medallion-related debt also by 76% from
$252 million at the end of 2015 to $60 million at year end,
positioning ourselves for a bright future.
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
to bail-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 as non-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.
Conference Call Information
The Company will be hosting a conference call to discuss the
fourth quarter financial results on Thursday, February 28, at 9:00
a.m. Eastern time.
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
Thursday, March 7, 2019, by telephone at (844) 512-2921 (toll-free)
or (412) 317-6671 (direct), passcode 13687822. A webcast replay of
the call will be available at
http://www.medallion.com/investors.html until the next quarter is
announced.
* * *
About Medallion Financial Corp.
Medallion Financial Corp. is a finance company that originates
and services loans in various industries, and its wholly-owned
subsidiary, Medallion Bank, also originates and services consumer
loans. Medallion Financial Corp. has lent more than $8 billion
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)
(Dollars in thousands, except per share data)
For the
Three Months Ended December 31, 2018 Total interest
income $ 31,007 Total interest expense
8,004 Net interest income
23,003 Provision for loan losses
10,227 Net interest income after provision
for loan losses 12,776
Other income (loss) Gain on deconsolidation of Trust III
25,325 Sponsorship and race winnings
3,769 Loss on
sale of loans, net
(542) Write-down of loan collateral in
process of foreclosure
(827) Impairment of equity
investments
(77) Write-down of other assets
(338)
Other income
317 Total other
income 27,627 Other
expenses Salaries and employee benefits
7,719 Intangible
asset impairment
5,615 Collection costs
2,989
Professional fees
2,412 Race team related expenses
1,705 Loan servicing fees
1,157 Rent expense
591 Regulatory fees
558 Amortization of intangible
assets
361 Travel, meals and entertainment
326 Other
expenses
2,258 Total other
expenses 25,691 Income before
income taxes 14,712 Income tax provision
(4,847) Net income after taxes
9,865 Less: income attributable to the non-controlling
interest
693 Total net income
attributable to Medallion Financial Corp. $
9,172 Basic net income per share
$
0.38 Diluted net income per share
$
0.38 Weighted average common shares
outstanding Basic
24,237,841 Diluted
24,404,010
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Dollars in thousands, except share
and per share data)
December 31, 2018 Assets Cash and federal funds sold
$ 57,713
Equity investments and investment
securities
54,521 Loans
1,017,882 Allowance for losses
(36,395) Net loans receivable
981,487
Loan collateral in process of foreclosure
49,495
Goodwill and intangible assets
204,785
Other assets
33,845
Total assets
$ 1,381,846 Liabilities
Accounts payable, accrued expenses, and
accrued interest payable
$ 22,641 Deposits
848,040
Short-term borrowings
55,178 Deferred tax liability and other tax payables
6,973
Long-term debt
158,810
Total liabilities
1,091,642 Commitments and contingencies
-- Total stockholders's equity 262,608
Non-controlling interest in consolidated
subsidiaries
27,596
Total equity
290,204
Total liabilities and equity
$ 1,381,846 Number of shares outstanding
24,434,357
Book value per share
$ 10.75
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version on businesswire.com: https://www.businesswire.com/news/home/20190227005887/en/
Company Contact:Alex E.
ArzenoInvestor
Relations212-328-2176InvestorRelations@medallion.com
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