0001564590-21-024056.txt : 20210505 0001564590-21-024056.hdr.sgml : 20210505 20210505161201 ACCESSION NUMBER: 0001564590-21-024056 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 110 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210505 DATE AS OF CHANGE: 20210505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDALLION FINANCIAL CORP CENTRAL INDEX KEY: 0001000209 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 043291176 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37747 FILM NUMBER: 21893369 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE 38 TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123282153 MAIL ADDRESS: STREET 1: 437 MADISON AVENUE STREET 2: 38TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 10-Q 1 mfin-10q_20210331.htm 10-Q mfin-10q_20210331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 001-37747

 

MEDALLION FINANCIAL CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

04-3291176

(State of Incorporation)

(IRS Employer

Identification No.)

437 MADISON AVENUE, 38th Floor

NEW YORK, New York 10022

(Address of Principal Executive Offices) (Zip Code)

(212) 328-2100

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading symbols

 

Name of each exchange

on which registered

Common Stock, par value $0.01 per share

 

 

MFIN

 

 

NASDAQ Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

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.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES      NO  

 

The number of outstanding shares of registrant’s Common Stock, par value $0.01, as of May 3, 2021 was 25,033,486.

 

 


 

 

MEDALLION FINANCIAL CORP.

FORM 10-Q

TABLE OF CONTENTS

 

 

The following discussion should be read in conjunction with our financial statements and the notes to those statements and other financial information appearing elsewhere in this report.

This report contains forward-looking statements relating to future events and future performance applicable to us within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions, or future strategies that are signified by the words expects, anticipates, intends, believes, or similar language. In connection with certain forward-looking statements contained in this Form 10-Q and those that may be made in the future by or on behalf of the Company, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. The forward-looking statements contained in this Form 10-Q were prepared by management and are qualified by, and subject to, significant business, economic, competitive, regulatory, and other uncertainties and contingencies, all of which are difficult or impossible to predict, and many of which are beyond control of the Company. In particular, any forward-looking statements are subject to the risks and great uncertainties associated with the ongoing COVID-19 pandemic and the related impact on the US and global economies.

All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statements. The statements have not been audited by, examined by, compiled by, or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Form 10-Q should consider these facts in evaluating the information contained herein. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in the forward-looking statements contained in this Form 10-Q. The inclusion of the forward-looking statements contained in this Form 10-Q should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Form 10-Q will be achieved.

In light of the foregoing, readers of this Form 10-Q are cautioned not to place undue reliance on the forward-looking statements contained herein. You should consider these risks and those described under Risk Factors in the Company’s Annual Report on Form 10-K and others that are detailed in the other reports that the Company files from time to time with the Securities and Exchange Commission.

Page 2 of 60


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BASIS OF PREPARATION

We, Medallion Financial Corp., or the Company, are a finance company, organized as a Delaware corporation that includes Medallion Bank, our primary operating subsidiary. In recent years, our strategic growth has been through Medallion Bank, which originates consumer loans for the purchase of recreational vehicles, boats, and trailers and to finance home improvements. We historically have had a leading position in originating, acquiring, and servicing loans that finance taxi medallions and various types of commercial businesses.

Since Medallion Bank acquired a consumer loan portfolio and began originating consumer loans in 2004, it has increased its consumer loan portfolio at a compound annual growth rate of 16% (19% if there had been no loan sales during 2016, 2017, and 2018). In January 2017, we announced our plans to transform our overall strategy. We have transitioned away from medallion lending and have placed our strategic focus on our growing consumer finance portfolio. Total assets under management, which includes assets serviced for third-party investors, were $1.8 billion as of March 31, 2021 and December 31, 2020, and have grown at a compound annual growth rate of 9% from $215,000,000 at the end of 1996.

We conduct our business through various wholly-owned subsidiaries including:

 

Medallion Bank, or the Bank, an FDIC-insured industrial bank that originates consumer loans, raises deposits, and conducts other banking activities, and has a separate board of directors with a majority of independent directors;

 

Medallion Funding LLC, or Medallion Funding, a Small Business Investment Company, or SBIC, our primary taxi medallion lending company;

 

Medallion Capital, Inc., or Medallion Capital, an SBIC which conducts a mezzanine financing business;

 

Freshstart Venture Capital Corp., or Freshstart, an SBIC which originates and services taxi medallion and commercial loans; and

 

Medallion Servicing Corp., or MSC, which provides loan services to the Bank.

Our other consolidated subsidiaries are comprised of Medallion Fine Art, Inc., CDI-LP Holdings, Inc., Medallion Motorsports, LLC, and RPAC Racing LLC, or RPAC. In addition, we make both marketable and nonmarketable equity investments, primarily as a function of our mezzanine lending business.

