MFIN - Earnings call transcript Q4 2017

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Operator

Greeting and welcome to Medallion Financial Fourth Quarter and Full-Year 2017 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Garrett Edson.

Garrett Edson

Thank you, and good morning. By now, everyone should have access to the earnings announcement, which was released prior to this call, and which may also be found on the company's website at medallion.com.

risks remarks, on to statements results this financial information. that formal the everyone or to begin may statements information discussed that and those matters call involve such differ we materially we company's projected remind need that projected cause from Before the uncertainties in actual forward-looking and include financial forward-looking projected reliance of should not statements guarantees future performance, therefore, them. are be not undue placed upon These and

impact call. We any the the update further based unless by Financial. in forward-looking on the information Murstein, financial that to on could required disclaim statements during herein, forward-looking to For and available information statements refer our Medallion of is Andrew Securities Each I to this contained as introduce information like of company's this company projections and Commission. factors would of President the now with projection statement law. made and us please obligation Exchange call of to the date filings

Andrew Murstein

Thank Financial's We fourth you, of support quarter to Medallion. Medallion everyone, your continued call. appreciate earnings and welcome, Garrett,

me today's Joining Chairman, Larry Hall. is Alvin on our our and Murstein; call CFO,

our ongoing the moving very we at material After focused of quarter are and a the right pleased direction. that fourth portfolio. We were successfully that segments loses consumer with lending of were our and we to a on our preferability continued the manage with able capably XXXX transformation results. was executing in financing success XXXX we Medallion demonstrated pleased are challenging our XXXX, sharply on continued Medallion. year we mezzanine and

we consumer from is made. time, had record-breaking lending understand At and standpoint. said, the both our that we take progress our efforts being originations generating year but segment a profit bank, an much As will have

income loans million. taxes of over to fourth investment originated of $XX.X In segment XXXX generate quarter alone, consumer underwriting before those net of generated taxes our $XX.X net and loans our and million. million before XXX lead year, income the the the bank help teams consistent in prudent For bank the investment

able of bank. addition, liquidity the worth million were of for the year, consumer we at In premium to loans $XXX during generating sale additional and a sell gains performing

consumer million receivables, As due of at $XXX XX, of the stood of portfolio net December XXX.X to a our of million reduction performing loans. December sale

originations the During very of high continue we loans a RV home loans. our mix between credit & yielding fourth see high yielding solid quarter, to and prime Marine improvement our

focus underwriting to as with to assets, long-term XX delinquencies days team are build XX-plus year. squarely proud continue still of In the We ourselves XXXX, was absolutely ahead. I’m in our able The to receivables hindsight, of of the and withstand where our diversify our and be end order its success. crucial in ago our saw being faced during on Previously, bank which for back we strong bank Medallion alone as that charge-offs we note New off change the was off. as day to only decision City positioning the loans charged or by our York years time for to to and to characterized depreciation performance Bank Medallions XX a days XXX the delinquency. want challenges entire X.X% offset the of were consumer December the portfolio, take believe particularly the and fully reducing start company continued the medallion in us of Chicago and values unrealized additional of of loans our We further charged of estimated after partially to as approximately before length the quarter bank's partially million of made best XX. delinquent due

or delinquent to XXX treatment and in is fully shortened a bank charging for the and before partially the During accurate We period off the both at time of period conservative we Financial quarter, more loan. loans of the the current Medallion new the the delinquency believe fourth markets. short days Medallion

and course, we Of pursuing are recoveries. though, still actively vigorously

both of decline. steadily Medallion Financial bank to Medallion the and Our continues exposure

As of of Medallion September reduction or XX% over year. company million loans, prior December now from have On combined through managed loans. $XXX the a XX, $XXX million cumulative we of basis, the reduction and $XX charged-off XX, million reserved medallion

Medallion in portfolio XX% XX% our bank's loans net of December, terms the not Medallion current In composition have Medallion the bank comprise would of investment generating If portfolio Medallion portfolio we positive is the sold the be only performance consumer cash at at of loans bank's Bank, the portfolio flow. as the portfolio.

