8-K
Medallion Financial Corp (MFIN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENTREPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 30, 2020
MEDALLION FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37747 | 04-3291176 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
437 Madison Avenue
New York, New York 10022
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (212) 328-2100
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<br>240.14d-2(b)) |
| --- | --- |
| ☐Pre-commencement | communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR<br>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<br><br><br>9.000% Senior Notes due 2021 | MFIN<br><br><br>MFINL | NASDAQ Global Select Market<br><br><br>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 ended March 31, 2020.
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 April 30, 2020 |
|---|
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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: April 30, 2020
| MEDALLION FINANCIAL CORP. | |
|---|---|
| By: | /s/ Larry D. Hall |
| Name: Larry D. Hall | |
| Title: Chief Financial Officer |
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EX-99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE:
MEDALLION FINANCIAL CORP. REPORTS 2020 FIRST QUARTER RESULTS
NEW YORK, NY – April 30, 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 2020 first quarter results.
2020 First Quarter Highlights
| • | Net loss was $13.6 million, or $0.56 per share, compared to a net income of $1.2 million, or $0.05 per<br>share, in the prior year period |
|---|---|
| • | COVID-19-related loan loss<br>provisions, non-cash NYC taxi medallion value write-downs, and a non-cash write-off of a legacy<br>non-core portfolio company produced the net loss for the quarter |
| --- | --- |
| • | Net interest income was $26.5 million, primarily reflecting the consumer lending segments, a 19% increase<br>from the 2019 first quarter |
| --- | --- |
| • | Net interest margin was 8.80% in the 2020 first quarter, compared to 8.56% a year ago |
| --- | --- |
| • | Net cash provided by operating activities was $18.7 million, compared to $11.1 million in the 2019<br>first quarter |
| --- | --- |
| • | The recreation and home improvement loan portfolios grew 20% and 32% in the quarter from a year ago<br> |
| --- | --- |
| • | Consumer originations were $103.1 million for the first quarter, up from $90.3 million in the<br>prior year period |
| --- | --- |
| • | Medallion Bank’s Tier 1 leverage ratio at quarter-end was 18.78%<br> |
| --- | --- |
| • | Total assets were $1.53 billion as of March 31, 2020 |
| --- | --- |
Andrew Murstein, President of Medallion, stated, “The Company continued its positive momentum from last year into 2020, and had a strong start to the year, but the COVID-19 pandemic and related economic impact, among other factors, led us to increase reserves. Transaction activity during the quarter indicated the need to lower medallion collateral values in New York City, which reduced earnings by over $10 million. While it is too early to predict how our consumer portfolio will be affected by the current economic disruption, we structured the Bank with resilience in mind and remain optimistic that the Bank is well-positioned to respond to opportunities to grow market share, just as it did in the last recession. While there are no assurances for the future, it is comforting to note that during the last recession the Bank’s consumer loans performed well and the Bank was profitable in every single quarter.”
Mr. Murstein continued, “During the quarter, we continued our strategy of growing our consumer and commercial segments, while lowering our medallion exposure. With $224 million in capital, Medallion Bank remains well-capitalized, and we will lean on its experience from the last recession to move forward in a cautious yet efficient manner. The Bank has not yet seen meaningful deterioration in its consumer credit quality and delinquency, which, at quarter-end, was only slightly above year-end and quarter-end last year. The Bank continues to focus on growing its home improvement and recreation lending portfolios, and hopes to take market share that has become available as a result of the current economic environment. The Bank also entered into its first fintech strategic partnership. We expect to continue to engage with companies in that space, many of which now have an enhanced need to work with banks like ours. The Company has also been exploring programs offered by the federal government.”
“Medallion Capital, the main component of our commercial segment, also continued to be profitable during the quarter. We are closely monitoring its portfolio companies, many of which have taken appropriate steps to ensure they obtain the liquidity needed to move forward in this current environment through the federal relief programs they qualified for.”
