Medallion Financial Corp. Reports 2019 Fourth Quarter and Full Year Results

NEW YORK--()--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 2019 fourth quarter and full year results.

2019 Fourth Quarter Highlights

  • Net income was $2.8 million, or $0.11 per share, compared to $9.2 million, or $0.38 per share, in the prior year period, which included a gain of $25.3 million as a result of the Company successfully deconsolidating Trust III in the 2018 fourth quarter
  • Net interest income was $26.6 million, primarily reflective of the contributions of the consumer lending segments
  • Net interest margin was 8.82% in the 2019 fourth quarter, up from 8.07% in the year ago quarter, reflecting the greater contribution of the higher yielding consumer and commercial segments
  • Net interest margins for the recreation and home improvement segments were 12.98% and 7.13%
  • Net income from the consumer and commercial segments totaled $7.2 million in the quarter
  • The total interest yield on the Company’s loan portfolio was 12.69% in the 2019 fourth quarter
  • Medallion loan exposure continued to be reduced, with the net portfolio at $109.4 million at quarter end which represented 7% of total assets
  • Total assets were $1.55 billion as of December 31, 2019

2019 Full Year Highlights

  • 2019 earnings were $1.5 million compared to a loss of $25.0 million in 2018
  • 2019 net income from Medallion’s consumer and commercial segments was $31.9 million
  • Net consumer loans grew 23% year over year
  • Consumer originations were $443.5 million for the year, up from $408.4 million in 2018
  • 2019 net interest margin was 8.64%
  • Net cash flow from operations was $64.9 million
  • Total medallion loans 90 days or more past due were $2.6 million, or 2.0% of total medallion loans at the end of 2019
  • Net medallion loans dropped 30% from $155.9 million to $109.4 million at year end

Andrew Murstein, President of Medallion, stated, “2019 was a significant year for us as we turned the corner and moved forward with a profitable year, and delivered on the strategy we have laid out. We continued to reduce the Company’s medallion losses and portfolio, raised capital, and began the process to provide loan origination services to the fintech industry. Losses from our medallion exposure, in particular in the second half of the year, have been lower than in recent years. We completed both a private placement at Medallion Financial of investment grade debt, and an initial public offering of perpetual preferred stock at Medallion Bank, raising over $82 million in total during 2019. This will allow us to grow our consumer portfolio. This past July, we hired an experienced executive at Medallion Bank to build-out its Strategic Partnership Program with financial technology companies, which we hope will ultimately provide new opportunities for profits and growth through the generation of fee income, as well as providing portfolio diversification. We look forward to providing updates on our progress in building out this new program throughout the year, as we hope to have our first partnership established and operational in the next few months.

"Our consumer and commercial segments had a record breaking year after coming off a strong 2018, as net income before taxes from our mezzanine, home improvement and recreation lending divisions totaled $43 million in 2019. Specifically, we saw the consumer segments continue to thrive in the 2019 second half, as for the first time since the inception of Medallion Bank, we recorded back to back quarters of over $9 million of net income. Looking ahead, we forecast our consumer segments to experience solid growth in 2020, while maintaining good credit quality for the portfolio.

"At the end of the year, Medallion Capital, the lead driver in our commercial lending segment, had $40 million in capital, and Medallion Bank had $230 million in capital.”

Mr. Murstein continued: “The medallion loan portfolio remains at the lowest level since going public in 1996. We continue to monitor industry news, both from a legislative and regulatory standpoint, and remain optimistic that the recommendations and proposals being reviewed by the City of New York will stabilize the industry, and help alleviate the pressure put on the borrowers as a result of the e-hail industry.”

“Lastly, we were pleased to have been recognized in the broad-market Russell 3000® Index in June 2019. This has allowed us to strengthen our position within the investment community.”

Larry Hall, Chief Financial Officer, stated, “We recorded a net interest margin of 8.82% in the 2019 fourth quarter, the highest in 12 years, which resulted in the Company being able to end the year with a net interest margin of 8.64%. The total interest yield on the Company’s loan portfolio was 12.69% in the 2019 fourth quarter, the highest it has been since we withdrew our BDC election and consolidated Medallion Bank. As a result of the Bank’s public offering of preferred shares, the Bank ended 2019 with a Tier 1 leverage ratio of 19.56%. The fourth quarter income tax provision included a charge of $1.5 million or $0.06 per share, attributable to the change in the Company’s effective state income tax rate and its impact on the deferred tax liability.”