Our consolidated balance sheet as of March 31, 2021, and the related consolidated statements of operations, consolidated statements of other comprehensive income/(loss), consolidated statements of stockholders’ equity and cash flows for the three months then ended included in Item 1 have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the US have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly our consolidated financial position and results of operations. The results of operations for the three months ended March 31, 2021 may not be indicative of future performance. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

Page 3 of 60


 

 

MEDALLION FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

(Dollars in thousands, except share and per share data)

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents(1)

 

$

69,477

 

 

$

54,743

 

Federal funds sold

 

 

70,800

 

 

 

57,297

 

Investment securities

 

 

38,081

 

 

 

46,792

 

Equity investments

 

 

9,529

 

 

 

9,746

 

Loans

 

 

1,259,215

 

 

 

1,229,838

 

Allowance for loan losses

 

 

(57,809

)

 

 

(57,548

)

Net loans receivable

 

 

1,201,406

 

 

 

1,172,290

 

Accrued interest receivable

 

 

9,215

 

 

 

10,338

 

Income tax receivable

 

 

859

 

 

 

1,757

 

Property, equipment, and right-of-use lease asset, net

 

 

11,858

 

 

 

12,404

 

Loan collateral in process of foreclosure(2)

 

 

50,733

 

 

 

54,560

 

Goodwill

 

 

150,803

 

 

 

150,803

 

Intangible assets, net

 

 

50,729

 

 

 

51,090

 

Other assets

 

 

25,260

 

 

 

20,591

 

Total assets

 

$

1,688,750

 

 

$

1,642,411

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses(3)

 

$

17,746

 

 

$

14,902

 

Accrued interest payable

 

 

4,762

 

 

 

4,673

 

Deposits(4)

 

 

1,084,074

 

 

 

1,065,398

 

Short-term borrowings

 

 

73,937

 

 

 

87,334

 

Deferred tax liabilities, net

 

 

3,528

 

 

 

807

 

Operating lease liabilities

 

 

10,464

 

 

 

11,018

 

Long-term debt(5)

 

 

182,225

 

 

 

153,718

 

Total liabilities

 

 

1,376,736

 

 

 

1,337,850

 

Commitments and contingencies(6)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock (1,000,000 shares of $0.01 par value stock authorized-none outstanding)

 

 

 

 

 

Common stock (50,000,000 shares of $0.01 par value stock authorized- 27,985,598 shares at March 31, 2021 and 27,828,871 shares at December 31, 2020 issued)

 

 

280

 

 

 

278

 

Additional paid in capital

 

 

278,035

 

 

 

277,539

 

Treasury stock (2,951,243 shares at March 31, 2021 and December 31, 2020)

 

 

(24,919

)

 

 

(24,919

)

Accumulated other comprehensive income

 

 

1,407

 

 

 

2,012

 

Retained earnings (accumulated deficit)

 

 

(15,071

)

 

 

(23,502

)

Total stockholders’ equity

 

 

239,732

 

 

 

231,408

 

Non-controlling interest in consolidated subsidiaries

 

 

72,282

 

 

 

73,153

 

Total equity

 

 

312,014

 

 

 

304,561

 

Total liabilities and equity

 

$

1,688,750

 

 

$

1,642,411

 

Number of shares outstanding

 

 

25,034,355

 

 

 

24,877,628

 

Book value per share

 

$

9.58

 

 

$

9.30

 

 

(1)

Includes restricted cash of $2,970 as of March 31, 2021 and December 31, 2020.

(2)

Includes financed sales of this collateral to third parties that are reported separately from the loan portfolio, and that are conducted by the Bank of $3,818 as of March 31, 2021 and $3,535 as of December 31, 2020.

(3)

Includes the short-term portion of lease liabilities of $2,048 and $2,004 as of March 31, 2021 and December 31, 2020. Refer to Note 6 for more details.

(4)

Includes $2,661 and $2,674 of deferred financing costs as of March 31, 2021 and December 31, 2020. Refer to Note 5 for more details.

(5)

Includes $3,862 and $3,131 of deferred financing costs as of March 31, 2021 and December 31, 2020. Refer to Note 5 for more details.

(6)

Refer to Note 10 for details.

 

The accompanying notes should be read in conjunction with these consolidated financial statements.

Page 4 of 60


 

MEDALLION FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

(Dollars in thousands, except share and per share data)

 

2021

 

 

2020

 

Interest and fees on loans

 

$

36,855

 

 

$

35,019

 

Interest and dividends on investment securities

 

 

225

 

 

 

470

 

Medallion lease income

 

 

 

 

 

53

 

Total interest income(1)

 

 

37,080

 

 

 

35,542

 

Interest on deposits

 

 

4,711

 

 

 

5,941

 

Interest on short-term borrowings

 

 

403

 

 

 

564

 

Interest on long-term debt

 

 

3,293

 

 

 

2,495

 

Total interest expense(2)

 

 

8,407

 

 

 

9,000

 

Net interest income

 

 

28,673

 

 

 

26,542

 

Provision for loan losses

 

 

3,019

 

 

 

16,541

 

Net interest income after provision for loan losses

 

 

25,654

 

 

 

10,001

 

Other income (loss)

 

 

 

 

 

 

 

 

Write-down of loan collateral in process of foreclosure

 

 

(2,785

)

 

 

(6,286

)

Sponsorship and race winnings, net

 

 

2,473

 

 

 

2,573

 

Gain on extinguishment of debt

 

 

1,767

 

 

 

 

Loss on equity investments

 