Larry Hall, Medallion’s CFO stated, “It is evident that COVID-19 has had, and will continue to have, a severe effect on the NYC economy and the taxi industry, with the final impact yet to be known. In our medallion portfolio, we reduced the net collateral value in the New York City market by 25% from $172,500 gross or $167,000 net, to $130,000 gross, or $124,500 net. The Company’s net medallion loan portfolio, excluding loan collateral in the process of foreclosure, was $96 million, less than 10% of our assets, at quarter-end. The charges for lowering the medallion values in the quarter were non-cash, while our consumer and commercial segments continued to produce significant cash income for the Company. We also took a charge on a legacy non-core sports-related equity investment for $3.5 million pre-tax in the first quarter as we continue to focus on the future of our commercial and consumer lending segments. Lastly, in April we began additional cost-cutting measures, with the goal of making the Company more efficient and increasing earnings.”
Mr. Murstein concluded, “In closing, we want to thank all of our employees across all of our segments for the dedication they have shown during these unprecedented times, as we remain optimistic for the future of the Company and our country.”
Consumer Lending Segments
The Company’s net consumer lending portfolio was $965.3 million as of March 31, 2020, compared to $940.0 million at the end of 2019, and $792.2 million at March 31, 2019. The gross consumer lending portfolio was $991.1 million as of March 31, 2020, compared to $960.7 million at the end of 2019, and $803.3 million at March 31, 2019. Net interest income for the 2020 first quarter was $27.4 million compared to $23.1 million in the 2019 first quarter, a 19% increase. The average interest rate on the portfolio was 14.42% at March 31, 2020 compared to 14.94% in the prior year period. Consumer loan delinquencies 90 days or more past due were $5.4 million, or 0.56% of total gross loans as of March 31, 2020, compared to $3.4 million, or 0.44%, a year ago.
Commercial Lending Segment
The Company’s net commercial lending portfolio was $64.9 million as of March 31, 2020, compared to $66.4 million at the end of 2019, and $51.2 million at March 31, 2019. The average interest rate on the portfolio was 13.36%, compared to 13.94% a year ago. Net income for the first quarter was $0.155 million, compared to $0.654 million in 2019. Medallion Capital remains well-capitalized.
Medallion Lending Segment
The Company’s net medallion lending portfolio, excluding loan collateral in the process of foreclosure, as of March 31, 2020 was $96.2 million, compared to $140.4 million at March 31, 2019, a 31% decrease. The average interest rate on the medallion loan portfolio was 4.21%, compared to 4.40% a year ago. Total medallion delinquencies 90 days or more past due were $1.5 million, or 1.21% of total gross loans at March 31, 2020, compared to $4.0 million, or 2.47%, in the prior year period. Medallion-related assets comprised 9% of our total assets as of March 31, 2020, compared to 10% at year-end, and 13% a year ago.
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Conference Call Information
The Company will be hosting a conference call to discuss the first quarter financial results on Friday, May 1, 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 Medallion Financial’s website athttp://www.medallion.com/investors.html.
A replay will be available following the end of the call through Friday, May 8, 2020, by telephoneat (844) 512-2921 (toll-free) or (412) 317-6671 (direct), passcode 13703156. A webcast replay of the call will be available at http://www.medallion.com/investors.htmluntil the next quarter’s results are announced.
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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,net interest income and expenses, other expenses, earnings, and growth. These statements are often, but not always, made through the use of words or phrases such as “will” and “continue” or the negative version of thosewords or other comparable words or phrases of a future or forward-looking nature. These statements relate to future public announcements of our earnings, expectations regarding medallion loan portfolio, the potential for future asset growth andmarket share opportunities. Medallion’s actual results may differ significantly from the results discussed in such forward-looking statements. For example, statements about the effects of the COVID-19pandemic on Medallion’s business, operations, financial performance and prospects constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in thoseforward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond Medallion’s control, including the scope and duration of the pandemic, actions taken by governmental authorities inresponse to the pandemic, and the direct and indirect impact of the pandemic on Medallion, its customers and third parties. In addition to risks related to the ongoing COVID-19 pandemic, for a descriptionof certain risks to which Medallion is or may be subject, please refer to the factors discussed under the heading “Risk Factors” in Medallion Financial’s 2019 Annual Report on Form 10-K.
