Medallion Financial Corp. Reports 2024 Second Quarter Results

Rhea-AI Summary

Medallion Financial Corp. (NASDAQ: MFIN) reported Q2 2024 results on July 30, 2024. The company achieved net income of $7.1 million ($0.30 per share), a decline from $14.2 million ($0.62 per share) in Q2 2023. Net interest income rose 7% to $49.9 million. Loan originations totaled $309.1 million, down from $346.3 million a year ago. Total loans grew 11% to $2.4 billion. The credit loss provision increased to $18.6 million, up from $8.5 million. The company repurchased 183,900 shares at $8.24 per share and declared a $0.10 per share dividend. The recreation lending segment saw originations of $209.6 million and loans grew 12% to $1.5 billion. Home improvement loan originations were $68.0 million, down from $117.0 million. Commercial loans reached $110.2 million. The company collected $2.3 million on taxi medallion-related assets, down from $10.6 million.

Positive

• Net interest income grew 7% to $49.9 million.
• Total loans increased by 11% to $2.4 billion.
• Recreation loans grew 12% to $1.5 billion.
• Declared a quarterly dividend of $0.10 per share.
• Repurchased 183,900 shares at $8.24 per share.

Negative

• Net income decreased to $7.1 million from $14.2 million.
• Loan originations fell to $309.1 million from $346.3 million.
• Credit loss provision increased to $18.6 million from $8.5 million.
• Collected $2.3 million on taxi medallion-related assets, down from $10.6 million.

Insights

Financial Analyst

Medallion Financial Corp.'s Q2 2024 results present a mixed picture with some positive developments and areas of concern. Net income decreased significantly to $7.1 million ($0.30 per share) from $14.2 million ($0.62 per share) in the prior year quarter, indicating a substantial decline in profitability. However, there are several positive indicators:

• Net interest income grew 7% to $49.9 million, reaching an all-time high.
• Loan portfolio expanded 11% to $2.4 billion, showing continued growth.
• Recreation lending segment, the largest portion of the portfolio, grew 12% to $1.5 billion.

The increased credit loss provision of $18.6 million, up from $8.5 million in the prior year quarter, is a point of concern. This could indicate potential credit quality issues or a more conservative approach to risk management. The decline in cash collected on taxi medallion-related assets from $10.6 million to $2.3 million suggests this legacy business continues to wind down.

The company's focus on recreation and home improvement lending appears to be paying off, with both segments showing growth. However, the slight increase in loans 90 days or more past due in these segments warrants monitoring. The company's ability to maintain a healthy net interest margin of 8.42% on net loans, despite the challenging interest rate environment, is commendable.

Overall, while the headline earnings number is disappointing, the underlying business appears to be growing steadily. Investors should keep an eye on credit quality metrics and the company's ability to maintain its net interest margin in the coming quarters.

Market Research Analyst

Medallion Financial's Q2 results offer insights into consumer behavior and market trends in specialty finance. The 12% growth in the recreation lending segment to $1.5 billion suggests continued strong demand for recreational vehicles and boats, despite economic uncertainties. This could indicate that consumers are prioritizing leisure activities and experiences, possibly as a lasting effect of post-pandemic lifestyle changes.

However, the slowdown in home improvement lending is noteworthy. Originations in this segment decreased from $117.0 million to $68.0 million year-over-year, a significant drop of about 42%. This could be attributed to several factors:

• Rising interest rates making home improvement loans less attractive
• A cooling housing market reducing the incentive for homeowners to invest in upgrades
• Inflationary pressures causing consumers to postpone non-essential home projects

The company's pivot towards fintech partnerships, as mentioned in their business description, is an interesting development. This move could help Medallion diversify its revenue streams and tap into the growing digital lending market. However, the report doesn't provide specific metrics on this initiative's performance, which would be valuable for assessing its impact.

The reduction in taxi medallion-related assets to just $10.0 million, less than 0.5% of total assets, marks the near-completion of Medallion's transition away from its original business model. This transformation demonstrates the company's adaptability in the face of industry disruption, a important trait in the rapidly evolving financial services sector.

