Medallion Financial Corp. Announces 2006 Fourth Quarter and Full Year Results
NEW YORK--Medallion Financial Corp. , a specialty finance company with a leading position servicing the taxicab industry and other niche markets, announced that earnings, or net increase in net assets resulting from operations increased to $5,844,000 or $0.33 per diluted common share in the 2006 fourth quarter, up from $603,000, or $0.03 per diluted common share in the 2005 fourth quarter. For the 2006 full year, net increase in net assets resulting from operations increased 90% to $13,108,000 or $0.74 per diluted common share from $6,862,000 or $0.39 per diluted common share in 2005.
Andrew Murstein, President of Medallion Financial, stated, “We are very pleased with the year’s results, especially the results this quarter. We continued to sell off our Clear Channel position at an optimal time and thus were able to realize substantial gains. We have realized proceeds from the sale of Medallion Taxi Media, our taxi top division, valued at over $35,000,000, representing cash received on the Media sale and from the sale of Clear Channel stock, as well as the carrying value of the shares still held at year end.”
The Company also changed its accounting methodology for Medallion Bank at year-end. Historically, the Company consolidated Medallion Bank’s accounts with those of its own, but will now treat the bank as a portfolio investment, similar to the Company’s past treatment of large non-investment company subsidiaries such as Medallion Taxi Media. Although this creates changes in the reported levels of assets, liabilities, revenues, and expenses, our earnings, shareholders’ equity, and the related amounts per share are unchanged. At year end, the Company determined the fair value of its investment in Medallion Bank was approximately $47 million. As a growing significant subsidiary, Medallion Bank’s financial information is also attached to this release.
The Company’s on balance sheet taxicab medallion loan portfolio grew by 14% to $428,249,000 at December 31, 2006 from $375,263,000 at December 31, 2005. The commercial loan portfolio decreased 4% to $88,207,000 at December 31, 2006 from $91,485,000 at December 31, 2005. Total managed loans, including taxicab medallion loans and commercial loans sourced and serviced by the Company but owned by Medallion Bank, are shown in the following table. This reflected growth of the Company’s managed taxicab medallion loan portfolio by 16% to $522,193,000 at December 31, 2006, an all-time high, and of the Company’s managed commercial loan portfolio by 2% to $148,444,000 at December 31, 2006. In addition, Medallion Bank’s consumer loan portfolio increased by 30% to $111,799,000 at December 31, 2006, also an all-time high.
The following chart shows the components of the Company’s $833,639,000 managed net investment portfolio at December 31, 2006.
| On-Balance Sheet |
Off-Balance Sheet(1) |
Total Managed Investments | |
| Medallion loans | $428,249,000 | $93,944,000 | $522,193,000 |
| Commercial loans | 88,207,000 | 60,237,000 | 148,444,000 |
| Consumer loans | 0 | 111,799,000 | 111,799,000 |
| Investment securities | 9,961,000 | 21,683,000 | 31,644,000 |
| Equity investments | 16,068,000 | 0 | 16,068,000 |
| Investments in Medallion Bank and other controlled subsidiaries | 50,448,000 | (46,957,000) | 3,491,000 |
| Net investment portfolio | $592,933,000 | $240,706,000 | $833,639,000 |
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(1) Off-balance sheet investments are those owned by our wholly-owned unconsolidated portfolio companies, primarily Medallion Bank. |
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Net investment income after taxes was $965,000 or $0.05 per share in the 2006 fourth quarter, compared to $144,000 or $0.01 per share in the 2006 third quarter and $1,040,000 or $0.06 per share in the 2005 fourth quarter. Including Medallion Bank’s net investment income after taxes with our own, as was the reporting methodology in prior periods, the amounts were $3,522,000 or $0.20 per share in the 2006 fourth quarter, compared to $2,781,000 or $0.16 per share in the 2006 third quarter and $3,763,000 or $0.21 per share in the 2005 fourth quarter.