 

 

 

 

(3,510

)

Other income

 

 

482

 

 

 

243

 

Total other income (loss), net

 

 

1,937

 

 

 

(6,980

)

Other expenses

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

5,685

 

 

 

6,933

 

Race team related expenses

 

 

2,122

 

 

 

2,130

 

Loan servicing fees

 

 

1,647

 

 

 

1,612

 

Collection costs

 

 

1,232

 

 

 

1,229

 

Professional fees

 

 

507

 

 

 

3,589

 

Rent expense

 

 

675

 

 

 

697

 

Regulatory fees

 

 

438

 

 

 

365

 

Amortization of intangible assets

 

 

361

 

 

 

361

 

Other expenses

 

 

1,975

 

 

 

2,355

 

Total other expenses

 

 

14,642

 

 

 

19,271

 

Income (loss) before income taxes

 

 

12,949

 

 

 

(16,250

)

Income tax (provision) benefit

 

 

(3,878

)

 

 

3,249

 

Net income (loss) after taxes

 

 

9,071

 

 

 

(13,001

)

Less: income attributable to the non-controlling interest

 

 

640

 

 

 

642

 

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

 

$

8,431

 

 

$

(13,643

)

Basic net income (loss) per share

 

$

0.34

 

 

$

(0.56

)

Diluted net income (loss) per share

 

$

0.34

 

 

$

(0.56

)

Distributions declared per share

 

$

 

 

$

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

24,518,775

 

 

 

24,401,773

 

Diluted

 

 

24,895,108

 

 

 

24,401,773

 

 

 

 

 

 

 

 

 

 

 

(1)

Included in interest and investment income is $325 and $293 of paid-in-kind interest for the three months ended March 31, 2021 and 2020.

(2)

Average borrowings outstanding were $1,305,162 and $1,164,483, and the related average borrowing costs were 2.61% and 3.11%, for the three months ended March 31, 2021 and 2020.  

 

  

The accompanying notes should be read in conjunction with these consolidated financial statements.

 

Page 5 of 60


 

 

MEDALLION FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME/(LOSS)

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

Net income (loss) after taxes

 

$

9,071

 

 

$

(13,001

)

Other comprehensive income (loss), net of tax

 

 

(605

)

 

 

147

 

Total comprehensive income (loss)

 

 

8,466

 

 

 

(12,854

)

Less comprehensive income attributable to the non-controlling interest

 

 

640

 

 

 

642

 

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

 

$

7,826

 

 

$

(13,496

)

 

The accompanying notes should be read in conjunction with these consolidated financial statements.

 

Page 6 of 60


 

 

 

MEDALLION FINANCIAL CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

(Dollars in thousands)

 

Common

Stock Shares

 

 

Common

Stock

 

 

Preferred

Stock

 

 

Capital in

Excess of

Par

 

 

Treasury

Stock Shares

 

 

Treasury

Stock

 

 

Retained

Earnings (Accumulated Deficit)

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Stockholders’

Equity

 

 

Non-

controlling

Interest

 

 

Total

Equity

 

Balance at December 31, 2020

 

 

27,828,871

 

 

$

278

 

 

$

-

 

 

$

277,539

 

 

 

(2,951,243

)

 

$

(24,919

)

 

$

(23,502

)

 

$

2,012

 

 

$

231,408

 

 

$

73,153

 

 

$

304,561

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,431

 

 

 

 

 

 

8,431

 

 

 

640

 

 

 

9,071

 

Distributions to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,511

)

 

 

(1,511

)

Stock-based compensation expense

 

 

 

 

 

2

 

 

 

 

 

 

496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

498

 

 

 

 

 

 

498

 

Issuance of restricted stock, net

 

 

163,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of restricted stock, net

 

 

(7,602

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains

   on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(605

)

 

 

(605

)

 

 

 

 

 

(605

)

Balance at March 31, 2021

 

 

27,985,598

 

 

$

280

 

 

$

 

 

$

278,035

 

 

 

(2,951,243

)

 

$

(24,919

)

 

$

(15,071

)

 

$

1,407

 

 

$

239,732

 

 

$

72,282

 

 

$

312,014

 

 

 

.

 

(Dollars in thousands)

 

Common

Stock Shares

 

 

Common

Stock

 

 

Preferred

Stock

 

 

Capital in

Excess of

Par

 

 

Treasury

Stock Shares

 

 

Treasury

Stock

 

 

Retained

Earnings (Accumulated Deficit)

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Stockholders’

Equity

 

 

Non-controlling

Interest

 

 

Total

Equity

 

Balance at December 31, 2019

 

 

27,597,802

 

 

$

276

 

 

 

 

 

$

275,511

 

 

 

(2,951,243

)

 

$

(24,919

)

 

$

11,281

 

 

$

999

 

 

$

263,148

 

 

$

71,320

 

 

$

334,468

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,643

)

 

 

 

 

 

(13,643

)

 

 

642

 

 

 

(13,001

)

Distributions to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,507

)

 

 

(1,507

)

Stock-based compensation expense

 

 

 

 

 

2

 

 

 

 

 

 

464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

466