In conclusion, Medallion's results reflect broader economic trends, including the resilience of the leisure industry and the challenges facing the housing market. The company's strategic shift towards growing consumer lending segments and fintech partnerships positions it to capitalize on evolving market opportunities, though execution risks remain.

NEW YORK, July 30, 2024 (GLOBE NEWSWIRE) -- Medallion Financial Corp. (NASDAQ: MFIN, “Medallion” or the “Company”), a specialty finance company that originates and services loans in various consumer and commercial industries, along with offering loan origination services to fintech strategic partners, announced today its results for the quarter ended June 30, 2024.

2024 Second Quarter Highlights

• Net income was $7.1 million, or $0.30 per share, compared to $14.2 million, or $0.62 per share, in the prior year quarter.
• $2.3 million of cash was collected on taxi medallion-related assets, compared to $10.6 million of cash collected, in the prior year quarter.
• Net interest income grew 7% to $49.9 million from $46.7 million in the prior year quarter.
• Net interest margin on net loans was 8.42%, compared to 8.77% in the prior year quarter, and on gross loans it was 8.12%, compared to 8.48% in the prior year quarter.
• Loan originations were $309.1 million, compared to $346.3 million in the prior year quarter.
• Loans grew 11% to $2.4 billion as of June 30, 2024, compared to $2.2 billion a year ago.
• The credit loss provision increased to $18.6 million from $8.5 million in the prior year quarter. The total provision included $1.0 million of net taxi medallion recoveries in the current quarter compared to $5.3 million of net taxi medallion recoveries in the prior year quarter.
• The Company repurchased 183,900 shares of common stock at an average cost of $8.24 per share.
• The Company declared and paid a quarterly cash dividend of $0.10 per share.
  

Executive Commentary – Andrew Murstein, President of Medallion

"Overall this was another solid quarter for us. Notable in the quarter, our earnings included approximately $0.12 per share of additional allowance tied to the growth of our loan portfolio, primarily within our recreation segment, which grew 10% from the first quarter to $1.5 billion, with over $200 million in originations this quarter. We continue to be pleased with the credit performance of that segment. Additionally, our results reflect atypical professional fees in the quarter associated with our successful defense of an activist proxy campaign.

Our net interest income reached $49.9 million, an all-time high, grew 4% from the prior quarter, and we saw our net charge-offs drop from what we experienced in the first quarter. We remain cautiously optimistic that the solid performance of our loans and the strong credit quality of our overall loan portfolio will continue. Despite some contraction over the past few years, due mainly to the current interest rate environment, our net interest margin increased two basis points from the first quarter.

Lastly, unlike the first quarter, our commercial division did not have any significant equity gains this quarter. Their net interest margin was more than 9% as they grew their loan portfolio by 19% from last year.”

Business Segment Highlights

Recreation Lending Segment

• Originations were $209.6 million during the quarter, compared to $190.0 million a year ago.
• Recreation loans grew 12% to $1.5 billion as of June 30, 2024, compared to $1.3 billion a year ago.
• Recreation loans were 63% of total loans as of June 30, 2024, compared to 62% a year ago.
• Net interest income grew 9% to $36.5 million for the quarter, from $33.5 million in the prior year quarter.
• The average interest rate was 14.80% at quarter-end, compared to 14.62% a year ago.
• Recreation loans 90 days or more past due were $5.9 million, or 0.41% of gross recreation loans, as of June 30, 2024, compared to $5.0 million, or 0.39%, a year ago.
• Allowance for credit loss rate was 4.35% as of June 30, 2024, compared to 4.07% a year ago.
  

Home Improvement Lending Segment

• Originations were $68.0 million during the quarter, compared to $117.0 million a year ago.
• Home improvement loans grew 6% to $773.2 million as of June 30, 2024, compared to $728.5 million a year ago.
• Home improvement loans were 32% of total loans as of June 30, 2024, compared to 34% a year ago.
• Net interest income grew 4% to $11.5 million for the quarter, from $11.1 million in the prior year quarter.
• The average interest rate was 9.71% at quarter-end, compared to 9.21% a year ago.
• Home improvement loans 90 days or more past due were $1.3 million, or 0.17% of gross home improvement loans, as of June 30, 2024, compared to $1.1 million, or 0.16%, a year ago.
• Allowance for credit loss rate was 2.38% as of June 30, 2024, compared to 2.26% a year ago.
  

