Medical Financial (NASDAQ: MFIN) reported Q2 EPS of ($0.16), $0.16 worse than the analyst estimate of $0.00. Revenue for the quarter came in at $26.75 million versus the consensus estimate of $27.98 million.

2020 Second Quarter Highlights

• Net loss was $4.0 million, or $0.16 per share, compared to a net loss of $7.5 million, or $0.31 per share, in the prior year period, and a net loss of $13.6 million, or $0.56 per share, in the 2020 first quarter.
• Provision for loan losses was $16.9 million, compared to $15.1 million in the prior year quarter and $16.5 million in the 2020 first quarter.
• Potential concerns about the long-term impact of COVID-19 on our lending businesses caused us to increase loan loss provisions in both the consumer and medallion lending segments by an extra $6.8 million in the quarter.
• Net interest income was $26.8 million in the quarter, primarily reflecting the contribution of the consumer lending segments, a 16% increase from $23.2 million in the 2019 quarter.
• Net interest margin was 8.23% in the quarter, compared to 8.46% a year ago.
• Net income from Medallion’s consumer and commercial lending segments totaled $9.0 million in the quarter, compared to $7.7 million in the 2019 quarter.
• Consumer loan originations were $150.9 million in the quarter, an all-time high, up 11% from $136.2 million in the 2019 quarter and up 46% from $103.1 million in the 2020 first quarter.
• The consumer loan portfolio reached an all-time high of $1.0 billion in net outstandings at June 30, 2020.
• Medallion Bank’s Tier 1 leverage ratio at quarter-end was 16.96%.
• Total assets were $1.7 billion as of June 30, 2020.

Andrew Murstein, President of Medallion, stated, “The Company saw strong demand in the second quarter for its consumer lending products, resulting in its net recreation and home improvement loan portfolios growing 16% and 35% over the prior year quarter. Applications grew significantly in the quarter despite Medallion Bank raising its credit standards, which allowed it to maintain healthy loan origination volumes, and ultimately grow its consumer loan portfolio to $1.0 billion. The potential impact of the COVID-19 pandemic on our consumer and medallion lending segments caused the Company to increase its loan loss provisions in the quarter by $6.8 million. We expect to continue to execute on our strategy for the rest of the year of growing our consumer and commercial segments, both of which have performed well, while reducing our total medallion-related exposure, which was 8% of our assets at quarter-end.”

“In addition to the consumer growth we have seen this year, the Bank began originating loans with its first fintech partner in the second quarter, and also executed a non-binding term sheet with another potential partner, both of which provide consumer finance services.”

Mr. Murstein continued, “Our commercial segment has been profitable in both quarters this year, making 23 consecutive profitable quarters for this segment, and remains well-diversified across industries and geographies. Liquidity remains strong as Medallion Capital was just approved for an additional $25 million of SBA leverage, which provides for a ten year term and interest of approximately 2.1%, based on current rates.”

Larry Hall, Medallion’s CFO, stated, “It is apparent that COVID-19 continues to have a significant impact on the NYC economy and the taxi industry. New York City medallion transfer activity in June resulted in the Company lowering its collateral value from $124,500 net to $119,500 net. The Company’s net medallion loan portfolio, exclusive of loan collateral in the process of foreclosure, was $84 million at the end of the second quarter, a $12 million reduction from the first quarter. All loans 90 days or more past due have been written down to collateral value, while all current medallion loans have a 21% general reserve. This quarter we saw approximately $1.5 million in recoveries on the medallion portfolio. Though this remains a focus for us, the recovery process is difficult to predict, particularly in these uncertain times, and will likely remain choppy in the quarters ahead. Lastly, operating expenses decreased $3.1 million from the first quarter as we reduced expenses.”

For earnings history and earnings-related data on Medical Financial (MFIN) click here.