MFIN - Earnings call transcript Q2 2019

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Operator

Good morning. Welcome everyone, to Medallion Financial's 2019 Second Quarter Earnings Call. By now everyone should have access to the earnings announcement, which was released prior to this call and which also may be found on the company's website at medallion.com.

Before we begin the formal remarks, we need to remind everyone that matters discussed on this call include forward-looking statements or projected financial information that involves 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.

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

Murstein, like to sir. introduce President Andrew of now today; proceed Medallion would I host Please Financial. your

Alvin Murstein

joining for our second Good morning, you everyone, thank call. earnings XXXX and quarter

Joining CFO, today's call Relations, Director Murstein; me is on Arzeno. our Larry of Alvin Chairman, Alex our our Hall; and Investor

quarter, public. forward our ended a with XX% portfolio the XXXX quarter. continue portfolio, the level the XX% decrease total as of comprised to currently net portfolio At million, second a just progress company's We of assets. and the went end company's managing X% lowest from first the year total of the medallion from XX% and We in the quarter, total net regards of the the Medallion XXXX loans since quarter at stands a XXXX, XXX it the company the the net decrease

loan attributed to portfolio first for that our to offs, lending The the losses off. by run cash quarter-after-quarter commercial earnings. charge losses greatly provision comparing report that been are in we non-cash to segments the we primarily Medallion the continues being and from provisions significant Medallion The record and we when while are quarters six consumer as produced earnings are lending manageable reduced XXXX of hopeful months have XXXX, are the upcoming

in the quarter, for half the interest the of income recorded million on have net we of of XX.X are XX.X interest income million all As XXXX. we to for XXX second track and approximately first for million year, net

commercial continue to both and thrive. lending our Turning Medallion and segments, Bank now to consumer Medallion Capital

way In first same a Bank in million originations only improvement million demand in to to the but well. Medallion consumer of year. for period of the as months the product, This the press vehicle last the the release highlighted loan six our XXX.X compared XXX.X recreational loans as bank's home and demonstrate quarter originated we year not growth its

portfolios. and XXth, for June for Medallion stood recreational increase of of recorded quality from a of charge-offs our improvement. enhance bank's path this Very these is portfolio months will net and As XXX working Bank's of in the home million, consumer year. hard other portfolio complement as XXX at exploring first credit demonstrates consumer good average the was quarter XXXX The consumer and portfolio X% the loan the forward. the bank's percentage the X.XX% X.XX% company that strength of numbers that products a six million

extensive the process relationships recent partnership Utah this charter. of another onboard those in we'll develop and Part Taylor, to strategic John hire companies, with He bank's President has was of ILC managing. based and First area look experience former to CEO of the up and the technology Bank, he build financial program came Electronic

continue deals The commercial pipeline source well quarter-over-quarter. to segment remain XX% their grew They and their capitalized. portfolio to grow

XX.XX% recorded quarter. of X second In ratio Tier end of the at the the a closing, leverage bank's

XX% by the that efficiency which operation bank's The cost maximize generally months recorded six ratio, In below addition, way the profits efficiency optimal the as XXXX, a XX% to for continues maintaining to is bank's the ending be low bank ability is a regarded XX, the measure ratio. bank a well June ratio to environment.

highlights the on to I'll give now will turn quarter. the call who Larry additional over second some

Larry Hall

Andy. you, Thank

$XX.X the compared highlights. from million to of and million to our or $X.XX in quarter $XX.X for taxes XXXX second million from second was was million Consumer loss after of quarter per the or $X.X increased you in some the The half. me through segments net increase. first share, to first $X.X in in enter flow as second second $XX.X of Commercial $XX.X the pipeline Cash the the million for prior we period. Net quarter, XXXX more year the take quarter, $X.XX and second a per operations Let quarter a million continues year. grow for our both for share loss segments half XX% the The income net

XX.XX% high Tier home Total Our and second both the Tier XX, and X to last in commercial and $XXX of quarter, the at XXXX the X million XXXX. capital the XX.XX%, capital both year net yields a interest in margin was quarter as recreation, improvement X.XX% reflecting remains quarter, a segment. June bank, of for at X.XX% comparable ago lending including

In million, XXXX provision year the quarter, in to the second Medallion the for quarter, first losses $XX.X was loan million $X.X $X.X million in prior compared the period. and