Larry Hall, the CFO of Medallion Financial, stated, “During the year our liquidity sources and financing options improved. In late December 2006, we entered into a new relationship with Citibank which lowered our cost of funds. While that benefit was not meaningful in the fourth quarter, it should start to show results in 2007.”
Mr. Hall continued, “In addition to improvements in profitability and asset growth, medallion prices have also continued to grow, with corporate medallion values growing from $425,000 to $525,000 in the last 12 months. This represents the highest values ever in the history of New York City taxi medallions. The average loan-to-value ratio on our loan portfolio is now under 58%, and our customers have more equity to tap into by borrowing from us to grow their businesses.”
Mr. Hall continued, “During the year we made over $470,000,000 of investments, a record for us, which includes $125,000,000 of loans made by Medallion Bank. Loan quality remains the Company’s trademark, as loans 90 days or more past due decreased to 2.1% from 3.5% a year ago. Loans 90 days or more past due in Medallion Bank’s consumer portfolio decreased to 0.5%, down from 0.8% one year ago, and in its total portfolio loans 90 days or more past due decreased to 0.2% down from 0.3% a year ago.
The Company also announced that it is increasing its quarterly dividend to $0.19 per share from $0.15 in the 2005 fourth quarter. For the year, the Company declared dividends of $0.70 per share, up from $0.54 per share in 2005, an increase of 30%. Also, 47% of the 2006 dividend will qualify as capital gains and thus be taxed at a lower tax rate to certain investors. The current dividend will be paid on April 13, 2007, to shareholders of record on March 30, 2007. Since the Company’s initial public offering in 1996, the Company has paid in excess of $104,951,000 or $7.01 per share in dividends.
Medallion Financial Corp. is a specialty finance company with a leading position in the origination and servicing of loans financing the purchase of taxicab medallions and related assets. The Company also originates and services commercial and consumer loans in targeted niche industries. The Company and its subsidiaries have lent over $3 billion to its taxicab, commercial, and consumer customers.
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 2005 Annual Report on Form 10-K.
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MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS |
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Three Months ended |
Year ended |
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| 2006 | 2005 | 2006 | 2005 | |||||
| (As adjusted) | (As adjusted) | |||||||
| Interest income on investments | $10,275,894 | $8,643,205 | $38,031,949 | $33,649,871 | ||||
| Dividends and interest income on short-term investments | 205,420 | 224,219 | 1,059,099 | 696,309 | ||||
| Medallion lease income | 171,220 | 122,750 | 543,867 | 464,750 | ||||
| Total investment income | 10,652,534 | 8,990,174 | 39,634,915 | 34,810,930 | ||||
| Interest on floating rate borrowings | 5,317,820 | 3,617,648 | 19,208,815 | 13,398,536 | ||||
| Interest on fixed rate borrowings | 1,256,719 | 1,242,755 | 4,981,488 | 4,598,713 | ||||
| Total interest expense | 6,574,539 | 4,860,403 | 24,190,303 | 17,997,249 | ||||
| Net interest income | 4,077,995 | 4,129,771 | 15,444,612 | 16,813,681 | ||||
| Gain on sales of loans | - | 46,874 | - | 884,608 | ||||
| Other income | 595,443 | 785,441 | 2,646,574 | 3,853,094 | ||||
| Total noninterest income | 595,443 | 832,315 | 2,646,574 | 4,737,702 | ||||
| Salaries and benefits | 1,654,482 | 2,040,466 | 8,192,731 | 9,554,489 | ||||
| Professional fees | 476,380 | 671,803 | 1,955,521 | 1,945,153 | ||||
| Other operating expenses | 1,577,244 | 1,239,844 | 4,777,549 | 5,484,065 | ||||
| Total operating expenses | 3,708,106 | 3,952,113 | 14,925,801 | 16,983,707 | ||||
| Net investment income before income taxes | 965,332 | 1,009,973 | 3,165,385 | 4,567,676 | ||||
| Income tax (provision) benefit | - | 30,034 | - | 13,924 | ||||
| Net investment income after income taxes | 965,332 | 1,040,007 | 3,165,385 | 4,581,600 | ||||
| Net realized gains (losses) on investments | 2,538,654 | (1,375,007) | 3,079,718 | 3,606,119 | ||||
| Net change in unrealized appreciation (depreciation) on investments | 789,219 | (492,427) | (591,405) | (6,338,641) | ||||
