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MFIN Medallion Financial

Participants
Alvin Murstein Chairman & CEO
Larry Hall CFO
Alex Arzeno Investor Relations
Mike Grondahl Northland Capital Markets
Scott Buck B. Riley
Alex Twerdahl Sandler O'Neill
Giuliano Bologna BTIG
Call transcript
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Operator

Good morning, and welcome, everyone, to Medallion Financial's 2019 First 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 the 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 the statements and projections contained herein, please refer to the company's filings with the Securities and Exchange Commission. projection on information as information day this and call during of statement of based is available call. forward-looking of made financial this the Each to us required update forward-looking to obligation any disclaim statements We unless by law. our would of Financial. President Andrew Medallion like introduce I now Murstein, to

Alvin Murstein

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

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

a greatly, in private period took an will The completed support first is decreased at continue points busy senior losses XXXX segments and strategic of lending our future successful beyond. was investment medallion in XXXX growth have It held of that quarter medallion. placement and unsecured a our and we rating. evident and and that We're commercial million steps that $XX focal to be initiatives. We notes the optimistic consumer the grade

our explore in quarter. loans the highlights last that to portfolio now continues continue accordingly. to of with ways taxi With to shrink. upon compared grow I we and can updating market to few a term We forward touch long segments the which over the in the XX% will in these medallion prior loans The year quarter of XX% ended and the XX% comprised We medallion quarter net period. look

year pricing XXXX. are a of $X.X XX, just regulatory first of a was happy congestion has decrease XX% the When briefly March $XXX medallion loan million, we managed this stands topic address. $XXX at net quarter. medallion to portfolio as at been the in discussion now Our from the provision field, that million million looking losses The for

the in aims indeed The the of to drivers now accepting making many fact passengers York Manhattan's in and to was hopeful without due week enter City consumer number usage therefore, enter XXth busiest platforms the plan major the for stopped quickly drop set to XXXX, forth also rules are New below companies This respective passed their it desired taxi drivers decrease we increase partly and this New that December result minimum companies zone. their will up running York unattractive business the City York toll a can X of are implemented, Commission -- in used was turning the vehicles require fares and result passengers market. that in new City more reported last after in be the on too cars to for over of news This It $XX.XX effect. a halt have As limited, on ultimately to vehicles that be that York having this will neighborhoods, traffic New high pick be hour Taxi City. by in penalize ride-hailing that will street companies an New streets a Limousine which the suggest of to pay expenses. was rules ride-hailing

these penalizing legislation control better more want We is number oversaturated street there for that companies of cars the other a for than streets. be rather hopeful to will drivers the previous the the or on model are cities capping running demand,

except Logan a week from companies prohibits location central plan year X:XX effect plan ride-hailing The ride-hailing a a in garage the addition, XX:XX curbside and In for making drop-offs, and steering pick-ups these in last April, International drives was this creating between a.m. from of at approved a.m. going later to Boston. instead into companies

congestion. companies $X.XX not fees beginning cities for that has regulate taxies. now additional drop-offs, to the these pick-ups remain are an While do implemented for which clear It on would ride-hails, at to ride-hailing of apply $X.XX is been fee of the for other Massport, commend on their standard field overwhelmed have the the level their set efforts airports We a high follow playing level which resulting and to that city the Logan to streets International runs lead. in

Turning segment was consumer Bank products consumer Capital million Medallion commercial and sourcing see to work their segments their Net now demand the taxes to and push pipeline to before platform. continue is exploring for niches forward. The hard our remains complement our capitalized. segments. their lending current that and deals commercial income for quarter. $X.X continued to other Both and grow would consumer Medallion to commercial first well The and segments for continues

the our bank XX, $XX of of of XXXX, XX.XX% on XXXX. will portfolio at a positioned net stability compared consumer the Closing, March are XX.XX% signifies Bank As X net highlights stood our while end Tier ratio to the believe at well We $XXX over turn this recorded billion. first commercial million, we demonstrates at to I'll the the and to now stood portfolio who leverage Medallion give additional move ratio call forward. some quarter. Larry, of

Larry Hall

Andrew. you, Thank

quarter, X.XX% through In was you compared quarter million trend up medallion quarter more Medallion quarter million a stand-alone, million was provisions first as from XXXX $X.X first with the of recorded quarter. medallion provision in million. in see Quarter compared were for the take of When was me the to $X.X interest the the interest when particularly Net this to pleased quarter, interest recorded quarter, for from our loan XXXX. last highlights. a in first combined looking interest net of after bank, continue Let $X.XX total and we quarter a X.XX% for or loss and Medallion first income XXXX share or a margin and record recorded our first loan quarter the we to first the year million in the for per the X.XX% in a The margin, losses X.XX% share net Financial margin, the net income net X.XX% quarter. to $XX.X which some XXXX $XX.X as of strong losses per continue the $X.XX segment. first metric medallion at Bank, prior this $XX.X downward period.