Consumer Lending Segments

Medallion’s net consumer lending portfolio as of December 31, 2019 was $940.0 million, compared to $761.5 million at the end of 2018. Net interest income for the 2019 fourth quarter was $27.0 million, compared to $23.6 million in the prior year period. The average interest rate on the portfolio was 14.54% at December 31, 2019, compared to 15.06% at the end of 2018. Consumer loan delinquencies 90 days or more past due as of December 31, 2019 were 0.64%, compared to 0.57% a year ago.

Commercial Lending Segment

The Company’s net commercial lending portfolio as of December 31, 2019 was $66.4 million, compared to $60.0 million at the end of the prior year period. The yield on the portfolio was 10.74% in the 2019 fourth quarter, compared to 14.33% in the 2018 fourth quarter. Net income for the 2019 fourth quarter was $0.366 million.

Medallion Lending Segment

The Company’s net medallion lending portfolio as of December 31, 2019 was $109.4 million, compared to $155.9 million at the end of 2018. The average interest rate on the medallion portfolio was 4.17%, compared to 4.43% a year ago. Total medallion loan delinquencies 90 days or more past due were $2.6 million, or 2.0% of the total portfolio, as of December 31, 2019, compared to $16.7 million or 9.4% of the total portfolio at the end of 2018. Total medallion loan delinquencies 30 days or more past due were $17.2 million as of December 31, 2019, or 13.6% of the total portfolio, compared to $28.1 million, or 15.9% of the total portfolio, at December 31, 2018. Medallion loans comprised 10% of the Company’s net loans receivable as of December 31, 2019, compared to 16% at the end of 2018.

* * *

Conference Call Information

The Company will be hosting a conference call to discuss the 2019 fourth quarter and full year financial results on Friday, February 21, 2020 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 our website at http://www.medallion.com/investors.html.

A replay will be available following the end of the call through Friday, February 28, 2020, by telephone at (844) 512-2921 (toll-free) or (412) 317-6671 (direct), passcode 13699052. A webcast replay of the call will be available at http://www.medallion.com/investors.html until the next quarter’s results are 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 $8.8 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 2018 Annual Report on Form 10-K and its other filings with the SEC.

 

MEDALLION FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
Bank Holding Company Accounting Combined(1)
For the Three Months Ended December 31 For the Year Ended December 31
(Dollars in thousands, except shares and per share data)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total interest income/total investment income

$

35,864

 

$

31,007

 

$

132,562

 

$

100,836

 

Total interest expense

 

9,277

 

 

8,004

 

 

35,045

 

 

28,367

 

Net interest income/net investment income

 

26,587

 

 

23,003

 

 

97,517

 

 

72,469

 

 
Provision for loan losses

 

6,162

 

 

10,227

 

 

43,013

 

 

59,008

 

Net interest income after provision for loan losses

 

20,425

 

 

12,776

 

 

54,504

 

 

13,461

 

 
Other income (loss)
Gain on deconsolidation of Trust III

 

-

 

 

25,325

 

 

-

 

 

25,325

 

Sponsorship and race winnings

 

2,734

 

 

3,769

 

 

18,742

 

 

14,368

 

Gain on sale of loans

 

-

 

 

(542

)

 

-

 

 

4,946

 

Writedown of loan collateral in process of foreclosure

 

(177

)

 

(827

)

 

(4,381

)

 

(2,188

)

Other income

 

410

 

 

(98

)

 

6,026

 

 

(445

)

Total other income

 

2,967

 

 

27,627

 

 

20,387

 

 

42,006

 

 
Other expenses
Salaries and employee benefits

 

6,514

 

 

7,719

 

 

24,971

 

 

21,706

 

Collection costs

 

2,049

 

 

2,989

 

 

6,638

 

 

5,207

 

Race team related expenses

 

1,785

 

 

1,705

 

 

8,996

 

 

7,121

 

Professional fees

 