| Net change in unrealized appreciation on Medallion Bank and other controlled subsidiaries | 1,551,212 | 1,430,494 | 7,454,321 | 5,012,424 | ||||
| Net unrealized gains (losses) on investments | 2,340,431 | 938,067 | 6,862,916 | (1,326,217) | ||||
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Net realized/ unrealized gains on investments |
4,879,085 | (436,940) | 9,942,634 | 2,279,902 | ||||
| Net increase in net assets resulting from operations | $ 5,844,417 | $ 603,067 | $13,108,019 | $ 6,861,502 | ||||
| Net investment income after income taxes per common share | ||||||||
| Basic | $0.06 | $0.06 | $0.18 | $0.27 | ||||
| Diluted | 0.05 | 0.06 | 0.18 | 0.26 | ||||
| Net increase in net assets resulting from operations per common share | ||||||||
| Basic | $0.34 | $0.04 | $0.76 | $0.40 | ||||
| Diluted | 0.33 | 0.03 | 0.74 | 0.39 | ||||
| Dividends declared per share | $0.19 | $0.15 | $0.70 | $0.54 | ||||
| Weighted average common shares outstanding | ||||||||
| Basic | 17,364,241 | 17,155,302 | 17,293,665 | 17,087,034 | ||||
| Diluted | 17,770,893 | 17,582,240 | 17,761,039 | 17,552,228 | ||||
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MEDALLION FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS |
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| December 31, 2006 | December 31, 2005 | |||||
| (As adjusted) | ||||||
| Assets | ||||||
| Medallion loans, at fair value | $ | 428,248,589 | $ | 375,263,403 | ||
| Commercial loans, at fair value | 88,206,661 | 91,485,479 | ||||
| Investment in Medallion Bank and other controlled subsidiaries, at fair value | 50,448,032 | 40,335,393 | ||||
| Equity investments, at fair value | 16,068,243 | 23,137,661 | ||||
| Investment securities, at fair value | 9,961,111 | - | ||||
| Net investments ($405,817,000 at December 31, 2006 and $380,267,000 at December 31, 2005 pledged as collateral under borrowing arrangements) | 592,932,636 | 530,221,936 | ||||
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Cash ($865,000 at December 31, 2006 and $574,000 December 31, 2005 restricted as to use by lender) |
15,398,740 | 22,808,388 | ||||
| Accrued interest receivable | 2,177,694 | 2,383,083 | ||||
| Fixed assets, net | 525,472 | 454,659 | ||||
| Goodwill, net | 5,007,583 | 5,007,583 | ||||
| Other assets, net | 15,562,763 | 12,479,159 | ||||
| Total assets | $ | 631,604,888 | $ | 573,354,808 | ||
| Liabilities | ||||||
| Accounts payable and accrued expenses | $ | 5,057,205 | $ | 4,326,282 | ||
| Accrued interest payable | 1,783,258 | 1,759,737 | ||||
| Floating rate borrowings | 377,886,424 | 323,664,950 | ||||
| Fixed rate borrowings | 77,250,000 | 77,250,000 | ||||
| Total liabilities | 461,976,887 | 407,000,969 | ||||
| Commitments and contingent liabilities | - | - | ||||
| Shareholders’ equity | ||||||
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Preferred Stock (1,000,000 shares of $0.01 par
value stock authorized - none outstanding) |
- | - | ||||
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Common stock (50,000,000 shares of $0.01 par value
stock authorized – 18,799,766 shares at December 31, 2006 and 18,546,648 shares at December 31, 2005 issued) |
187,998 | 185,271 | ||||
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Treasury stock at cost (1,373,351 shares at December 31,
2006
and December 31, 2005) |
(12,611,113) | (12,611,113) | ||||
| Capital in excess of par value | 176,849,296 | 175,259,730 | ||||
| Accumulated undistributed net investment income (loss) | (7,765,327) | (5,838,235) | ||||
| Accumulated undistributed net realized gains on investments | - | - | ||||
| Net unrealized appreciation (depreciation) on investments | 12,967,148 | 9,358,186 | ||||
| Total shareholders' equity | 169,628,002 | 166,353,839 | ||||
| Total liabilities and shareholders' equity | $ | 631,604,888 | $ | 573,354,808 | ||
| Number of common shares outstanding | 17,426,415 | 17,173,297 | ||||
| Net asset value per share | $ | 9.73 | $ | 9.69 | ||
| Total managed loans | $ | 795,980,453 | $ | 690,280,561 | ||
| Total managed assets | 907,132,484 | 802,106,190 | ||||
Medallion Bank Financial Information
The following table presents MB’s statement of operations and other valuation adjustments on other controlled subsidiaries for the years ended December 31, 2006, 2005, and 2004.
