MFIN - Earnings call transcript Q1 2018

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Operator

Good morning and welcome to Medallion Financial’s First Quarter 2018 Earnings Call. By now everyone should have access to the earnings announcements which was released prior to this call and which may also be found on the company’s website at medallion.com.

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

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

Andrew Murstein

to everyone of call. support Financial’s first welcome We and quarter your appreciate you Medallion Thank continued Medallion. earnings

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

consumer With medallion of strong respect York and and City proactively another on $XXX,XXX. to York quarter segments of a for significant New reserves to few values our additional was New results, a net the From quarter to first generate our charge-off Medallion’s, we The to Medallion Medallion $XXX,XXX perspective mezzanine down recorded continue accessible substantial while wheelchair performance. fairly fronts. writing and took City and newsworthy profits of

month For of a reserves York by first recoded as sizable reported of average related in we quarter the to loss in price net $XX.X quarter the was Overall New Medallion the offs our in Medallion and and City net $XXX,XXX. charge segment. recorded TLC April the the transfer realized over combined million

on lower additionally exposure, our publicly loans lessened we those institutions at of carrying financial a Importantly level their that the reported. significantly reduced level our to compared values to to Medallion and lending delinquent par lower end

a BDC the quarter first company at into a the we we During non-investment from officially approval received shareholder April. the convert and overwhelming of beginning process completed to

income Bank will controlled including wholly one balance of consolidating and portfolio investment reporting statement and all sheet our forward Medallion be as moving will or and entity. we our on our We subsidiaries, owned

understand as will two, to financial increase integrated important note, our one overall to condition; of ability greatly We transparency; one, our three, and it’s which shareholders reporting and to expect once in support initiative. to to for simplify the shareholders our regulatory again Medallion want their the Bank due thank limited of growth BDC no constrains. longer ability be We our on invest this our entity, will

through with some to Let’s our brief respect go highlights main segments.

consumer bank, the our income of the bank million. investment again $XX at before led First way segment taxes lending recording with the net once

XX segments net sequential at $XX increases depreciation portfolio plus X.X%, and Medallion underwrite XX X.X% stood within in day our March receivables, led as of in and loans. at improvement $XX.X performance in our was additional with million a unrealized of by consumer of only million team increase by an the home end the of from to million the Critically $XXX As quarter were prudence originations continues of offset XX. our portfolio. Bank’s RV these The delinquencies loans charge-offs improvement December consumer solid and

our we million from As are consumer attributed before strong earnings reiterate, segment to in generated. or but cash record income our I’ve to noted losses that Thus the with the per charge-offs. have earnings is extremely overall at significant bank cash Medallion that primarily Lending the year flow non-cash we over lending interest $XXX are being want from

consistent portfolio a company now $XX.X as that a have be with producer to continues for million a segment generate mezzanine Our yield. annual typically the XX% loans we

$X.X an over return quarter equity earned million, mezzanine this for For XX% the on the segment segment.

generate to for continue over long will segment the company term. this expect We solid results the

be to bank both the Medallion our and Medallion reduced. exposure, the Importantly, Financial continues

of $XXX from reduction $XX managed a loans, Medallion As and one December year ago. million XX a the $XXX of reduction XX from million March million company

also March taken. the of Our since XX end XXXX, were day delinquencies lowest as of the levels charge-off primarily reflecting plus XX the

XXXX. the bank comprise of Bank’s Medallion a portfolio, XX% a the investments formation low Medallion of Bank, Medallion only now In our historic percentage is in which current for terms at of investment portfolio net compensation loans since as its

the at we appreciation of net on holdings. our end quarter depreciation recorded several unrealized the of and Finally,

renewed third in Bank, as or of with portion partnership a well Medallion from as all We expected interest opportunities. purchase the parties have with potential

the In assist through well. significant the know investments, a pursue to has in BDC outside or be Medallion adjustments the we on focused and and creating ahead, for be other a requirement bank the as held portfolio, the under potential majority That portfolio of the our noted We I’ve recurring for are or alternatives segments impairment fair but company subsidiaries bank long moving we operating value addition, will bank of that matter company direction these for quarters non-investment exploring will previously value we the basis. were said, old fair forward controlled will on our no investment we as longer earnings no structure, been capital owned value what before term shareholders. that

the So to it the took portfolio. significant simply we to quarter sum some steps our and up, remove additional in overhang from reporting company’s

on squarely call to exposure divisions, quarter mezzanine while to Medallion the first our consumer further time over order our our reducing We value in long unlock who results. some will term give I’ll regarding over will highlights to turn now and focus Larry for continue shareholders. brief