A $XXX second to of XXXX. million the the end with decrease decreased decrease quarter. portfolio quarter at the XX, ended million the million first as $XXX net Our XXX a of a XX% June from XX% the from we Medallion and loan XXXX

in this side Loan over portfolios as average both year. rate loans The delinquent delinquencies remains consumer in X.XX% remain reporting. XX second first the due was our a and low quarters interest consumer on days constant the past of loan

portfolio the XX.XX% prior the decrease the the on year period. a XXXX from the XX.XX% rate however, quarter in average was slight in from slightly up interest first the XX.XX%, This quarter,

use. first June to line portfolio capital the quarter to to income quarter segment source and grow recorded for put was average as period. of as segment its was in year quarter. previous was million XXXX in portfolio and second $XX.X for in the able XX.XX% and year, net the commercial capitalized quarter recorded in with $XXX,XXX Our $XXX,XXX in the prior and well commercial remains the the the XX.XX% they XX.XX% second lending lending The opportunities of to million, year. their The continue months the rate the first compared six XX, of of interest $XX.X the The

of on in loan We company's the strong in will consumer both expect total the our coming total and quarters commercial demand XX.XX%. yield current segments portfolio that support the

With now back to that, turn call I'll Andrew. the

Andrew Murstein

begin Thank you, call. Larry. we can now portion the Q&A of Operator the

Operator

this Kitsis will from we At first question Sandler and comes O'Neill. Please conduct with Jeffrey Our session. time with question question. instructions] a you. answer [Operator Thank proceed your

Jeffrey Kitsis

ramp-up? strong please and this expect on few discussions release, Can SVP, Good mentioned how prepared quickly already partners. well Taylor hiring can the the this morning. In remarks, And said you're your then to partnerships? as in initiative? Partnerships, you that we the What you of in potential and John with Strategic earnings expand a from these we can expect known you initiative

Alvin Murstein

Jeff. Sure,

have State working So the has And say with Utah in Utah, years. the well very export are for partly several I'd strategic most of been now been it's permitted partnership can probably that program all because the that you states. working XX ILCs, for law charter it's FinTech companies regulations at preferable Utah,

had of prior CIT. of at it's at So one and bank, First kind that his companies. before he Electronic stop a shopping FinTech number at the accounts John for was

be numbers, is if and this up So and anyone about done very another it's XX%. a Southeast and north active Electronic but ROEs not take profitable ROEs that's and like in if are and their of look to very Fin Cross all others. Bank wanted WebBank correctly. brought one their Law Call reports and banks space River hit a First business can significant, that all is are those we'll

So is started our and John six about have something place. start. somebody in hope and to takes July. in pick to partner vet Typically months a

so or hit in January by we'll with is hope the So partner a ground running the place.

Jeffrey Kitsis

And provision. then moving to on

you're remarks Is related provisions upcoming provisioning prepared there way the are quarters You mentioned to in hopeful to in that in ones? a forecast Medallion manageable.

Alvin Murstein

it. to this very loss or were question. XXX is know, have a $XXX taking million and hard I been heading. loans, Medallion only to kind down up directionally from so. steps we're time-to-time, forecast one or but mean, peak from And step It’s The we're where of of two we lumpy a so pleased honestly good million you with back forward of it's and

again, don't have going more those. we've several year, an into going the will like did the we're next are continue down. losses So, From But to significantly time-to-time We're think quarter, you losses The many next last to have we cut of quarter. quarters this have that it. to confident we been going you know, increase decrease.

Jeffrey Kitsis

And than how think give about around should bounced But level? to lower then after coming onetime expense excluding insight expected. how full-year think from see of you charges, core It your quarter-to-quarter? into expenses nice last to-quarter. there the question. about seasonality Is And was even target? you us some Can have kind from we expenses quarter

Alvin Murstein

not some you if they there. behind, pays then that like know around, though it usually of It but partly our to successful they to, expenses to borrowers fall want want jump have behind, could out, to our itself do you litigate. could and comes we're for up that pointed in is jump The endeavours they fall we usually if correct, down

if where this to expense. if like So, low, probably it'll some litigation quarter quarters, you but continue over say, the be to looked an six that's last at four I'd there's quarters average be, could no

Operator

Capital. next with Our your Grondahl Please with from proceed Northland Mike question. comes question

Mike Grondahl

could kind detail seeing a And demand? bit Andrew, that more specifically of you or Just is into talk bit you. sequential go Thank you're little loan strength? about a Yes. year-over-year strength little more there.