X.XX% March $XXX busy from into X.XX% portfolios portfolio from Our quarter. XXXX, due loan end in at the grows. The to remain after million These Earnings decrease interest million XX% the first delinquent quarter. segments with the XXXX fourth delinquencies consumer the and low, continues pipeline segments business the a for taxes consumer the and side their of side the average are medallion to XXXX XX, stay loans a positive of progressing consumer $XXX quarter first ended $XXX consistent. decreased a as XXXX of decrease the we year as were the the the with, of XX% from the million million commercial net quarter. were days forward Loan consumer on past loan as entering XX rate over time in compared to $X.X

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

segment We turn release. created. segment we the $XX.X of lending back ratio do the XXXX, net the $X.X commercial net well at of of March increase XX.XX% part in remains several line as ability investments, has analyzing capitalized grow from $XXX,XXX The income previous to Bank's bricks-and-mortar efficiency of assets income of expense a decreases of With quarter have Bank's are segments. year, managed now business value portfolio overhead the remains our press call quarter. noteworthy in end efficiency ago the strong the recorded in pay-off in that XXXX. decrease recorded this percentage was the expect I'll loan first demand into XX, turn noted for ratio and $XX.X to consumer The over and from first is Andrew. million recorded non-interest interest in million model coming quarter signifies XX.XX% million our and The of result as and opportunities quarters of to in compared typical. as portfolio XX.XX% with the a which income on XXXX commercial interest in Our a couple seen at the year last The Bank's a we of hard lending the defined closing, year. the no both work, the quarter. In revenue their large to basis of total plus XX.XX%, average rate The fourth the quarters a an the was recorded commercial

Alvin Murstein

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

Operator

is the [Operator first line Instructions] from Capital Markets. of Northland Our with question Grondahl Mike

Mike Grondahl

guys Thanks progress. the on

that to trend little long The XQ And have at could with medallion, pricing, talk value you time. XQ? the bit first utilization sight of was of operational a a the you March? got you lowest maybe little medallion and provision $X.X million in end then about the bit line just the very Do question, a in

Alvin Murstein

Thanks, York. business stable in is New Mike. the Operationally,

positive take January of which I about think effect lot there or 'XX, 'XX feelings so. congestion is pricing, probably about a in will

that's it's below a So big cars for cars implemented street. a deal properly, which going if all XXth consumer commercial and toll is

there So has bit has even Prices actually little Chicago getting it the been cars in has stable been there, in fleets a are before now, up are business past. Chicago. out. that better went been doing than

that think I there's better comes things to when again some are congestion pricing in the optimism overall, industry going So through. get

X quarters past It's the less out. year the lot $X.X or been but the lumps a In predict now of us. in of to the positive for couple That a hard very was honestly, terms been. or they lumpy million. It's next have even than are

the we've or of the been out, or pipe, there will end down be at substantially I tunnel that year levels don't So past. The you think good the last have had is near as a coming pointed have reserves charge-offs you And here. X. the in the always light trends it down coming we could the but think

Mike Grondahl

just general outlook your of kind talked and the for comment on borrower. of rest the the And the it. one recovery of about press Anything that? for of medallion the release maybe larger year? recovery Or a to Got pace

Alvin Murstein

through one that to about that the recovery. us, not this you had aren't the But probably or but years large Right. a of positive path. that did actually for recoveries X was as shown down going We so quarter. million until be ones come And mentioned, it X, $X very

a and you a He collateral. additional I'm loan using He over just let's So worked. -- the numbers, us one year. current. been million made large rough $XX delinquent us had just restructured to We He how borrower yield say give for us gave loan. example of that he's an

but off. actually income paid take all it don't until the loan we So into is very positive,

