Medallion Financial (US:MFIN)2025-05-06 20:02PART I – FINANCIAL INFORMATION Financial Statements The company's total assets slightly decreased to $2.85 billion, while Q1 2025 net income attributable to the company increased to $12.0 million, reflecting a strategic focus on consumer and commercial lending Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,847,738 | $2,868,606 | | Net Loans Receivable | $2,261,334 | $2,265,428 | | Total Liabilities | $2,398,726 | $2,429,648 | | Deposits | $2,022,828 | $2,090,071 | | Total Equity | $449,012 | $438,958 | | Book Value per Common Share | $16.36 | $16.00 | Consolidated Statements of Operations Q1 2025 vs. Q1 2024 Performance (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Interest Income | $75,425 | $67,070 | | Net Interest Income | $51,412 | $47,917 | | Provision for Credit Losses | $22,014 | $17,201 | | Total Other Income, net | $11,599 | $5,403 | | Net Income Attributable to MFIN | $12,014 | $10,024 | | Diluted Earnings Per Share | $0.50 | $0.42 | Consolidated Statements of Cash Flows Q1 2025 vs. Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $36,259 | $32,255 | | Net Cash used for Investing Activities | ($4,695) | ($32,906) | | Net Cash (used in) provided by Financing Activities | ($43,142) | $19,931 | | Net (Decrease) Increase in Cash | ($11,578) | $19,280 | Note 4: Loans and Allowance for Credit Losses The total loan portfolio was $2.49 billion, with consumer loans comprising 91%, while the allowance for credit losses increased to $100.4 million, and nonperforming loans reached $34.2 million Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2025 | % of Total | | :--- | :--- | :--- | | Recreation | $1,545,844 | 62% | | Home Improvement | $812,381 | 33% | | Commercial | $116,059 | 5% | | Taxi Medallion & Other | $12,149 | <1% | | Total Gross Loans | $2,486,433 | 100% | Allowance for Credit Losses Activity - Q1 2025 (in thousands) | Activity | Amount | | :--- | :--- | | Balance at Dec 31, 2024 | $97,368 | | Charge-offs | ($24,646) | | Recoveries | $5,630 | | Provision for credit losses | $22,014 | | Balance at Mar 31, 2025 | $100,366 | - Nonperforming loans increased slightly to $34.2 million (1.38% of total loans) at March 31, 2025, from $33.4 million (1.34% of total loans) at December 31, 202492 Note 5: Funds Borrowed The company's primary funding source is deposits exceeding $2.0 billion, with total funds borrowed reaching $2.34 billion at a 4.09% weighted average interest rate Composition of Funds Borrowed as of March 31, 2025 (in thousands) | Borrowing Type | Balance | Interest Rate | | :--- | :--- | :--- | | Deposits | $2,023,124 | 3.75% | | Privately placed notes | $146,500 | 8.12% | | SBA debentures and borrowings | $70,500 | 3.84% | | Federal reserve and other borrowings | $65,000 | 4.50% | | Trust preferred securities | $33,000 | 6.69% | | Total | $2,338,124 | 4.09% | - In February 2024, Medallion Capital secured a new $18.5 million debenture financing commitment from the SBA, enhancing its liquidity for commercial lending106 Note 9: Segment Reporting The company operates four lending segments, with Recreation being the largest interest income contributor at $50.5 million, and Commercial generating significant other income of $9.6 million from equity gains Segment Net Income (Loss) After Taxes - Q1 2025 (in thousands) | Segment | Net Income (Loss) | | :--- | :--- | | Recreation | $8,014 | | Home Improvement | $3,328 | | Commercial Lending | $4,909 | | Taxi Medallion Lending | $497 | | Corporate and Other Investments | ($3,222) | | Total Net Income After Taxes | $13,526 | Note 10: Commitments and Contingencies The company reached an agreement in principle with the SEC's Division of Enforcement to resolve a 2021 civil complaint, pending final approvals - In December 2024, the company and its President reached an agreement in principle with the SEC's Division of Enforcement to resolve the 2021 litigation, pending final approvals159 Management's Discussion and Analysis (MD&A) Management attributes the 20% YoY net income increase to $12.0 million to strong consumer loan growth and higher yields, despite rising funding costs and a 28% increase in credit loss provisions Key Performance Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Return on average assets | 1.93% | 1.80% | | Return on average equity | 12.32% | 11.18% | | Net interest