MFIN - Earnings call transcript Q2 2018

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Operator

Good morning and welcome everyone to Medallion Financial’s 2018 Second Quarter Earnings Call. 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.

Before we begin 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 on information of call. and call during the statement this based is available forward-looking of made financial this date Each to us law. to unless We forward-looking any obligation required disclaim by statements Medallion I would now to introduce Financial. President Andrew Murstein, like of Please sir. go ahead,

Andrew Murstein

your everyone, appreciate welcome call. and Medallion. of morning, our second support Good earnings quarter to We continued

subsidiaries, or our shareholders of as provided a as company hope Medallion both our controlled unit. has Joining CFO, picture Larry transparent our financial for including me Murstein; second we Company condition and Bank, presenting wholly-owned Alvin quarter, this future and consolidate on more holding today’s one and Chairman, call a the now our results purposes accounting report and current Commencing only operations. is with bank our our Hall. We of

continue lending commercial exposure consumer emphasize segments, medallion our the while taxi We very loan successful our market. medallion and monitoring and to closely

the with medallion begin Let’s portfolio.

on charge-offs This quarter, we and reserves lower took than medallion. delinquent loans much foreclosed medallion

We at the segment $XX.X and first a in $XXX,XXX. in for medallion City losses we accessible million wheelchair $XX.X recorded quarter. net medallion to collateral Overall, medallion loan collateral are York City $XXX,XXX a New the of quarter provision XXXX York compared of in valuing New million at the

quarter. against of The to in reduction their principal from with million XX, certain addition loans end $XXX $XXX foreclosure, XXXX, the status. first of is of remains reserves of level change the medallion medallion first decline the $XXX reduction collateral as and reflects there $XX quarter. of XXXX, the million The a million in to in the charge-offs X, As loan loans, since XXXX the June movement of million XXXX netting and connection in of loans a process the net of reporting quarter, second XXXX lowest for April the

of to percentage In the constantly bank all playing City the both hope quarter, performing, their operating is the continues our York Mayor, with is prices looking of for we medallion allowing our the term. our the leveled a believe since we portfolio X.X%, We to opinion, Financial recoveries have and also hopeful with is TLC until City more continue the is of will long and Although the over to are the Medallion of the taxi work of is to Speaker portfolio industry. the exposure that ways fourth City a reflecting environment. be evident field as reduced. members brought New the It and above. the for the of borrowers the now Council stabilized, Council, industry XXXX support continue balanced efforts fairness for majority lowest and delinquency XX-plus-day

last months For example, there over transactions have the the than been preceding a few year and more half.

vehicles As will conducts in we’ve August of will TLC package a will volume for on as Xth, high impact a the we that cap the other now vehicles these release for-hire TLC also legislative service press the the study the and license amount City the things, a among category previously of Council’s which regulate. on stated higher support create

drivers. set pay will volume services a wage that for-hire minimum TLC the addition, high their In

the also medallion market. to liquidity the confidence Speaking current medallions, taxi of not positively of holders and step New only the of profitability City affect York believe but this we will drivers

Let’s and now turn segments. growth to our profitable

before they for quarter. or bank continue $XX.X the taxes net prosper the million is of to income segments recorded lending First consumer two as

our $XX over XXXX by RV again of sequential was originations in loans. $XXX June first solid once million the our led XX, a As and at quarter increase improvement XXXX. of net consumer million, million in XXXX, portfolio $XXX stood This and increase home from

underwrite to a diligent continues Bank highly successful Medallion these at manner. team and loans in Our

of the again loans. million, $XXX is and million RV and first a XX, home increase sequentially originations solid over stood quarter As improvement of led from XXXX, by our $XX increase at XXXX. portfolio XXXX once This in our consumer $XXX June net billion in

these at a team Medallion Our highly diligent continues Bank manner. to and loans underwrite in successful

flow in quarter. I that medallion on are segments these generated to XXXX strong to second lending non-cash that almost bank calls, as attributed earnings consumer primarily while income the are at million As the lending record cash continue charge-offs have reserves. the remained overall state and our from losses The from earnings significant we interest segments consumer of $XX cash our we

lending commercial income the interest quarter. to million turning for reported We $X.X of net segment. Now, the second

regarding lending focal loans we now quarter-over-quarter. that some segment almost the I’ll second continue who results. be in of our to main and regard produce closing, In Larry, the points strategic turn as million growth, Company over highlights our will commercial commercial give continues while exposure have generate for segments $XX quarter to to consumer now medallion Our yields. the reduced to brief our attractive we call