1,441

 

 

2,412

 

 

7,402

 

 

9,332

 

Loan servicing fees

 

1,402

 

 

1,157

 

 

5,253

 

 

3,470

 

Intangible asset impairment

 

-

 

 

5,615

 

 

-

 

 

5,615

 

Other expenses

 

3,752

 

 

4,094

 

 

14,921

 

 

13,738

 

Total other expenses

 

16,943

 

 

25,691

 

 

68,181

 

 

66,189

 

 
Income before income taxes/net investment loss before taxes

 

6,449

 

 

14,712

 

 

6,710

 

 

(10,722

)

Income tax provision

 

(3,412

)

 

(4,847

)

 

(1,486

)

 

(373

)

 
Net income after income taxes/net investment loss after taxes

 

3,037

 

 

9,865

 

 

5,224

 

 

(11,095

)

 
Net realized losses on investments, net of taxes

 

-

 

 

-

 

 

-

 

 

(26,319

)

Net unrealized appreciation on investments, net of taxes

 

-

 

 

-

 

 

-

 

 

14,675

 

Net realized/unrealized losses on investments

 

-

 

 

-

 

 

-

 

 

(11,644

)

 
Net income after income taxes/net decrease on net assets resulting from operations

 

3,037

 

 

9,865

 

 

5,224

 

 

(22,739

)

Less: income attributable to non-controlling interests

 

274

 

 

693

 

 

3,758

 

 

2,307

 

Total net income (loss) attributable to Medallion Financial Corp.

$

2,763

 

$

9,172

 

$

1,466

 

$

(25,046

)

Basic net income (loss) per share

$

0.11

 

$

0.38

 

$

0.06

 

$

(1.03

)

Diluted net income (loss) per share

 

0.11

 

 

0.38

 

 

0.06

 

 

(1.03

)

Weighted average common shares outstanding
Basic

 

24,361,680

 

 

24,237,841

 

 

24,342,979

 

 

24,214,978

 

Diluted

 

24,541,166

 

 

24,404,010

 

 

24,557,925

 

 

24,214,978

 

(1) Balance includes the nine months ended December 31, 2018 under Bank Holding Company Accounting and the three months ended March 31, 2018 under Investment Company Accounting.
   

MEDALLION FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

   
(Dollars in thousands, except shares and per share data) December 31, 2019 December 31, 2018
Assets  
Cash and federal funds sold

$

67,821

 

$

57,713

 

Equity investments and investment securities

 

59,077

 

 

54,521

 

Loans

 

1,160,855

 

 

1,017,882

 

Allowance for loan losses

 

(41,720

)

 

(36,395

)

Net loans receivable

 

1,119,135

 

 

981,487

 

Loan collateral in process of foreclosure

 

52,711

 

 

49,495

 

Goodwill and intangible assets

 

203,339

 

 

204,785

 

Other assets

 

43,957

 

 

33,845

 

Total assets

$

1,546,040

 

$

1,381,846

 

   
Liabilities  
Accounts payable, accrued expenses, and accrued interest payable

$

20,632

 

$

22,641

 

Deposits

 

951,651

 

 

848,040

 

Short-term borrowings

 

38,223

 

 

55,178

 

Deferred tax liabilities and other tax payables

 

10,486

 

 

6,973

 

Operating lease liabilities

 

12,738

 

 
Long-term debt

 

174,614

 

 

158,810

 

Total liabilities

 

1,208,344

 

 

1,091,642

 

   
Commitments and contingencies.  
Total stockholders’ equity

 

266,376

 

 

262,608

 

   
Non-controlling interests in consolidated subsidiaries

 

71,320

 

 

27,596

 

Total equity

 

337,696

 

 

290,204

 

   
Total liabilities and equity

$

1,546,040

 

$

1,381,846

 

   
Number of shares outstanding

 

24,646,559

 

 

24,434,357

 

Book value per share

$

10.81

 

$

10.75

 

 

Contacts

Company:
Alex E. Arzeno
Investor Relations
212-328-2176
InvestorRelations@medallion.com

Contacts

Company:
Alex E. Arzeno
Investor Relations
212-328-2176
InvestorRelations@medallion.com