Profile: Medallion Financial Corp (TAXI.O)
17 Sep 2014
Medallion Financial Corp. (Medallion) is a specialty finance company that is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. A wholly owned portfolio of the Company, Medallion Bank, also originates consumer loans for the purchase of recreational vehicles, boats, motorcycles, and trailers. The Company also provides other debt, mezzanine, and equity investment capital to companies in a variety of industries. The Company conducts its business through various wholly owned investment company subsidiaries, including Medallion Funding LLC. (Medallion Funding), a small business investment company (SBIC), its primary taxicab medallion lending company; Medallion Capital, Inc. (Medallion Capital), an SBIC and a and a regulated investment company (RIC), which conducts a mezzanine financing business, and Freshstart Venture Capital Corp. (Freshstart), an SBIC and a RIC, which originates and services taxicab medallion and commercial loans. In June 2012, the Company’s subsidiary, Medallion Bank, acquired a taxi medallion loan portfolio of over $10,000,000 from First National Bank of New York. In July 2014, Medallion Financial Corp acquired assets of Newark Funding Corp.
Medallion also conducts business through its asset-based lending division, Medallion Business Credit, an originator of loans to small businesses for the purpose of financing inventory and receivables. In addition, it conducts business through a wholly owned portfolio company, Medallion Bank, and the Utah Department of Financial Institutions, which originates taxicab medallion, commercial, and consumer loans, raises deposits, and conducts other banking activities.
Medallion provides loans to individuals and small to mid-size businesses, directly through its investment company subsidiaries and also through Medallion Bank, in three primary markets, which includes loans that finance taxicab medallions; loans that finance commercial businesses, and loans that finance consumer purchases of recreational vehicles, boats, motorcycles, trailers. Taxi medallion loans of $307,167,000 comprised 68% of its $451,835,000 net investment portfolio as of December 31, 2011. Managed taxi medallion loans of $600,667,000 comprised 63% of its $956,626,000 managed net investment portfolio as of December 31, 2011. Including loans to unaffiliated investors, the total amount of medallion loans under its management was $676,533,000 as of December 31, 2011,.
Medallion loans collateralized by New York City taxicab medallions and related assets comprised 74% of the value of the medallion loan portfolio as of December 31, 2011 and were 78% on a managed basis. The New York City Taxi and Limousine Commission, or TLC, estimates that the total value of all of New York City taxicab medallions and related assets exceeded $11.9 billion as of December 31, 2011. The Company’s commercial loans finance either the purchase of the equipment and related assets necessary to open a new business or the purchase or improvement of an existing business.
Commercial loans finance either the purchase of the equipment and related assets necessary to open a new business or the purchase or improvement of an existing business. Commercial loans of $54,159,000 comprised 12% of its $451,835,000 net investment portfolio as of December 31, 2011. Managed commercial loans of $129,700,000 comprised 13% of its $956,626,000 net investment portfolio as of December 31, 2011, Commercial loans are generally secured by equipment, accounts receivable, real estate, or other assets.
Through its Medallion Business Credit division, it originates, manages, and services asset-based loans to small businesses which require working capital credit facilities ranging from $500,000 to $6,500,000. The Company, through its subsidiary Medallion Capital, originates both senior and subordinated loans nationwide to businesses in a variety of industries, including manufacturing and various service providers. It originate, primarily through its subsidiary Freshstart, other secured commercial loans that are focused on food services, real estate, dry cleaner and laundromat businesses.
Consumer loans are originated by Medallion Bank, a wholly owned, unconsolidated portfolio company. Consumer loans of $192,672,000 comprised 20% of its $956,626,000 managed net investment portfolio as of December 31, 2011. The loans are collateralized by recreational vehicles, boats, motorcycles, and trailers located in all 50 states. The portfolio is serviced by a third party servicer.
The Company’s medallion loan portfolio consists of fixed-rate loans, collateralized by first security interests in taxicab medallions and related assets (vehicles, meters, and the like). The portfolio was originated at an approximate loan-to-value ratio range of 60-75%. Medallion estimates that the average loan-to-value ratio of all of the medallion loans was approximately 40% as of December 31, 2011. Commercial loans are originated at an average loan-to-value ratio of 60 to 75%. Substantially all of the commercial loans are collateralized by security interests in the assets being financed by the borrower. Consumer loans require equal monthly payments covering accrued interest and amortization of principal over a negotiated term around ten years. Interest rates offered are both floating and fixed, and certain of the floating rate notes have built in floors. Borrowers may prepay consumer loans without any prepayment penalty. In general, Medallion Bank has established relationships with dealers in the industry, who are the sources for most of the customers of Medallion Bank.
Sources of Funds
The Company fund its lending operations primarily through credit facilities with bank syndicates and, to a lesser degree, through equity or debt offerings or private placements, and fixed-rate, senior secured notes and long-term subordinated debentures issued to or guaranteed by the small business administration (SBA). Medallion Bank’s funding are provided by federal deposit insurance corporation (FDIC) insured brokered certificates of deposit.
Medallion Financial Corp
38TH FLOOR, 437 MADISON AVE
NEW YORK NY 10022