Larry Hall

Andy. you, Thank

me which Let net to Medallion our mainly quarter interest take was recorded the highlights. quarter In attributable income consumer lending our of through you of second segment. Financial some $XX.X million,

was quarter and As million per consumer the from the from business share, improvement a of results. side were slight for a provision the quarter. $X.X first commercial in Earnings loan our the result net of Company’s or million medallion for the portfolio, loss a positive lending $XX.X the losses $X.XX

bank, now holding primarily finance as an we its a operating including As bank of segment. conventions company, the that company presentation of our the operations conducts reporting follow commercial industrial

to from $XXX report to Every delinquencies XX, March XX, Our net quarter, XX over days XXXX. as XXXX, consumer of at we XX.XX% June portfolio continue up lending X.XX% the rate last in low slight as as in delinquencies, line loan second interest stood with XXXX were quarter The $XXX million million, quarter. of XX.X%, X.XX% reported the the due compared average from increase past portfolio’s prior we a quarter. was and

$XXX,XXX X.XX% of included a a in the the New and for in We as with collateral to value loan $X.X for of against provision prior a non-Medallion as $XXX million million delinquencies. net of rate medallion was average net City a a performing from to medallion June reserve million improved second Also X.XX% to drop XXXX The losses We above accounting consistent to with quarter. additional in XXXX. of decreased Bank $XX.X of Bank. the Chicago Medallion took result the a ended in loans marking medallions the follow medallions medallion general losses $XX,XXX. large of XX, Our the a net to loans quarter York loan an order interest methodology

primarily June million. up interest income a quarter. lending was million of $XX interest recorded XXXX We continues of Our made rate commercial deliver XX.X%. for lending portfolio mezzanine was lending XXXX portfolio net segment $X.X for to Company. as the second a commercial which average XX, the The is The

exposure million, would medallion with reduction $XXX in Company approximately for not recapture for. the medallion discussion then of lenders the changes have to exposure That reduce structural overall make further loans with associated medallion a which total the If sheet also our in our from loans trust results, would various $XX June from one from certain we XX% medallion that approximately to we would is our and been that of reserves we facility. to XX, to $XX of successful, able liable owns deconsolidate our are our Finally, million be allow balance XXXX. million eliminate

accomplish we hopeful Andy. that this, positive to are that we With we now can back be restructuring While would call this this there that, closes guarantees I’ll the can no achieve and result. turn

Andrew Murstein

Thanks, Larry.

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

Operator

Thank you.

from comes you selling consumer excited What you year? you changes the of of about Mike question Grondahl the consumer Any the competitive in Securities. Are portfolio? for any the are happy with first The plan Northland Do environment? on rest loans?

Andrew Murstein

Good Yes. questions, you. Mike. Thank

ROE We exceptional. or the portfolio. grow The earning. very are so year. what very or banks well double XX% The with triple happy per The business to are are continues margins consumer most is at

at XX% lending X%. We’re and at borrowing rates

extremely are So, we business with. very that it’s happy profitable an

opportunistically for the time been selling loans. always from last nice In new option premium. time a to several always terms consumer of an We’ve doing loans, at us. it That’s years,

So, think, getting lot banks acceptable loan. if by consumer buying and in of to us the I grow are are to offers they come aggressive, looking and a

So, it’s selling at large them premiums. those continue we can possible that

next one changes in think, was the any competitive I the environment? no. Thankfully,