So they're it to about business guys the and old just willing these that out of additional think collateral. points come the that payments future I are with up optimistic

on have Of their we these still personal guarantees loans. course,

direction. it's So the another step in right

Mike Grondahl

negotiation? of expect taste of do in Like, you more those these? you continued kind of have Do a

Alvin Murstein

lot a off The loans. do. written of We few know, years, as you last we've

coming So we're now, of many it's come the -- borrowers. terms to with

I them talks in we of in. several We're large as are one, as all are the be are not this a doing with many to others. in And So think They're on positive daily but well. basis. outcomes going as those that

Mike Grondahl

the I'll queue. great. jump Okay, Thanks. back in

Alvin Murstein

you. Thank

Operator

line Buck Our Riley. Scott the with next of question B. is from

Scott Buck

Hi, the business in to from good NII looks like can negative to or When medallion that that? segment. if contribution be morning the breakeven still of guys. of we there's expect terms lending coming It side

Alvin Murstein

and old that's still positive, us. of owe there. coming some by their are some they in though, good The Scott. accurate, on that making these Yes, money We're signs losing borrowers payments again,

question, or So $XX,XXX there? the in get pinpoint. when we predict to it's a And do that's hard way,

we say I of making to think it's and very progress losses a safe substantially. the were cutting lot

hope of the that, hard end year is that pretty we by to predict. to be should the it's close the So but

Scott Buck

a quarter and in cost, meaningful of new the ebb line look level Sure. to then item collection quarter. just there of this That's fourth step right this have Is that of from kind terms Or was looks a it it going down think a of flow, to this And kind helpful. we'll is out quarter-to-quarter as rate? the like for basis? lumpier that's run and on to

Alvin Murstein

to on in effort good lumpy. it's we're successful, we a very as though. and latter, out, going if We've lot very Whenever need be, court, a of time you spend collections point position. and The been

We good again, have personal documentation, guarantees.

get sometimes for go. after far again, go most So positive you the you don't and know to But lumpiness think, how seek it's effort that therefore, we a court because to cases and direction. borrowers the try the part, in personal have will I moving and assets,

been negotiate accordingly have court others act think settlements us and the borrowers, about I in and hear cases that or positive with weaker a us. are position therefore, to to

as I are So right think the direction trends in there well.

Scott Buck

it Is the guys some seeing Where And unique maybe lending momentum both broad-based home Or consumer Great of is the really geographies? and are from demand it X you X products, one. on coming improvement across last side? or businesses, the rec?

Alvin Murstein

It's RV a marine actually a more home and coming Home from stronger the competition little it's in have but RV and you both, little and there. home improvement marine, improvement, than bit improvement. bit areas

that XX% a think I and So and the or is nice and the is higher competition growing us for positive that And XX%. less where that the it's are rate than lending is business there ROE for RV yields yields more. is those XX%. at But still great from are It's us. home coming improvement growth pretax marine,

most where from It's growth the that's of RV portfolio. that coming. So marine yielding is higher

Scott Buck

guys. appreciate I color Thank. the

Operator

O'Neill. the questions with next Our Twerdahl Alex are from Sandler line of

Alex Twerdahl

guys. good morning Hey

Alvin Murstein

Alex. good morning Hey

Alex Twerdahl

leading just you settled from a you give in back to start the pay So of you long the kind of stopping second borrower Can Or the in defaulting beginning referenced kind us the restructures how that take? negotiations, that of whenever release sense to process quarter. whole whether to early the began, did or like that up press loans? conversations to the them,

Alvin Murstein

you much and courts, But specifics talk a of don't and I'll therefore, That to works. give a deal about example too involved you general there. just give one general I'll a with how lawyers got example. want

XXXX somebody's current they for fall behind X, and they part, or pattern say, XXXX, in behind. if current, they're days. So XX is XX, the most let's fall The January

what's you You them in, come, happening. to them you about bring talk it,

payments. the And the they after if to them up assets. loan pay, You have don't go you then get the try caught ability need restructure in or be to immediately if

So within could the up a medallions. pick day, we literally

doing than part drivers, sometimes Uber want all a pick example. from shows living that medallions and that cab there good still So making and data about it, we then are up And do good have or some to because they that, There's Lyft they're you more the they're is the the back drivers nice medallions. well. out earning XX% for

to making they're making show. statistics hour are about drivers other an $XX hour. $XX So $X and from versus per Lyft Uber anywhere

they So could auction. We them make medallion it not, it current. usually for their gave want up put then if to loan If their back. we they

who to for or us sell so loan after the negotiate with come terms is process, guess I and make in Sometimes takes his months personal his to or they'll medallion for short one assets. new a go X the us, auction answer and the the borrower either it to but then current about us

