MFIN 8-K
Medallion Financial Corp (MFIN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 20, 2020
MEDALLION FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-37747
(Commission File Number)
04-3291176
(IRS Employer Identification No.)
437 Madison Avenue
New York, New York 10022
(Address of principal executive offices) (Zip code)
(212) 328-2100
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Common Stock, par value $0.01 per share 9.000% Senior Notes due 2021 |
MFIN MFINL |
NASDAQ Global Select Market NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
Medallion Financial Corp. (the “Company”), issued a press release to the news media announcing, among other things, the Company’s results for the quarter and year ended December 31, 2019.
A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The information in the press release is being furnished, not filed, pursuant to Item 2.02. Accordingly, the information in the press release will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits |
The following exhibits are being filed with this Current Report on Form 8-K:
| 99.1 | Press release, dated February 20, 2020 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 20, 2020
| MEDALLION FINANCIAL CORP. | ||
| By: | /s/ Larry D. Hall | |
| Name: Larry D. Hall | ||
| Title: Chief Financial Officer | ||
Exhibit 99.1
FOR IMMEDIATE RELEASE:
MEDALLION FINANCIAL CORP. REPORTS 2019 FOURTH QUARTER
AND FULL YEAR RESULTS
NEW YORK, NY – February 20, 2020 – 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.
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* * *
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.
Company Contact:
Alex E. Arzeno
Investor Relations
212-328-2176
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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 | ||||||||||||
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|||||||||
| 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 | ||||||||||||
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| Net interest income after provision for loan losses |
20,425 | 12,776 | 54,504 | 13,461 | ||||||||||||
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| Other income (loss) |
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| 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 | ) | ||||||||||
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| Total other income |
2,967 | 27,627 | 20,387 | 42,006 | ||||||||||||
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| Other expenses |
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| 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 | ||||||||||||
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| Total other expenses |
16,943 | 25,691 | 68,181 | 66,189 | ||||||||||||
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| Income before income taxes/net investment loss |
6,449 | 14,712 | 6,710 | (10,722 | ) | |||||||||||
| Income tax provision |
(3,412 | ) | (4,847 | ) | (1,486 | ) | (373 | ) | ||||||||
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| Net income after income taxes/net investment loss after taxes |
3,037 | 9,865 | 5,224 | (11,095 | ) | |||||||||||
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| Net realized losses on investments, net of taxes |
— | — | — | (26,319 | ) | |||||||||||
| Net unrealized appreciation on investments, net of taxes |
— | — | — | 14,675 | ||||||||||||
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| Net realized/unrealized losses on investments |
— | — | — | (11,644 | ) | |||||||||||
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| 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 | ||||||||||||
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| Total net income (loss) attributable to Medallion Financial Corp. |
$ | 2,763 | $ | 9,172 | $ | 1,466 | $ | (25,046 | ) | |||||||
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| 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 | ) | |||||||||||
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| 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. |
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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 | ) | ||||
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| Net loans receivable |
1,119,135 | 981,487 | ||||||
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| Loan collateral in process of foreclosure |
52,711 | 49,495 | ||||||
| Goodwill and intangible assets |
203,339 | 204,785 | ||||||
| Other assets |
43,957 | 33,845 | ||||||
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| Total assets |
$ | 1,546,040 | $ | 1,381,846 | ||||
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| Liabilities |
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| 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 | ||||||
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| Total liabilities |
1,208,344 | 1,091,642 | ||||||
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| Commitments and contingencies |
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| Total stockholders’ equity |
266,376 | 262,608 | ||||||
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| Non-controlling interests in consolidated subsidiaries |
71,320 | 27,596 | ||||||
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| Total equity |
337,696 | 290,204 | ||||||
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| Total liabilities and equity |
$ | 1,546,040 | $ | 1,381,846 | ||||
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| Number of shares outstanding |
24,646,559 | 24,434,357 | ||||||
| Book value per share |
$ | 10.81 | $ | 10.75 | ||||
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