$X last years, breakeven. get into to coming business to that aggressively is writing us off conservative We’re The entrants still new excited leader are of the rest key it per portfolio and the there, end, What We’ve the for outside I lot. few business. very for us believe, eventually. the a year? our is making positions. the The business. medallion get medallion lot medallion A just the share no behind of The rest taking been to an a about you market of losses, are

just if breakeven we the new is I shape. to think passing, So, City regs in then, get Council the could can, which a medallion going to we’re the we be especially business great that with

it’s that. simple So, as really as

Operator

marked talk loans of the comes the consolidation portfolios of of were total accounting and bit size The marked in questions all little mark next and from set mark? is Twerdahl the rate total or interest they the Can O’Neill. you. Alex fair What a Thank Sandler credit value? to how you loan the about of various

Larry Hall

the happened took was our at opening that the in of we portfolio when April fair There as fair to final question, valuing brought as our this medallion were investment the What of fair quarter, commercial of or Thanks Xnd, adjustment end for as marking quarter. mark-to-market that end first company. Alex. our we became values no is XXst finance level value company. Back March new investment against a life the over balances during on an that life market the we at and that began of had the

all for of starting do origination properly, so the of the them and the were number net instead to April loan new the one those Xnd. balances, gross, did was, that that So, amounts what netted accounting costs to point became reserves the showing we

Operator

questions purchasing Is buyback there Where the or of the the private portion? last in its The are status? any of with investors. from stand a is does bank What the sets interest share more Company policy?

Andrew Murstein

plans share business the where over We to consumer are want in ROEs impressive. very market have no grow We our and XX% immediate a buyback. still for

short that’s term, our focus, So, anyway.

things few we’re terms there. a on of working bank, our In

a doing as not we a sell in announce just to or are we’re there’s initiatives so be I the Our upside so working to there something and believe well. days. prior, preference, to much said XX actually the bank few portion capital XX And of as next able on. is There it’s hope

Operator

Did mark-to-market grandfathered in anything you seem may valuable? at which Bank past, Medallion like in mark-to-market know like charter you’ve I and your extremely quarter, the is least ILC investments. this the

Andrew Murstein

way. same Yes. the We feel

not do longer BDC. bank or we forward, since a or anymore going RIC holdings have the we’re and no mark-to-market quarter This our the a

Operator

It that? seems regulations more that the some on Can changer. us a City were give Council’s game new you thoughts

Andrew Murstein

I’d will My Ubers on to that few time, the size hasn’t the to of there’s a and going card cease, likely black years will and be the lose the is more more and lot the and other Uber vice take market erosion some less in companies taxi the due stabilize business to pie possible The over It’s But recover. vehicles is road. and last agree. change. drivers to on cars versa.

extra and hopefully or increase taxi Also, time. for XX,XXX steadily there So, companies stabilized with are should cars. the over more revenue restrictions

think, way around. changer look the lose values, potential owners, other likely to that and for most And owners, Uber important is medallion the So, cars thing a at cap will that game time. looking entirely be with more at other in it’s for I to is investors, stability liquidity all market the I also, to a And they the way and probably more And comeback it going returning an think market new happening the over they’re asset it’s this with pave that’s going a perspective. class. to companies

last so space. half the new least week voted at looking the this I’ve Within laws dozen investors on, or a at since calls gotten were new from

Operator

so, it business why state is is about continues profitable? correct this that XX%? the so And well. pre-tax Is to if perform actually Your consumer extremely to ROE

Andrew Murstein

years a for foundation and XX of rates. it impressive years Yes. before continues XXXX. We’ve plus has It’s keeps it already, for The doing close very to that. for bedrock Management that. be since in to been XX business this growing been us, at business

XX-year on a start and be And we will the sort here. to market speak. become, we’ve have the we think continue I to leader competition So, head

Operator

your making in increased us a where actually rates that obviously sign. noticed is even. I business portfolio, day that Give money at which a least actually medallion or break good starts

your earnings to continues that well consumer it as business If great. look you can would get in to perform your point does, as