Larry Hall

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

total $XXX appreciation million At year our $XX.X in million in from pretax in assets. on gain basis. income $X.X as year quarter. prior results to XX prior mark from XX, of than and Medallion prior originations bank, $XXX net loans in and just XX.XX% a day at $XX.X prior loss compared Medallions on of portfolio to XX due Financial XX% $XXX be $XX.X from in $XXX first the million the at a stood delinquencies to loans March as XX $XX.X reduce rates. and recording XXXX the reserves average stood and $XX net large of and exposure. portfolio, bank's prior to taxes a $X.X of a The repossessed was loans at $XX,XXX. X.X%, lending XX% March RV we subsidiaries, York investment $XX.X the the in to as net majority net was charge-offs, million March million year to Bank to million, $XX.X stood as offset improved of period. in net a On of million quarter slight in Bank, increase quarter March quarter. net our X% XX portfolio a City have an $XX.X as $XXX provision Medallion reduction year Boston loans. a reduction Medallion we quarters our million XX-plus At Bank's medallion million, as the portfolio's higher XX.XX%, improvement XX% were $XX.X sequentially we March took a of the X.XX% of at net charge-offs interest million consumer our compared the from unrealized result from decline The decline in were primarily X.XX% down represent net difference related from continue prior lending prior quarter interest in the X.XX% delinquencies value million million additional than the write non-performing new which existing investment net from of at with an Medallion past XX, day December improvement Medallions of for we loans, up period. Combined, delinquencies million, $XX.X incurred Medallion a prior quarter. We stood as to XX% managed million versus the of XXXX. At from average inventory a a Net first before The downs Our on sequentially. of Medallion loans consumer Medallions lending ago. wrote lower portfolio $XXX,XXX, to year bad XX-plus were larger Chicago Medallion was $XXX the quarter. million, the rate The the XX-plus XX% rate a due able and XX by managed million and a to day to primarily of in partially of prior million, both in of net in home $XX.X XX% included reduction the a of as million March as was a XX% net as million, debt Over and other as collateral in basis Medallion of to down New $XX,XXX, year portfolio further took our of refinance

had of prior our of portfolio commercial the of reduction Medallion. million, well In warehouse with XX% interest on bank remains The increase lenders net loans are saw March With had debt period call made stood at that, is we credit decline in Our $XXX I’ll $XX we from March million believe terms now to renewed an quarter. of an its which We as our million from lending support and the primarily portfolio, March up loans as the months. as XX.XX% XX, appreciate nine commercial Medallion balance mezzanine sheet was mezzanine for year $XX as cash DZ additional a quarter. Andy. a and Financial The of continuing of in XX. the capitalized. XX, XX.XX%, from we during loan a $XXX December rate average turn in our prior year back in of million their good increase all facility on

Andrew Murstein

Thanks Larry.

As we’ll the calls, community for on asked investment and emailed your we answer questions previous from we now questions. have

Operator

Yes, from Mike of Securities. Northland the Grondahl comes first question

Mike Grondahl

future your Loans? provisions Medallion confidence is level What for from

Andrew Murstein

for Hi in took not to hoped they coming quarters. for We Mike, be large the as are We questions. going large quarter. reserves thanks the pretty that the

positive very In Medallion fact that prices. a uptick it’s I in saw we sign think an

we seeing So we’ve anywhere don’t based as April, they be large. been near think will upon what in

Mike Grondahl

as you range your for of Medallion in regard press give portfolios to Second would question; look also a Can Medallion can and release? talk serving size opportunities Loans revenue in about you to potential stated service? financial

Andrew Murstein

we in just yet, just know haven’t clear, you we are to signed anything talks. Sure, be

either there project, to we’ll know are been are and get had XX as upside. of talking X%. two talking equity XX% very by private and immediate is about hopeful. else. be and you in guarantees is them past are or I Loans We something mean of But type serviced still $XXX like the most is to firms the someone be and Medallion will been the Servicing future this, again they more when It’s past, need at to serviced but which a million no in others, we we’ve possible, that quite in is or large work need there the number fee

be. So that’s our goal what would

Unidentified Participant

The Were from lending or trending forward final things internal consumer inline for Mike portfolio Grondahl, the they to question quarter? regard in above are expectations? your