Andrew Murstein

point, good Yes, that's a Mike.

home core look improvement for exiting. medallion doing of us mezzanine which the potential If quite you business, again were it marine, lending, a of lines into they're our business, lending, and choppiness cut all business, lot of past for well. all kind RV, of and is the the and the you which There's

the at will So growing the per home know, in continue with XX%. marine evolve area, that's and XX% we north returns it's We're you improvement the so continuing. and RV as even blending areas, in of that think XX% in year, XX% or

execute lot this the So we're we're demand, think And grow to the of we the bullish and to the a year of year. going to and balance room still on plan on there's next there. into future

Mike Grondahl

the peak? this How improvement, think with is the boat summer seasonality? and about Seasonally do we RV peak? Is the sprig home that

Andrew Murstein

boats done where as cargo And little not and our and been your gets hauler obviously in lot one lines nicely. new that's spring months, for business, growing seasonal. example to a but cars that's Actually, finance, of is mini things, of the hitting and for summer you're

of I think now. consumer it's to XX% us up portfolio our

and that's round some them are year but RV, call boats in business. the the these these the for spring improvement most of they lending summer, and other part, elements, a So cargo

Mike Grondahl

anything then last it. recovery, Got it to days? XXX on any really the got call out medallion to update And XX

Andrew Murstein

we've Nothing XX some on our settlement years customers come or discussion. in of the for seen XXX, last larger

place. get So know, hopeful, that'll we're put you into

people are somewhat think now. the industry generally I bullish on

medallions. funds of we was hedge auction in. looking a in hedge York lot a There an that believe there's bought fund Now, New recently

this at looking people of lot space. a there's So,

trigger them the of medallions. have Some started pulling buying and the

Lyft good Uber been vehicles in hope boost it congestion effect raising will that starts with when to Yellow And January the takes very that we and raise that be probabilities for large and in consumer a profitability and losses probably both cabs. pricing to started Lyft have and have There's prices, they XXXX which York, has New then Uber, believe them commercial prices. cars

prices inflow more therefore an there Yellow those escalate. start to of So to from there's cabs as

in and think I to buy sentiment are a upside of expand our there's and the industry some So prices medallion medallions. now fleet to that owners several the more there's looking

Mike Grondahl

you broken raised? maybe $XX you what that with break And or broke, debt sub are have this out lastly, it. million doing you you're Got out

Andrew Murstein

that put opportunistically. up retained potentially any they've but earnings the job of it building at say bank seen I'd great a looking haven't is and money in into you've extra The of their yet, we been the release, we earnings doing kind could. money. without bank capital We're

we as We to up buy down to bank. I over ratio tier debt, went well. so were to gain. pay which the other debt the weeks some We think use last about. XX% they're back quarter take able that coming So for some $X capital million some the over hope or one We to spoke in

good news. So the we're we it, think printing

Operator

question Scott Buck from with question. proceed your Riley. next B. Our with Please comes

Scott Buck

of a provide bit little dislocation a transfer current bit the Is in to could tells auction monthly more be Medallion color then and was on there the markets, appears little data what we're I us. you hoping, kind if valuations. what seeing between, of

there five four I helpful? any think weeks, the some over volatility it's stock the provide so here can you color, or caused last be additional would in

Andrew Murstein

think down coming from cash were couple a were continue XXX, ago, So, over deals second to for honestly and the Medallion prices hedge option, funds. at as sold are some were XXX,XXX, as to place. all low, getting ones all are were XXX,XXX auction that prices, be high XXX,XXX. the that the of which as sold the done deals that The finance as low I average quarter, weeks Cash deals those including the

look at auction, about the price the whole quarter you lower If for with was that the average XXX,XXX.

pretty accessible at you with think prior quarters, know, at really about which were carrying XXX,XXX, So are carrying or we're I consistent Medallions ways XXX,XXX.

in we with So is. the right line think we're market where

Scott Buck

Second, the generally increased on occur? lag when expenses will what's typical the collection recoveries credit versus