Andrew Murstein

just for can Yes. to the less obviously shape. now. side. key Rates medallion breakeven. in this is really taxi us, have gone quarter we’re stated in competition lot that, before, as to do The I up is the And we for great a business There if be going getting

again, Our making $X other are as share. as per businesses, much

profitable my So, is to business the not in hope future. actually the be too to distant get

could we do just eventually here. breakeven think, I business than a better

stable of the and along expect think, stay should personal can I it’s new again, we current these medallions we as have on medallion We not possible And good, are who as well. them delinquent customers, the guarantees just on but a go on very way. current. collect also lot owners to the regs

city be taken again it’s think I that going to the to has the industry. very supportive help measure a

going us, in losses medallion we’re So, I soon to which upon as is be think the almost shape. get us, great we as behind

Operator

for commend more quarter to and Hopefully, it and and to the why ask transparent. financial in for prior presentation do though, statement, have the being interested. you quarters? cleaner new leads to didn’t like this you much now your more I’d I of shareholders why

Andrew Murstein

right. You’re

make We’re trying it cleaner. to

little RIC the bit I look quarter, you’ll better. weren’t We over But the a bank. when done the as have was it able to figure right be But we’re but wish definitely and and in to could you think permitted moving still Q, a of noise everything little the in consolidate earlier. to bit there a time just we BDC direction. we out

to easier we And shareholders? that’s of hope much and going quarter to to going more and attract this it’s lot to transparent follow. going be So, new forward,

Operator

surprises your you intangible no a and can time? understood at quarter value everyone were book for with build your book value bank being was But, the There carried over the how up premium.

Larry Hall

that the other fair by portfolio companies number million current $XX a correct. bank the our translated the other adjustments quarter. value had no the companies million, for against goodwill from that that $XX March of bank and during the to of that That’s just deferred or amounts booked the to liabilities valuation There were quarter, range we as help into of tax any to amount. basically and portfolio some came The reduce offset number. actually over the And go goodwill that it XX is

that parts earnings indicated, road from So, of book once is building the to the of tangible we commercial down happen, and expect Andy up because value get the consumer basically to the going business the the business, profits in stabilizes. superior as the medallion

Andrew Murstein

to to And just to the don’t add point to are due to that, I think, there we is RIC add at One that least Larry’s going a three BDC, longer past no book. have to and able as are anymore. to we ways be earnings tangible we is,

of -- or building there. expect income maintain can be are the bank’s the we lot all banks there lending of again earnings. were to lot a and earnings rates, those we are including The margins double So, and of up XX% but bank at other triple,

we So, We’ve that are our is do disclosure bit release to good better restructure Two mentioned are there that that. to restructuring the will or we the But some the a job. that’s value trust trust we’ve able I to $XX be Q. if the facility. and facility, to are little we third able going in press one is of by tangible need more in in way a immediately also think And done bring million do when job, done. we is, book that

so delinquent going the of for. $XXX think guarantees, written-off borrowers personal I million and collecting just after on we’ve over these loans

million book. that we’re should example, We a just into would of if that be $XXX ride-hailing new come us other can guarantees. regulations medallion meaningful. amount on that tangible help back collect the that that market were income of the of the and strengthen cap our would obviously hopeful mean very by And are we So apps way to on one-third the passed going those thus and

and the foreclosed several want in who days, buy are seeing last to process some medallions. couple we’re owners medallion already medallions of So, other

move books further as So, Company. even well, will of book our value up the that as we the off go

Operator

for over turn the Andrew back now you. call remarks. Thank to I’ll Murstein closing

Andrew Murstein

Well, the thank this It’s dialogue for this would talking morning you continue pleasure everybody. to in and weeks days everybody joining like a really ahead. us. We again to

investorrelations@medallion.com. us call we or tried at time. you us, many email one, are any a So, call But, At to answer day have we like Thank and realize questions that’s feel We free to as great we at could. do to every you on to but as day. available all impossible anytime XXX-XXX-XXXX a call, today.

Operator

conclude does That teleconference. you. Thank today’s

your day. at thank your disconnect time. for participation. wonderful And We have may lines You you this a

Medallion Bank (MBNKP) 14 Aug 182018 Q2 Earnings call transcript