Andrew Murstein

Yes very actually, this our trending with estimates. are pretty much in-line happy business. We about remain very, they

Unidentified Participant

in a We by taking Can above from would as The them This turning your things XX%, from Investors. come reported at other most this what every prices at be took only company’s capital take next Medallion please? so. least Private that finally what loss, lender their that was this It could to should doing happen at? long address to for far away large below were your was cut you point set it’s publicly applaud concern important stock As you quarter, price. you of to you bank? ratio how the levels most The questions, someone this buyers. like me,

Andrew Murstein

be to believe ratio many XX% consumer going XX. company for is sure for April would continue the us Yes, great tier are X really profitably of and incredibly results and as from what has our weren’t this leverage us a capital I The to in that right. be ways consumer it’s ratio over has future. we due was the business the business mean The the in taking been continued business, when news our you though large. from hits are good We strong bank’s we carried

Unidentified Company Representative

The and you are what you can you. Thank Medallion next touch on seeing question, in new the prices market?

Andrew Murstein

April. Well, the price is in average transfer

they very was slightly over. City Many positive, been have been have reporting financed all over about $XXX,XXX these fleets. York are $XXX,XXX are upon cash doing looking Prices all place, to Medallions that is if the or and if $XXX,XXX they are days, are they deals. New from depending expand the of they though their actually buy which operators well and to actually

Unidentified Company Representative

the City the question. about? Next talking new Council regulation is is What

Andrew Murstein

have of lot capping the Council now, UBER are include the ago. the you to a they may several retrospect. that unsuccessful. Many the of Mayor are was things and should Many of done amount recall they at Well, It’s years tried and in about something it things. looking do talking of cars, that said politicians that’s that the City they something Mayor have

change them for charge less e-held wage fees charges like is something and for happen to earn hale below so other for what not cares handicap [ph] accessible companies, taxi [ph] Increased doing. that been could more as than Having able a have the them drivers Medallion a good driver there many not a e-held be So the licensing and companies. of fair, minimum now. LYFT do UBER

do of they these There go any is are So no them guarantees go changers several through, will through. game there on is the if but things of a lot table.

Unidentified Company Representative

news ask, of associates us his lawyer of Cohen and President is much, borrowers Trump’s they so the James Let ex yours. but in one are Michael Freedman since

Sorry people’s but lot for it’s asking on minds? a this, of

Andrew Murstein

Actually of problem. are borrowers of one No company. either them no, the

Unidentified Company Representative

Thank you.

portfolio Turning to question next tell from a X the Medallion more show? can Investor, us you what Private about Cap the

Andrew Murstein

sharp too, is of equity the rumor have clear Basically pounce for positive circling very me be too. track XX bottom. that was and met to are funds the and many that probably have true lot it to hedge they private years I a industry firms, it’s the a of great ready so, to most that though. these but market Well of and sign just them hit went they records been with pretty or firms personally sale when here felt people

looking new of the the a in to as more see to loans. just are is and and could use So this shot capital be Medallions more flowing want industry major into buy to arm. iceberg they a tip the lot they It to more put

positive a it’s very sign. So

Unidentified Company Representative

I Investor. from concerns? in any following not there the question best The my Is seen Next business a of credit or business any if years continues competition to XX-plus lending stocks. consumer Private be one ever have new financial

Andrew Murstein

we XX%. You are on lending seen The right, of XX best RV I’ve experience. marine years you segment lending have and this know it’s my probably is pretax over the business ROE in actually

seen So at at rates new we XX money markup. competition any so fold X.X%, borrowing have it’s lending are basically here. a XX% and we not Thankfully

Unidentified Company Representative

that? Can your income comment fee you Medallion new mentioned Loans servicing You from in press release. on further

Andrew Murstein

groups of after this so approached help. it have more want in experience in servicer Sure, of service current don’t they have them just they is years. to work. the us. who workouts lot been they than portfolios; us, all over probably do also loans is for and several are a industry that continue these over and want be who buying or to nor currently service market for these this The Medallions to new any Loans, hard are investors doing want and Medallion in and lenders better many We’ve of There many investments no hand their to them to have is truth XX there or no it’s us sector