Commercial Lending Segment

• Commercial loans were $110.2 million at June 30, 2024, compared to $92.6 million a year ago.
• The average interest rate on the portfolio was 13.05%, compared to 12.64 % a year ago.

Taxi Medallion Lending Segment

• The Company collected $2.3 million of cash on taxi medallion-related assets during the quarter.
• Total net taxi medallion assets declined to $10.0 million (comprised of $2.1 million of loans net of allowance for credit losses and $7.9 million of loan collateral in process of foreclosure), a 44% reduction from a year ago, and represented less than half a percent of the Company’s total assets as of June 30, 2024.

Capital Allocation

Quarterly Dividend

• The Board of Directors declared a quarterly dividend of $0.10 per share, payable on August 30, 2024 to shareholders of record at the close of business on August 15, 2024.
  

Stock Repurchase Plan

• During the second quarter, the Company repurchased 183,900 shares of its common stock at an average cost of $8.24 per share, for a total of $1.5 million.
• As of June 30, 2024 the Company had $16.4 million remaining under its $40 million share repurchase program

Conference Call Information

The Company will host a conference call to discuss its second quarter financial results tomorrow, Wednesday, July 31, 2024 at 9:00 a.m. Eastern time.

In connection with its earnings release, the Company has updated its quarterly supplement presentation, which is now available at www.medallion.com.

How to Participate

• Date: Wednesday, July 31, 2024
• Time: 9:00 a.m. Eastern time
• U.S. dial-in number: (833) 816-1412
• International dial-in number: (412) 317-0504
• Live webcast: Link to Webcast of 2Q24 Earnings Call
  

A link to the live audio webcast of the conference call will also be available at the Company’s IR website.

Replay Information

The webcast replay will be available at the Company's IR website until the next quarter’s results are announced.

The conference call replay will be available following the end of the call through Wednesday, August 7.

• U.S. dial-in number: (844) 512-2921
• International dial-in number: (412) 317-6671
• Access ID: 1019 0811
  

About Medallion Financial Corp.

Medallion Financial Corp. (NASDAQ:MFIN) and its subsidiaries originate and service a growing portfolio of consumer loans and mezzanine loans in various industries. Key industries served include recreation (towable RVs and marine) and home improvement (replacement roofs, swimming pools, and windows). Medallion Financial Corp. is headquartered in New York City, NY, and its largest subsidiary, Medallion Bank, is headquartered in Salt Lake City, Utah. For more information, please visit www.medallion.com.

Forward-Looking Statements
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, growth, and our growth strategy. These statements are often, but not always, made using words or phrases such as “will” and “continue” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These statements relate to future public announcements of our earnings, the impact of the pending SEC litigation, expectations regarding our loan portfolio, including collections on our medallion loans, the potential for future asset growth, and market 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 current economy, whether inflation or the risk of recession, 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 those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond Medallion’s control. In addition to risks relating to the current economy, a description of certain risks to which Medallion is or may be subject, including risks related to the pending SEC litigation, please refer to the factors discussed under the heading “Risk Factors” in Medallion’s 2023 Annual Report on Form 10-K.