Andrew Murstein

Saying the take don't until back interest. is you these will being lot pay borrower he'll Because us write he'll he'll current shown, give for of loan where done. this take something good you're off a with are permitted on it in think make A gap, to loan once But the quarter or it back call, the under not settle we in and see it two, recovery. we recoveries us in, income as a mentioned I prior will extra paid-off. come you'll collateral, not

So they're back other loans still therefore loans significant two, and And place for have recoveries, start more lenders the X/XX coming the market other going many other cycles three gets lenders The road, it's we're the down one, times and be after more paid-off. now. many won't we be happened all into left. to into liquidity paid-off, say hope years and is but from these could

a then later. of in came And they back couple years

coming the now existing lenders stable year. some in stepping the So first is lenders be lenders in financing the next the in. coming start an usually earnings that's will and new before the step are will of start industry and up And hope

Scott Buck

opportunities Is just one, next to the the assumption quarters in portfolio a book Medallion terms run that larger in declined as over of the Last reduction? of continued kind forward book. safe XX% there around, few rate conversion from of it down loan are took loan XX% exposure for going

Andrew Murstein

probably, been now. step-by-step you the as as think I last couple you've it's by years seeing of

knocking down it bit-by-bit. keep we So,

level, XX% manageable as total a settings As loan out, of X% very of it's you assets. pointed

we consumer So, of to continues All away chip top and rise is a the to whole need can breakeven business close the then in to quarter. and business was do mezz cream to that do will our the continue each really to very well. at get business

So we're where headed. that's

Operator

Thank you.

Our question. with comes Bologna Giuliano next question Please BTIG. your from proceed with

Giuliano Bologna

in from start the it just $XX.X off a of Medallion the different the into reduction questions. bank reduction just I like under million, downs period? guess how net And or recoveries I If about in the couple turn offs I million. versus Medallions side, on charge was looks much $XX pay was charge total sense of that off

Andrew Murstein

the principal I don't the amount loans or mean, know most exact We payments. of

only quarter interest we by are they down being loans. quarter, very So, paid few have

don't So, as we yet. the we more some it of may in have queue, breakout but have

Giuliano Bologna

balance And any on strategic your the perspective, then hold From originations portion sheet? side. strategy of jumping over the to to looking a you loans partnership balance sheet or be on partner would

Andrew Murstein

that. think the tier will that is ratio the hold at or XX% to It Originally, depend we where I plan we're upon, should very look little. one time. at

over be that to in they're very I nice books, mean, the to can high income some we you will getting. rates paper the loans. some time, know north XX% is, be plan that be income, think fee added of hold would rates on it'll addition our hold I

the very comfortable holding in in credit to hold little, too, performing the paper and first feel slow, start see quality the of how in risk, start year, it's to just probably paper. year if is probably our plan some the So if we then any, minimize

Giuliano Bologna

the the reduction read days saw we XX next going Medallion significant quartersfrom XX your one, off your into there sense. likea Is inflows delinquent forward days makes loans. delinquent anything plus credit XX in is going That the other quick And drop the looks balances. but in We plus it of slight into can there, quarter that in slower now. charge portion two if one

Andrew Murstein

levels and in we quarter, last for million. took were we had right to I we large true. a this that quarter, a reserve mean, it's high Yes, off led $X

have The large year. last of even from various few even would a those was have Medallion otherwise where it been more But left. have would there on hit better. fleets we been So last or bar large improved

now So days. high the XX now. and is I days right dropped And quarter, have were good. the trend last we In significantly it XX

that the to it continue is will hope So or next the two. quarter

Operator

At you. turn Thank this Andrew over the closing comments. Murstein to time, would to like for call I back Mr.

Andrew Murstein

up, at Department attending today's you. to investorrelations@medallion.com. everyone questions and thank We're question all not to today for or just wanted to happy was additional I Relations to email follow everyone Investor Thank We're your call. call. answered. at please again available XXX-XXX-XXXX week that thank want morning's any anytime To end, or if contact answer this for

Operator

Thank you. conclude This does teleconference. today's

and day. You may your disconnect a great have lines,

Medallion Bank (MBNKP) 6 Aug 192019 Q2 Earnings call transcript