Medallion Authorizes $40 Million Buyback, Targets $5 Billion in Assets
Key Facts
Medallion Financial’s board on October 27 authorized a new $40 million share repurchase program, as the company reported results for the quarter ended September 30. Management is targeting an increase in assets from $3 billion to $5 billion over five years, according to remarks on its third-quarter results conference call. The target comes as assets stood at $3.361 billion at the end of September, compared with $2.900 billion a year earlier. Loans originated during the quarter also rose 41% to $603.9 million, from $427.4 million in the year-earlier period. The buyback decision accompanies rapid lending growth, while the company continues to distribute dividends to shareholders.
The new authorization is separate from a previous $40 million share repurchase program. The previous program had $1.2 million remaining as of September 30, and the company used that amount after quarter-end. The new plan gives the board discretion to repurchase shares subject to market conditions, and the board may amend, suspend or terminate the program. The announcement signals continued buybacks after the previous authorization was exhausted, while management set the same five-year asset-growth target on its first-quarter call. The company did not provide an annual interim timetable for reaching the target in the cited remarks.
Lending accelerated as the company reported a decline in net income attributable to shareholders. It was $2.4 million, or $0.10 per share, in the third quarter, compared with $7.8 million, or $0.32 per share, a year earlier. The provision for credit losses rose to $30.8 million from $18.6 million in the year-earlier period. The company attributed much of the earnings decline to provisions recorded when new loans are originated as the portfolio grows. At Medallion Bank, net income fell to $11.8 million from $19.8 million, despite net interest income rising to $60 million from $55.7 million.
The bank’s provision for credit losses widened to $29.8 million in the third quarter, from $17.2 million a year earlier, while annualized net charge-offs rose to 2.83% of average loans outstanding, from 2.28%. Management said expansion is focused on recreational and home-improvement loans, alongside strategic partnerships, with competitive pricing, broader marketing and new relationships contributing to business growth. It added that growth in both segments is partly due to “improving the competitiveness of our pricing.” Home-improvement loans originated rose 145% to $146.3 million, from $59.7 million a year earlier. Management said growth in this business is currently expected to outpace growth in recreational loans.
Loans originated through strategic partnerships increased 25% to $259.4 million, compared with $208.4 million in the third quarter of the previous year. In September, the company added R Finance Credit Company, making it the sixth partner in these programs. The partnership expansion is part of the efforts management said support lending growth, alongside pricing, marketing and new relationships. Meanwhile, net interest margin declined to 7.34% from 8.21% a year earlier. Management partly linked the decline to a shift in the loan mix toward home-improvement loans to borrowers with excellent credit ratings, as well as higher borrowing costs.
Recent capital moves included Medallion Bank’s September 30 closing of an additional offering of Series G preferred stock with an aggregate liquidation value of $55 million. The bank said the proceeds are intended for general corporate purposes and may include the redemption of Series E preferred stock, subject to approval by the Federal Deposit Insurance Corporation. In a separate October 19 announcement, Medallion Financial said it had agreed to repurchase $15 million in liquidation value of preferred securities at 73.66% of their face value. The company expected to record a fourth-quarter gain equal to the difference between the $15 million book value and the purchase cost. The investor parties also agreed to refrain from certain actions for five years and to dispose of their remaining common shares by December 31, 2026.
The company said in an October 19 statement that its stock had recently reached its highest level in about 12 years and that assets tied to taxi medallions had fallen to 0.1% of total assets. It reported third-quarter results after the market closed on October 29 and scheduled its results call for October 30 at 9:00 a.m. Eastern time. It also declared a quarterly dividend of $0.14 per share, payable to shareholders of record on November 9, with payment due November 19. The new buyback had been approved two days before the results were released. The next scheduled date for shareholders remains the November 19 dividend payment, while a replay of the earnings call is available through November 6.