Alex Twerdahl

Okay.

kind if what right? that can't is down X large the Why some a years to immediately. than go months road So to X of X bit faster it's think, medallion to of Repossess kind little recoveries? pop I through call that? it, process of and for happen these you the you it can Why XX,

Alvin Murstein

answer. the is GAAP

he seeing down has example, and medallion borrower $XXX,XXX, for his worth current, $XXX,XXX say is So, let's $XXX,XXX. and the and a a we're -- loan value is to write medallion the we'll not

We'll to hit. got what though don't be. we we've account count taking personal assets, reserves a that big $XXX,XXX take a will we'll in take Even the So hit.

his off not able even loan is he the makes in we're if that to loan take recovery back So full. current, until paid

that's was X period So just paid loan end restructured take could at it. we if why of it several the that hope X because a will saying I we be years or off the

years, off loan, $XXX,XXX We our a you a delinquent. $XXX,XXX. pay savings books the that and $XXX,XXX. him XX% down for us say again, loan, if took case, the give million. after medallion We to Got on $X may after him, savings. X we therefore, we'll lent on reserve. take you example, for in $XXX,XXX was that Sometimes, we'll He to bought He

to due. incentivized loan be comes when he'll us pay off the So

mark Now or taking as that, this again paid we'd loan above down $XXX,XXX the off. is when to we be everything loan in income

Alex Twerdahl

Okay.

So GAAP is G-A-A-P...

Alvin Murstein

Exactly.

Alex Twerdahl

and bit and positive-negative? to only it's sentiment, piece you Okay. revenue, are your that first the some And new in of farebox the borrowers City have anything first for saying seasonally of Lyft. comparison. And medallion But medallion's from been a operators then we've quarter both kind it's with what drivers I Uber in specific know quarter seen early of farebox? is always little the New and a lighter some of of either months congestion But X in terms necessarily in since pricing the respect I heard perfect not so know York

Alvin Murstein

that's pricing We at basis, look they about like in much saw revenues are the and past when up was look you what drop of and -- customers on some we meters a this access meter a X% you of several months anything, at a cabs then fare hit. There's last bringing bit thinking were a to maybe we want was in to, over again. less get daily. there there Actually, literally off a have usually, than information good take when for couple rate daily some to I it don't We of disgruntled the so it the question. realize because receipts the we congestion how increases, that could the days, see little you a and shock, of have was pulled good wasn't from lot need our sticker

X only which than lot after about revenue we it went a and bounced that. thought, down then actually So a is back less X%, up month about or

and March So bounced of back it kind April, up.

been So of thankfully, much an effect. it hasn't

Alex Twerdahl

Can on of the Larry, portfolio That's you medallion the reserve end the great the quarter? first hear. to -- at

Alvin Murstein

Total reserve?

Larry Hall

million $XX $XX was million. Total reserve, -- it about

Alex Twerdahl

million. $XX

fair is say the that's consumer? Okay. provision that And of all then medallion-related, not to is it

Larry Hall

Yes.

Alex Twerdahl

consumer the portfolio, maybe some what in rates in kind give seeing the you're on commentary of then us And quarter? on first Okay. loss of terms just

Alvin Murstein

positive. been that's say might I

are time been X% are of You a in better bit bit they then because the high. so get obviously, -- losses year always around But a there, months. this of and losses yields little summer the have little have

I'd So what's historical typical. range say of within a the it's

Alex Twerdahl

a higher that first Is a first little quarter? because just Is little that the the because in of seasonality? X% bit loss rate of values quarter weaker in are just bit residual the

Alvin Murstein

Yes.

Larry Hall

-- Fourth the worst on. the right. and Seasonality, it goes quarter performance, the quarter better usually are as gets first year

Alex Twerdahl

Okay. question just And for me. then Great. final

You year? the that just rest should a what be for And Can tell for quarter? tax benefit this what we then the first tax bit of kind overall quarter. of modeling had in the drove us little a rate of an you

Alvin Murstein

You want to try that?

