New York-based Medallion Financial Corp. is shifting its strategy, veering away from medallion lending in favor of its consumer finance business.
In a Jan. 31 news release, President and COO Andrew Murstein stated that the change was made after a "careful review" of the company's entire business.
"We believe that our ongoing transition away from medallion lending and placing our strategic focus fully on our growing and profitable consumer finance business — which currently generates over 90% of our earnings — will allow us to streamline our structure and amplify the value and prominence of Medallion Bank," Murstein said.
As of Sept. 30, 2016, Medallion Bank held a $676 million consumer loan portfolio, which currently generates a 13% yield as well as an above 30% after-tax return on equity, according to the release.
In addition, Freshstart Venture Capital Corp., a unit of the company, will restructure its outstanding debentures with the U.S. Small Business Administration into a new $34.0 million loan, effective March 1. The loan has a yearly interest rate of 3.25%, and is expected to cost less than the previous debentures, which mature Feb. 1, 2020. Freshstart, which was primarily engaged in taxi medallion lending, will stop originating new medallion loans.
The company also elected to not be a regulated investment company for the tax year ending Dec. 31, 2016. The move is intended to lower the company's tax burden by consolidating the tax returns of Medallion Bank with its medallion lending entities that have taken significant reserves.
Last year, the company saw its stock tumble more than 25% during trading on Aug. 2, 2016, following the announcement of second-quarter 2016 earnings, with executives stating that a shift to focus more on banking operations was already being considered.