to special decline BDC from converge a in the March quarters. continue Furthermore, non-investment for on meeting to is Medallion the this any environment company is the to asset vote excluding will loan subsequent for scheduled and bank's potential the consumer should future we company in We’re X. pleased shareholders whether challenging expect that a continuing on hold that sales portfolio a percentage to

So, the key overall, Medallion saw direction our to on continue XXXX, focus in as right we moving drivers.

lending the to resulting cash bank its that offset exposure XX%. Larry some optimistic now give earnings through by our increase who division, turn are the call medallion paper in to to with Our us with perform to consumer expect, regarding from from greater be will driven growth. I’ll will even losses as well profitable generate from generate net quarter consistent operations to we strong highlights long-term results our we in the we charge-offs If lending brief by over results. reduce Medallion we continue position fourth division its continues net our very reserves. lending perspective, continues Meanwhile, division a assets and cash increasing mezzanine partially and

Larry Hall

$X.XX of some period. per net or million Thank resulting fourth diluted fourth let of assets quarter, increase per of In our financial operations in a million highlights. you, from resulting the net to $X.X share the or me year increase net compared in operations quarter you and Andy $X.XX take share, through Medallion a assets from recorded $X.X net in prior

a of charged-off home loans just prior charge-offs, sequentially. related At to from to XXXX into of million a XX% results in of quarter the quarter year tax consumer mostly signed to our of the year down on loans. previous the RV the Bank, Both, be wrote tax the by average loans. million the on from able quarter handicap result to loans quarter we incurred as our on at of X.XX% to prior $XX.X compared a The million of also which sequential at with The result corporate interest million XX-plus increase City as depreciation, to Medallion to improvement investment period. in Medallion marking $XX.X for fourth accessible law. X% debt liability million in million the medallion quarter, income as from $XX,XXX. consumer due XX-plus Our $XX.X prior decrease lending loans majority year million mix an taxes XX% Medallion basis. performing rates a net XX% sold quarter. $XX.X bank, yielding at a as portfolio's benefit A took reduction the premium. $XX.X a recording the stood was the of day depreciation $XX.X towards refinance in and of at offset in year delinquencies to medallion XX, additional of of XXXX. charge-offs repossessed million on $XX.X higher tax million recently XX, reduction million, the to an New $X.X at net a to consumer prior a rate from $XXX related represent due deferred million delinquencies as to XX% Chicago loans. of the in the before quarter increase shifted included value unrealized Medallion portfolio higher in period. bank's included we of stood lending of improved in lower was a December and X.XX%, At portfolio $XX.X reduction the as We December bad collateral the from $XXX,XXX, the consisting The loans of in the compared $XXX inventory the primarily $X.X was in loans. of in primarily day net product portfolio loss as realized $XXX provision a $X.X stood X.XX% prior were September rates. reversal existing yielding from loss due $XXX,XXX, X.X% reduction prior rate Net to million The the net XX average an net continue million. portfolio, and increase a reserves bank's difference investment sale reduction loans net as of an and Medallions income to The of nonperforming of York million, our year December of million, $XXX XX% fourth XX.X% was in XX interest December from

as We loans. $XXX a also basis Medallion our of the and with our in net portfolio million XX% decline stood continue a a December delinquency Medallion in December than Financial in XX from On XX% steadily other XX-plus as of prior XX Combined XX-plus subsidiaries, at down took as day delinquencies $XXX were of $XX X% managed were lending exposure. lower sequentially million, $X.X of the from net $XX the we million, At decline as to versus total the Medallion prior $XX million Medallion million, year million nonperforming quarter. prior December prior lower Bank, managed quarter. from were loans million million $XXX the as charge-offs XX and $XXX our year. day

quarters steadily reduce the We continue to exposure will to loans ahead. Medallion in our

call and December Financial million to million in mezzanine believe had an its as which good terms capitalized. in their sheet XX.XX%, XX, year of from September average are we had bank a and proceeds $XXX the X% loan December of remains the of turn the Medallion an appreciate at XX, portfolio up lenders million, Andy. of on decline the portfolio, quarter. XX. support primarily the reduction of with Our as loans our commercial a in continuing $XXX partially deployed, saw in to in back all mezzanine debt of The With sale year commercial the stood We $XXX as loan I’ll rate we was from medallion. from well cash from now increase prior yet of reflecting period XX.XX% net quarter. million $XX lending is made increase that, prior on loans be The as warehouse interest our balance