You to know They kind in have any We scenario. to expertise potential don’t take need more real a anymore it balance risk help to the capital sheet be has or win-win industry. the more up tie them.

have fees, our the people could through which already So line we bottom handled charge this. in since and we will to place mainly workout fall service and infrastructure

work we future. near could hopefully So, something in the out

Unidentified Company Representative

even Next valuing selling Investor. would MFIN. a the investment Why bank question when the community from is Private you consider is

Andrew Murstein

in third of market in from cap. purchasing But It remarks, if or was the a recently. worth we in to alone came us renewed a know everyone the little about parties we bank my interest We was, to we all as the bank? bank, have believe been firmly don’t of or our expect portion release of partnership multiple As selling the there that is as would muffle. the These consider well bank a noted unsolicited opportunities. the has question it. piece and why a I heard

bonafide We’d We value interest would are if what we an if be didn’t create that’s the not opportunity to explore do. there for the is pursuing actively atleast like sale. shareholders we and whether significant though to remiss is

Unidentified Company Representative

to question, see is be in divided potential come XXXX. next there a The back

Andrew Murstein

hopeful. are We

again reviews business dividend, high policy but the be with we’d ROEs, for course. due it divided announce really continued in said, board in Regarding we’d that our has and divided the company capital our the if reinstated deleveraging consumer hopeful growing our quarterly be to is That allocation and those XXXX. the priority

Unidentified Company Representative

Thank you.

broader the performance Medallion market delinquency Does back the from question track the non-prime of auto Next portfolio trends? for loan RV the Private performance or lending to Bank Investor. a

Andrew Murstein

– that the the was sorry, full Actually question.

Unidentified Company Representative

I if have segment, it especially that does, weather as also, a the to delinquency about bank that and is are Loans want second Medallions the parent taken? to finish just increasing in rates company beating there Medallion and part concern is, trying the

Andrew Murstein

many the No, and looked Direct a buyer. very not go subprime have than sub We at price a to buying need. different the luxury auto times is that is the and business for RevPar auto demographics product auto elected product is buyer business. really into

differently. very, historically perform they So very

Unidentified Company Representative

Thank you.

being Investor; Next value question Private is of versus it year? book Medallion bank? Is of million basis the from the $XXX in a worth the Bank last million $XXX the what

Andrew Murstein

at liability attributed Actually you about differed know to we bank the are $XXX netted investments. million our with carrying the when tax

the than our banks going to the strong it’s under old fair ever level many been doing But has required portfolio for bank noted going the that be The most less XXXX. be at lowest for been portfolio view we’ve quarter but value is hurting at bank has the Medallion the Medallion as structure, reasons, since adjusted consumer including not the the my think. in it’s not valuable at to which bank shrinking people So we started forward. the remarks, what are in we the to The of more end in limited becoming bank earnings. is but anymore

example Medallion to the has worth portfolio, how valuable becoming. for clearly a one to in it the its party is it’s than be us lot and becoming and how the low the realized third is day bank others entirely, out So if bank the will in bank it more than and

carrying value the party determined third the looked other at So that, we they that at are looked firm at the factors at. they valuation many looked and projections, it

Unidentified Company Representative

Thank what by see of shareholders the end you would the MFIN improvements question, XXXX? you like to for and final

Andrew Murstein

a the the but strong earnings sincerely people time think shine going and but would Well, the for of some I guess Eventually more without business Medallion get definitely will we to are The brightly. company short confident we know our happen. are question rest the answer path. is collectively. there on than I through doing price, stock best that stabilize. right we higher taking know going highly I’m I that’s are We the to will it’s like,

Unidentified Company Representative

With to that’s for to Murstein, I’m you call that Mr. remarks. the turn closing back final question. going the

Andrew Murstein

Thanks that you investor you. great we others day! at have a questions answered. thank your at by happy could. Brad. and much call. everyone to and further there relations question We on contact to follow-up email many for To We tried investorrelations@medallion.com. realize We if to in look thank updating or are attending we’re the XXX-XXX-XXXX as end, forward very morning's get to Thanks please wasn’t in I Well, as this future. want progress in

Operator

teleconference. today's concludes This you. Thank

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

Medallion Bank (MBNKP) 15 May 182018 Q1 Earnings call transcript