Company Contact:
Investor Relations
212-328-2176
InvestorRelations@medallion.com

MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands, except share and per share data)		June 30, 2024				December 31, 2023				June 30, 2023
Assets
Cash, cash equivalents, and federal funds sold		$	157,961			$	149,845			$	124,554
Investment and equity securities			66,625				65,712				65,096
Loans			2,385,590				2,215,886				2,156,998
Allowance for credit losses			(89,788	)			(84,235	)			(74,971	)
Net loans receivable			2,295,802				2,131,651				2,082,027
Goodwill and intangible assets, net			170,672				171,394				172,118
Property, equipment, and right-of-use lease asset, net			14,094				14,076				13,343
Accrued interest receivable			13,299				13,538				13,345
Loan collateral in process of foreclosure			9,359				11,772				16,803
Other assets			33,064				29,839				31,851
Total assets		$	2,760,876			$	2,587,827			$	2,519,137
Liabilities
Deposits		$	2,006,782			$	1,866,657			$	1,813,785
Long-term debt			230,803				235,544				178,128
Short-term borrowings			37,500				8,000				67,880
Deferred tax liabilities, net			22,394				21,207				26,840
Operating lease liabilities			6,071				7,019				7,629
Accrued interest payable			7,945				6,822				4,449
Accounts payable and accrued expenses			26,592				30,804				32,662
Total liabilities			2,338,087				2,176,053				2,131,373
Total stockholders’ equity			354,001				342,986				318,976
Non-controlling interest in consolidated subsidiaries			68,788				68,788				68,788
Total equity			422,789				411,774				387,764
Total liabilities and equity		$	2,760,876			$	2,587,827			$	2,519,137
Number of shares outstanding			23,211,990				23,449,646				23,345,017
Book value per share		$	15.25			$	14.63			$	13.66

MEDALLION FINANCIAL CORP.‌
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)‌
		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in thousands, except share and per share data)		2024				2023				2024				2023
Total interest income		$	70,704			$	61,726			$	137,774			$	117,568
Total interest expense			20,836				15,035				39,989				27,275
Net interest income			49,868				46,691				97,785				90,293
Provision for credit losses			18,577				8,476				35,778				12,514
Net interest income after provision for credit losses			31,291				38,215				62,007				77,779
Other income (loss)
Gain (loss) on equity investments			(512	)			99				3,655				9
Gain on sale of loans and taxi medallions			242				1,306				830				3,161
Write-down of loan collateral in process of foreclosure			—				(21	)			—				(273	)
Other income			1,369				558				2,017				1,128
Total other income, net			1,099				1,942				6,502				4,025
Other expenses
Salaries and employee benefits			9,435				9,339				18,892				18,175
Loan servicing fees			2,692				2,361				5,162				4,583
Collection costs			1,659				1,608				3,126				3,146
Regulatory fees			888				781				1,865				1,463
Professional fees			1,845				1,368				2,616				3,075
Rent expense			698				603				1,355				1,226
Amortization of intangible assets			362				363				723				723
Other expenses			2,416				2,580				4,481				5,004
Total other expenses			19,995				19,003				38,220				37,395
Income before income taxes			12,395				21,154				30,289				44,409
Income tax provision			3,782				5,472				10,140				11,854
Net income after taxes			8,613				15,682				20,149				32,555
Less: income attributable to the non-controlling interest			1,512				1,512				3,024				3,024
Total net income attributable to Medallion Financial Corp.		$	7,101			$	14,170			$	17,125			$	29,531
Basic net income per share		$	0.31			$	0.63			$	0.76			$	1.32
Diluted net income per share		$	0.30			$	0.62			$	0.73			$	1.29
Weighted average common shares outstanding
Basic			22,598,102				22,488,463				22,619,743				22,416,089
Diluted			23,453,162				22,853,927				23,609,104				22,915,094
Dividends declared per common share		$	0.10			$	0.08			$	0.20			$	0.16

FAQ

What were Medallion Financial Corp.'s earnings for Q2 2024?

Medallion Financial Corp. reported net income of $7.1 million or $0.30 per share for Q2 2024.

How much did Medallion Financial Corp.'s net interest income grow in Q2 2024?

Net interest income grew by 7% to $49.9 million in Q2 2024.

What was the total loan origination amount for Medallion Financial Corp. in Q2 2024?

Total loan originations amounted to $309.1 million in Q2 2024.

How did Medallion Financial Corp.'s credit loss provision change in Q2 2024?

The credit loss provision increased to $18.6 million from $8.5 million compared to the prior year quarter.

What is the dividend declared by Medallion Financial Corp. for Q2 2024?

Medallion Financial Corp. declared a quarterly dividend of $0.10 per share for Q2 2024.