Andrew Murstein

Larry. Thanks

for As have asked we questions, previous on answer I we will now calls, email questions. those

Garrett Edson

guys, you much. very think Hi

Grondahl The questions Northland first comes from Securities. batch of Mike of

Mike Grondahl

six New what trends last First, you York did valuation utilization observe City over Medallions months? with the

Andrew Murstein

cash finance about wide XXX,XXX much as little honestly. covered as for of $XXX,XXX. a Well prices as have and range as deals have There been deals

August. since As utilization far considerably rates, seen as we’ve improved those

our they of several fleet about XX% rate occupancy or customers fact, that over told gone In so us to from XX%. have

Mike Grondahl

do question, plans Next more more any to you currently loans? have fill any consumer

Larry Hall

selling are given to we We holding our Otherwise, we a minded our balance for yields high continue and to premium. can line. sell significant about them contribution only open sheet on are if bottom content their

Mike Grondahl

on facilities? provide any question, please next near-term the an And update funding debt and

Andrew Murstein

Well, they partner have been in facility, lenders. with good very nearly DZ I our our for a we which a position of great us warehouse facility, The think is for a are decade. all largest

to will our renew them continue work and facility closely We with hopefully.

Mike Grondahl

question, final valued bank the consolidate be the vote bank, proxy to the with will X how And consolidation? upon March

Larry Hall

book fair we value bank annually. at be will the Goodwill carried which at in and booked to DBDC, be of over we consolidate will fair the will then excess evaluated portion value. value, If

Garrett Edson

are Okay, set private investors. from of questions thanks. And next

Unidentified Analyst

us last What the over many How program? of quarter? and anywhere shares is repurchase average at status share repurchased the price the if

Andrew Murstein

were shares There fourth repurchased quarter. no in the

our reducing calls prioritizing about are talked business debt. our and previous on towards overall As capital we’ve we growing allocation our

Unidentified Analyst

of What is status process? the the DBDC

Larry Hall

place. vote The it to community update and for investment we after taken X, further March scheduled expect the is has

Unidentified Analyst

Is in the ratio with X and compliance the what Tier ratio? leverage Medallion is Bank

Andrew Murstein

XX% XX.X% January we threshold. On December by XX the deferred that to this XX, above the incurred, returned ratio asset was due ratio of the had that one-time and tax reduction was the year but million partially $X

Unidentified Analyst

Andy. you, Thank

intend to share reinstitute Next does the question, the when dividend? company common

Larry Hall

shareholders is the The course. the by reviewed in a quarter decide due to current the each change should in notify dividend board make status of would the status, board, we

we share. ROE For now, put the area, business loan increase fund excess grow into we strong pre-tax our lending back to believe over in a demand gain so should XX%, market consumer and our to continue and of with

Unidentified Analyst

Thank you, Larry.

Next was level at question. year-end there cash at How much XXXX? unrestricted parent the

Larry Hall

million basis, we over December a On combined hand our including as on bank, XX. had of $XXX of cash

Unidentified Analyst

taxi Medallions rebounding, business prices you consider lending Okay. taxi the reached bottom? again? Is Have and Medallion a against would

Andrew Murstein

we’re further Well on fleets, positive mezzanine squarely though consumer road getting recently prices more remains the and our while our lines, Medallion on generally profitable our seen long-term. on the reducing the to rise focus from in for in cars potential business lending exposure. We’ve

Unidentified Analyst

Andy. Thanks,

your trading the at last at equity publicly XX have parent has over bank par, from and now level? near to a nicely premium debt you months rebounded question, Next any to the plans very going or do par debt XX% a or traded the raise discounted slight

