Medallion Financial Corp. (Nasdaq: MFIN), a specialty finance
company that originates and services loans in various niche
industries, announced today its second quarter 2017 results.
Second Quarter 2017 Highlights
- Net decrease in net assets resulting
from operations of $4.8 million, or $0.20 loss per diluted share,
as Medallion Financial and Medallion Bank recorded non-cash
reserves and charge-offs of $12.7 million and $8.9 million,
respectively, on the medallion portfolio
- Net investment income before income
taxes at Medallion Bank of $16.9 million, driven primarily by the
Bank’s consumer lending segment; for the first half of 2017, net
investment income before income taxes at Medallion Bank was $34.1
million
- Medallion Bank’s consumer lending
portfolio grows to $730 million of receivables as of June 30, 2017;
originated over $232 million in consumer loans in the first half of
2017
- Managed assets of $1.61 billion as of
June 30, 2017, including $1.07 billion at Medallion Bank
- Medallion Bank’s Tier 1 capital to
average assets leverage ratio at quarter-end improved to 15.7%
- Book value per share of $11.65 as of
June 30, 2017
- Mezzanine lending division earned $3.8
million for the quarter, driven by net realized gains of $3.0
million
- Net investment loss before income taxes
was $3.3 million for the second quarter of 2017, compared to net
investment loss before income taxes of $1.4 million for the
prior-year period. On a combined basis with Medallion Bank, net
investment income before income taxes was $13.9 million for the
second quarter of 2017, a reduction from $16.0 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 such as
Medallion Bank’s increased valuation.
“Our second quarter performance saw continued strength from our
consumer and mezzanine lending segments,” stated Andrew Murstein,
President of Medallion Financial. “Our consumer lending segment at
Medallion Bank saw receivables grow a record $87 million from the
end of the first quarter, and the portfolio continues to generate a
pre-tax return on equity of over 50%. Driven by our consumer
segment, Medallion Bank earned over $34 million in investment
income before taxes in the first half of 2017. In addition, our
mezzanine segment continues to be profitable, earning $3.8 million
for the quarter due to the recognition of net realized gains and
generating an ROE above 20%. We will continue to focus our efforts
on these core value-generating segments.”
“On the medallion lending side, to better reflect current market
conditions, we reduced the estimated value of New York City
unrestricted medallion collateral,” added Mr. Murstein. “As a
result, we incurred additional unrealized depreciation expense and
charge-offs of $22 million for non-performing medallion loans on a
combined basis with Medallion Bank as we reserved for the full
amount of the loan over the medallion value regardless of the fact
that they are all personally guaranteed. The Company has now
reserved for and charged off over $153 million in medallion loans
in total thus far – despite the personal guarantees and the
medallions pledged as collateral – and expects to achieve
recoveries on those loans over time, while we expect to continue
reducing our medallion lending exposure.”
Medallion Bank
For the second quarter of 2017, Medallion Bank produced a slight
increase in net interest income to $23.5 million, compared to $23.4
million in the prior-year period. Net investment income before
taxes was $16.9 million, a 4% reduction from the prior-year period.
Medallion Bank earned net income of $1.9 million, compared to net
income of $8.7 million in the prior-year period, primarily due to
recording $8.9 million in charge-offs and reserves in the second
quarter of 2017 for medallion loans, compared to $4.5 million in
the prior-year period.
As of June 30, 2017, Medallion Bank met all of the regulatory
capital adequacy requirements to be considered well-capitalized.
Medallion Bank’s Tier 1 capital to average assets leverage ratio as
of June 30, 2017 was 15.7%.
Consumer Lending Segment
Medallion Bank’s net consumer loan portfolio was $729.5 million
as of June 30, 2017, an 18% increase compared to $618.6 million at
the end of the prior-year period, despite the sale of approximately
$94 million in performing consumer loans in the first quarter of
2017. Including the loans sold, the consumer division continues to
grow in excess of 30% per year. The average interest rate on the
portfolio was 14.6%, comparable with a year ago. Consumer loan
delinquencies over 90 days as of June 30, 2017 were 0.30% versus
0.37% in the prior quarter.
Medallion Lending Segment
Medallion Bank’s net medallion loan portfolio as of June 30,
2017 was $219.2 million, compared to $318.8 million at the end of
the prior-year period. The average interest rate on the portfolio
was 4.22% versus 3.84% in the prior year. Medallion loans now
represent 22% of Medallion Bank’s investment portfolio compared to
31% at the end of the prior-year period. Total medallion loan
delinquencies over 90 days past due were $22.6 million as of June
30, 2017, compared to $17.9 million in the prior quarter.
Medallion Financial and Non-Bank Subsidiaries
For the second quarter of 2017, net decrease in net assets
resulting from operations was $4.8 million, or a loss of $0.20 per
diluted common share, compared to a net increase in net assets
resulting from operations of $4.6 million, or $0.19 per diluted
common share, in the prior-year period. Net investment loss before
taxes for the second quarter of 2017 was $3.3 million, compared to
net investment loss before income taxes of $1.4 million in the
prior-year period.
If Medallion Bank was fully combined with Medallion Financial,
net investment income before taxes for the second quarter of 2017
would have been $13.9 million, compared to $16.0 million in the
prior-year period.