Company Contact:
Alex E. Arzeno
Investor Relations
212-328-2176
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MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended<br>March 31, | ||||||
|---|---|---|---|---|---|---|
| (Dollars in thousands, except per share data) | 2020 | 2019 | ||||
| Total interest income | $ | 35,542 | **** | $ | 30,043 | |
| Total interest expense | **** | 9,000 | **** | 7,722 | ||
| Net interest income | **** | 26,542 | **** | 22,321 | ||
| Provision for loan losses | **** | 16,541 | **** | 13,343 | ||
| Net interest income after provision for loan losses | **** | 10,001 | **** | 8,978 | ||
| Other income (loss) | ||||||
| Gain on the extinguishment of debt | **** | — | **** | 4,145 | ||
| Sponsorship and race winnings | **** | 2,573 | **** | 3,179 | ||
| Change in collateral on loans in process of foreclosure | **** | (6,286 | ) | (2,119 | ) | |
| Impairment on equity investments | **** | (3,559 | ) | — | ||
| Other income | **** | 292 | **** | 1,658 | ||
| Total other income (loss) | **** | (6,980 | ) | 6,863 | ||
| Other expenses | ||||||
| Salaries and employee benefits | **** | 6,933 | **** | 5,341 | ||
| Professional fees | **** | 3,589 | **** | 1,636 | ||
| Race team related expense | **** | 2,130 | **** | 1,998 | ||
| Loan servicing fees | **** | 1,612 | **** | 1,194 | ||
| Collection costs | **** | 1,229 | **** | 638 | ||
| Other expenses | **** | 3,778 | **** | 3,895 | ||
| Total other expenses | **** | 19,271 | **** | 14,702 | ||
| Income (loss) before income taxes | **** | (16,250 | ) | 1,139 | ||
| Income tax benefit | **** | 3,249 | **** | 256 | ||
| Net income (loss) after taxes | **** | (13,001 | ) | 1,395 | ||
| Less: income attributable to the non-controlling interest | **** | 642 | **** | 167 | ||
| Total net income (loss) attributable to Medallion Financial Corp. | $ | (13,643 | ) | $ | 1,228 | |
| Basic net income (loss) per share | $ | (0.56 | ) | $ | 0.05 | |
| Diluted net income (loss) per share | **** | (0.56 | ) | 0.05 | ||
| Weighted average common shares outstanding | ||||||
| Basic | **** | 24,401,773 | **** | 24,288,263 | ||
| Diluted | **** | 24,401,773 | **** | 24,616,890 |
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MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (Dollars in thousands, except shares and per share data) | March 31, 2020 | December 31, 2019 | |||
|---|---|---|---|---|---|
| Assets | |||||
| Cash and federal funds sold | $ | 55,497 | $ | 67,821 | |
| Equity investments and investment securities | **** | 56,468 | 59,077 | ||
| Loans | **** | 1,183,779 | 1,160,855 | ||
| Allowance for loan losses | **** | (54,057 | (46,093 | ) | |
| Net loans receivable | **** | 1,129,722 | 1,114,762 | ||
| Loan collateral in process of foreclosure | **** | 46,817 | 52,711 | ||
| Goodwill and intangible assets | **** | 202,978 | 203,339 | ||
| Other assets | **** | 42,913 | 43,957 | ||
| Total assets | $ | 1,534,395 | $ | 1,541,667 | |
| Liabilities | |||||
| Accounts payable, accrued expenses, and accrued interest payable | $ | 23,399 | $ | 20,632 | |
| Deposits | **** | 960,126 | 951,651 | ||
| Short-term borrowings | **** | 60,904 | 38,223 | ||
| Deferred tax liabilities and other tax payables | **** | 6,239 | 9,341 | ||
| Operating lease liabilities | **** | 12,213 | 12,738 | ||
| Long-term debt | **** | 150,941 | 174,614 | ||
| Total liabilities | **** | 1,213,822 | 1,207,199 | ||
| Commitments and contingencies | |||||
| Total stockholders’ equity | **** | 250,118 | 263,148 | ||
| Non-controlling interests in consolidated subsidiaries | **** | 70,455 | 71,320 | ||
| Total equity | **** | 320,573 | 334,468 | ||
| Total liabilities and equity | $ | 1,534,395 | $ | 1,541,667 | |
| Number of shares outstanding | **** | 24,806,656 | 24,646,559 | ||
| Book value per share | $ | 10.08 | $ | 10.68 |
All values are in US Dollars.