margin, gross | 7.94% | 8.10% | | Net charge-offs as a % of avg. loans | 3.10% | 3.20% | Consolidated Results of Operations Net income increased to $12.0 million ($0.50/share) in Q1 2025, driven by an $8.3 million rise in interest income and $6.2 million in other income, partially offset by higher interest expense - Net interest margin tightened to 7.94% from 8.10% YoY, as the average cost of funds rose 49 basis points to 4.16%, outpacing the 31 basis point increase in the yield on interest-earning assets286287 - Operating expenses increased to $20.8 million from $18.2 million YoY, driven by higher salaries, loan servicing fees, and professional fees289 Financial Condition and Credit Quality The loan portfolio remained stable at $2.49 billion, while the allowance for credit losses increased to $100.4 million, and the provision for credit losses rose to $22.0 million due to rising loss rates - The provision for credit losses of $22.0 million was primarily driven by a $16.9 million provision for the Recreation segment and a $3.1 million provision for the Commercial segment232285 - Loans 90+ days past due increased slightly to 1.2% of the total portfolio, up from 1.1% at the end of 2024238 Segment Analysis Recreation and Home Improvement segments drove loan growth, with Recreation net income up 35% to $8.0 million, while Commercial net income reached $4.9 million due to $9.4 million in equity gains - Recreation Lending: Originations were $86.8 million, down from $105.8 million YoY, reflecting more restrictive underwriting, though the portfolio grew 13% YoY to $1.5 billion245246 - Home Improvement Lending: Originations were $48.8 million, down from $51.6 million YoY, with the portfolio growing 8% YoY to $812.4 million255256 - Commercial Lending: Net income increased to $4.9 million from $3.6 million YoY, primarily due to $9.4 million in net gains on equity investments262264 Liquidity and Capital Resources The company maintains liquidity through over $2.0 billion in deposits and other borrowings totaling $2.34 billion, while increasing its quarterly dividend to $0.12 per share and repurchasing $0.5 million in shares Debt Composition as of March 31, 2025 (in thousands) | Source | Balance | Percentage | | :--- | :--- | :--- | | Deposits | $2,023,124 | 87% | | Privately placed notes | $146,500 | 6% | | SBA debentures & borrowings | $70,500 | 3% | | Federal reserve and other borrowings | $65,000 | 3% | | Trust preferred securities | $33,000 | 1% | | Total | $2,338,124 | 100% | - The quarterly dividend was increased to $0.12 per share, payable in May 2025322 - The company repurchased 60,185 shares for $0.5 million in Q1 2025, with $14.9 million remaining under the authorized repurchase program323 Quantitative and Qualitative Disclosures About Market Risk No material changes have occurred in the company's market risk disclosures since its 2024 Annual Report on Form 10-K - There has been no material change in disclosure regarding quantitative and qualitative disclosures about market risk since the company filed its Annual Report on Form 10-K for the year ended December 31, 2024324 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025325 - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting326 PART II—OTHER INFORMATION Legal Proceedings The company refers to Note 10 of the financial statements for details on legal proceedings, including the ongoing SEC litigation and potential settlement - Details regarding legal proceedings, including the SEC litigation, are provided in Note 10 to the consolidated financial statements328159 Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K have been reported - No material changes in risk factors are reported since the filing of the 2024 Form 10-K329 [Issuer Purchases of Equity Securities](index=58&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 60,185 shares for $0.5 million in Q1 2025 under its stock repurchase program, with $14.9 million remaining available Stock Repurchase Activity - Q1 2025 | Period | Total Shares Purchased | Average Price Paid | Total Cost (in thousands) | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31 | — | — | $— | | Feb 1 - Feb 28 | — | — | $— | | Mar 1 - Mar 31 | 60,185 | $8.83 | $531 | | Total | 60,185 | $8.83 | $531 | - As of March 31, 2025, $14,861,069 remained available for repurchase under the company's stock buyback program330331