Andrew Murstein

of We right no plans to the explore exposure at of our cost level, the it capital was at type could Medallion very and have this but capital some now only bank its raise bank especially reasonable. continues and of we raise given prospects, strength to its the time reduce as if capital

Unidentified Analyst

any to a XX% excluding do continue grow remarkable question, sales? is expect Next to consumer your between at to grow XX%, it rate, receivable to you business continuing

Larry Hall

at we will Consumer that and level well few to performed plenty lending historically to level has deal the We’ve over see us. flow feel grown years, of extremely continue of that past reach growth. for

Unidentified Analyst

And the given question, is the growth these quality loans? lending business, your the what consumer of actual of next

Andrew Murstein

averaged low very in historically, been especially the And & RV Marine of we’ve losses have and only in given X% here, X% lending. about losses the about Well improvement home yields.

been now performs we’ve years, seen more have performance. is pleased cycles & have for quite with or RV then been the XX and how there it during economic well various the and We Marine

Unidentified Analyst

How new you the bank the much rate-up tax increase, Bank during question, given of in value have environment Next Medallion did to rate rate. no the quarter? lower values continued especially interest

Andrew Murstein

values quarter. from bank value and unchanged That the have environment. correct, very in this the increased That’s though, still we Medallion remain strong kept said Bank prior of

Unidentified Analyst

on congestion discussed pick fares, good being can by and be with cars for City, taxis mean get question accurate? faster the as Next less up you New road would New York that is State that around pricing more York

Andrew Murstein

road make up the Conceptually, pick about yes. more fares. the when at or mean faster, over started Less $X.XX cabs about would The then meter the cars on turns money $X.XX more charges so. and

So, it be thus possible, so you a as very beneficial charge initial an X.XX could as thing. want really frequently

Unidentified Analyst

Andy. Thanks

company, there start the which coverage? Next is new question, a saw into great analyst to opportunity recently additional covering is an to go see,

Andrew Murstein

Well, transformation full the swing. company is and

coverage procure that the Yes, we additional obviously our coming of are Street year our out We to be to our planning able more bank. and well the analyst coverage be of visible to will control. in asset in given hopeful the we is performance are size ongoing strong

Unidentified Analyst

Medallion out And valuation your the how banks question, next compare to there? does other

Andrew Murstein

line appear We has terms of Medallion We’d general an as in much that also be all note reserve December banks to on of loans. Bank year-end performing XX. X% valuation pretty other in with the additional

that nonperforming reserves So its that’s takes addition to on specific the loans. it

Unidentified Analyst

Lyft Thank on can belief more passage equal City, additional Uber playing question pass? and New you you, that final what for is field we put New a on have, yesterday York Andy, and this that in crafted provide the building saw York is by will color this we City and eventually Council that your of bill a the would there much

Andrew Murstein

on can would any and fee a York rather $X,XXX that a encouraging was as came only out to would a crafted, New impose certainly it to additional each Medallions for whether currently bill them That will base from base. the to development too all surprise than yesterday ensure pass, single on us. Yes. Little dispatch City. an to rideshare an in respond early allowing cars but the speculate is it Essentially for bill rideshare attached vehicle, nice be

to to it will closely us. hope watch continue and again will those we beneficial developments be So,

Garrett Edson

time, Andy. this to will you, call And turn at the back I

Andrew Murstein

Well Well morning's to you we thanks for the look progress and again this the future. in on attending great. forward call everyone updating further

questions While realized as we follow-up happy could, answered. are that and tried not question to get many your we’re others in was as we to if we there

XXX-XXX-XXXX at have investor email investor Thanks please contact and end So, day. to everyone, a great reach that us at relations relations@medallion.com. or at

Operator

This today's teleconference. concludes you. Thank

this You time you may your lines disconnect your participation. at for thank and

Medallion Bank (MBNKP) 2 Mar 182017 Q4 Earnings call transcript