| Year ended December 31, | ||||||
| 2006 | 2005 | 2004 | ||||
| Statement of operations | ||||||
| Investment income | $ | 29,956,940 | $ | 22,376,878 | $ | 14,301,397 |
| Interest expense | 10,453,732 | 6,413,605 | 3,244,540 | |||
| Net interest income | 19,503,208 | 15,963,273 | 11,056,857 | |||
| Non interest income | 508,601 | 434,146 | 160,697 | |||
| Operating expenses | 6,289,009 | 5,543,633 | 3,869,221 | |||
| Net investment income before income taxes | 13,722,800 | 10,853,786 | 7,348,333 | |||
| Income tax provision | 4,387,959 | 1,973,019 | 1,911,737 | |||
| Net investment income after income taxes | 9,334,841 | 8,880,767 | 5,436,596 | |||
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Net realized/unrealized (losses) of Medallion Bank and other controlled subsidiaries (1) |
(1,880,520) | (3,868,343) | (5,093,235) | |||
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Net increase in net assets resulting from operations of Medallion Bank and other controlled subsidiaries |
$ | 7,454,321 | $ | 5,012,424 | $ | 343,361 |
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(1) Includes $1,450,068, ($230,649), and ($2,826,598) of net realized/unrealized gains (losses) of controlled subsidiaries other than Medallion Bank for the years ended December 31, 2006, 2005, and 2004. |
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The following table presents MB’s balance sheets and the net investment in other controlled subsidiaries as of December 31, 2006 and 2005.
| 2006 | 2005 | |||
| Medallion loans, at fair value | $ | 93,944,562 | $ | 73,893,149 |
| Commercial loans, at fair value | 60,237,698 | 54,322,488 | ||
| Consumer loans, at fair value | 111,798,871 | 85,678,412 | ||
| Investment securities, at fair value | 21,682,923 | 18,092,838 | ||
| Net investments ($0 pledged as collateral under borrowing arrangements at December 31, 2006 and 2005) | 287,664,054 | 231,986,887 | ||
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Cash ($0 at December 31, 2006 and $0 December 31, 2005 restricted as to use by lender) |
14,698,918 | 20,227,118 | ||
| Accrued interest receivable | 2,435,766 | 1,702,018 | ||
| Fixed assets, net | 184,091 | 160,199 | ||
| Other assets, net | 3,958,506 | 5,002,719 | ||
| Total assets | $ | 308,941,335 | $ | 259,078,941 |
| Accounts payable and accrued expenses | $ | 499,983 | $ | 511,181 |
| Payable to parent | 267,246 | 324,234 | ||
| Fixed rate borrowings | 261,483,540 | 219,107,214 | ||
| Total liabilities | 262,250,769 | 219,942,629 | ||
| Medallion Bank equity | 46,690,566 | 39,136,312 | ||
| Total liabilities and equity | $ | 308,941,335 | $ | 259,078,941 |
| Investment in other controlled subsidiaries | $ | 3,530,220 | $ | 874,847 |
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Total investment in Medallion Bank and other controlled subsidiaries |
$ | 50,488,032 | $ | 40,335,393 |