Medallion Financial’s net interest margin was 0.24% for the
second quarter of 2017 compared to 1.57% in the prior year,
primarily due to lower investment income in the second quarter of
2017. On a pro-forma combined basis with Medallion Bank, second
quarter 2017 net interest margin was 6.63%, compared to 6.71% in
the prior-year period, reflecting the low cost of funds at
Medallion Bank and its higher-yielding loan portfolio.
Medallion Lending
Medallion loans outstanding, net, as of June 30, 2017 were
$233.4 million, a reduction of 22% compared to $297.4 million at
the end of the prior-year period, primarily due to unrealized
depreciation reflecting current medallion market conditions and
portfolio reductions. The average interest rate on the medallion
portfolio was 4.40% versus 4.10% in the prior year.
The net managed medallion portfolio, which encompasses loans at
Medallion Bank and those serviced for third parties, was $452.7
million at quarter end, a decline of 29% from $641.2 million a year
ago. Total medallion delinquencies over 90 days (inclusive of
Medallion Bank) increased to $112.4 million as of June 30, 2017,
compared to $88.5 million in the prior quarter.
Commercial Lending
Commercial loans, net, as of June 30, 2017 were $78.1 million,
an 11% decrease from $88.0 million at the end of the prior-year
period, primarily reflecting the disposition of the asset-based
portfolio in the third quarter of 2016 and a decline in secured
commercial loans in the portfolio. Commercial loans represented 13%
of the investment portfolio, compared with 14% in the prior year.
The average interest rate on the portfolio was 13.18%, compared to
12.88% in the prior-year period, reflecting the disposition of the
lower yielding asset-based portfolio.
For the second quarter of 2017, the Company’s mezzanine segment
grew its assets, which includes its loan portfolio, by 3% from the
prior-year period to $87.4 million. Net increase in net assets
resulting from operations for the segment was $3.8 million compared
to $2.0 million in the prior-year period, primarily due to stronger
net realized and unrealized gains as compared to the prior-year
period. The mezzanine segment’s pipeline remains robust and the
Company expects continued growth in its loan portfolio in 2017.
Conference Call Information
The Company is hosting a conference call to discuss the
financial results today at 5:00 pm 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, August 15, 2017, by telephone at (844) 512-2921
(toll-free) or (412) 317-6671 (direct), passcode 13667904. 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 June 30, (Dollars in thousands,
except per share data)
2017 2016
Total
investment income $3,787 $5,836
Total interest
expense 3,408 3,368
Net interest
income 379 2,468
Total
noninterest income 12 21
Salaries and benefits
2,097 2,668 Professional fees
616 331 Occupancy expense
262 205 Other operating
expenses
707 687
Total operating
expenses 3,682 3,891
Net
investment income (loss) before income taxes (3,291
) (1,402 ) Income tax benefit
1,998 -
Net investment income (loss) after income taxes
(1,293 ) (1,402 )
Net realized gains
(losses) on investments, net of taxes 1,996
(2,318 ) Net change in unrealized depreciation on
investments
(11,450 ) (1,552 ) Net change in
unrealized appreciation on Medallion Bank and other controlled
subsidiaries
930 9,840 Income tax benefit
5,020
-
Net unrealized appreciation
(depreciation) on investments (5,500 )
8,288
Net realized/unrealized gains (losses) on
investments (3,504 ) 5,970
Net increase (decrease) in net assets resulting from
operations ($4,797 ) $4,568
Net investment income (loss) after income taxes per common
share Basic
($0.05 ) ($0.06 ) Diluted
($0.05 ) ($0.06 )
Net increase (decrease)
in net assets resulting from operations per common share
Basic
($0.20 ) $0.19 Diluted
($0.20
) $0.19
Distributions declared per
share - $0.05
Weighted
average common shares outstanding Basic
23,925,567
24,209,556 Diluted
23,997,686
24,265,565
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
June 30, 2017 December 31, 2016
Assets
Medallion loans, at fair value
$ 233,415 $ 266,816
Commercial loans, at fair value
78,092 83,634 Investment in
Medallion Bank and other controlled subsidiaries, at fair value
301,819 293,960 Equity investments, at fair value
10,316 8,468
Net investments
623,642 652,278 Cash and cash equivalents
22,126 20,962 Accrued interest receivable
755 769
Fixed assets, net
244 267 Investments other than securities
9,510 9,510 Other assets, net
5,075
5,591
Total assets $
661,352 $ 689,377
Liabilities Accounts
payable and accrued expenses
$ 4,075 $ 5,425 Accrued
interest payable
3,167 2,883 Deferred and other tax
liabilities, net
38,255 45,900 Funds borrowed
333,116 349,073
Total liabilities
378,613 403,281 Commitments and
contingencies
- -
Total
shareholders' equity (net assets) 282,739
286,096
Total liabilities and shareholders'
equity $ 661,352 $ 689,377
Number of common shares outstanding
24,276,048 24,024,821
Net asset value per share
$ 11.65 $
11.91 Total managed loans
$ 1,290,064 $
1,341,968 Total managed assets
1,606,271
1,631,839
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For Medallion Financial
Corp.Investors:212-328-2176InvestorRelations@medallion.comorMedia:Brian
Ruby, 203-682-8268bruby@icrinc.com
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