Larry Hall

It's Sure. charge-offs reserves. and of function primarily a the the

benefit state audit with We settled was the also had quarter. end that settlement an a ongoing tax the on of a first at

a booked $XXX,XXX we So benefit there.

Alex Twerdahl

Okay. should And that then the of for be tax using we rest rate year?

Larry Hall

XX% is to a good number use.

Alex Twerdahl

Thanks Great. questions. for my taking

Alvin Murstein

Sure.

Operator

questions are from line next BTIG. Bologna with the of Giuliano Our

Giuliano Bologna

for my thanks Hi, taking questions.

Alvin Murstein

Giuliano. morning Good

Giuliano Bologna

Good morning.

So you million the many step above have know Do the left you of bit or little a taking on -- counterparties business. are the side that remaining? medallion X how

Alvin Murstein

million. Not off was to million my head. the top I there XX But guess, of X

Giuliano Bologna

That reperformed? sense. book any And the there is of settled of or of has makes figuring portion worked. That way been what out has

Alvin Murstein

In loans? the terms of medallion

Giuliano Bologna

Yes, that's right.

Alvin Murstein

of or days up I was some I'm not portfolio XX to going is percent look just numbers. sure. less mean the I what now.

Giuliano Bologna

-- I while is we consumer to side. And Larry the then while be see. guess looking, on And it would interesting

strong of consumer terms kind middle What you the of of the year? magnitude of the business. of the have going the strategies growth in trying to grow period laid of some growth, side terms In for expect kind seasonally in through we should the for of areas

Alvin Murstein

little X go XX past that's under your due second back medallion. about is million, question So days for up let's a to number

think. you very So loans? then a positive that's growth consumer the in for terms of And number said, I

Giuliano Bologna

right. That's

Alvin Murstein

quarter for of the $X We deal. well continues to us. That charge way the do did by their a have about for preferred business in million very

item. So that's non-recurring a

but return. up offering, parent was preferred investment know, we X.XX% you ended private looked at we attractive grade company, a a that more had January doing doing a rating a which is that deal what much in thought As placement and

I go therefore, bank is it the lot earmarked more So of to was now the couple they to loose able that than bank. into And bouncing past. or were around handcuffed. let think know question, they've a were and release, press circle a they lot money, from XX.X% be last They you going in back to your to to the XX% able really of are, -- it The years, more. the been to as is

potential. we'll strong let we're the reach have So summer the and capital to in pretty expecting growth the time this months, bank their

Giuliano Bologna

of excess Right of do makes has that So capital, lot into that as I'm think introduce bank stand-alone no a now, assuming fast how you can you you to were been capital the terms if up deploy But levering yet. a have you and sense. capital? pushed capital in

Alvin Murstein

Right.

point. good a that's So

week of the that saw in So raised get you March it not the the that that without And the gone as did parent we quarter of The growth until last bank done company the XX, capital. was March. yet. with has capital none of into

should it's in that pretty it's -- summer that quarter because summer than or did think first we again month. well. They better million the $XX So so do We the second growing quarter. the in

next So to in year. I of the think this use able most we'll be put to money

Giuliano Bologna

Okay, questions. I Thanks taking appreciate. for my

Alvin Murstein

Thank you.

Operator

of questions line Grondahl Capital next Northland are Markets. from with the Our Mike

Mike Grondahl

Hi $XX the raised. with do $XX that that on million sounds you It earmarked bank. Andy, on else million? the doing a chunk plan a just What follow-up like for of is you

Alvin Murstein

it to opportunistic-type investing. at of would discount. buy earmarked is it We, just -- a part it's to try like of part to back for debt a of bank. our Other the working good some capital, example, Yes, general

portfolio Some on of just our we like took the banks reserves had They that. interest on own. expressed in our an took

us. at a even a their to So positive by it to able earnings effect to might a be take discount, and they selling markup

opportunities good or So that do just is there's to the one we're But a the quarters. of in. lot of also more businesses those the in next hope in of couple

surpass We're so to a too. think, of there's at that a the lane staying those not to and marine or lot going But businesses so in looking growing that other part, business. returns we're from. RV again, and be our I able most it's XX% for businesses pretax So of that has ROE,

Mike Grondahl

you the How Was could quarter? million down? some in debt about And talk that paying $X.X from generated? was the gain it. that Got

Alvin Murstein

Yes.

of had, there for the So able that roughly was we to were $X dollar. million $X.XX we and on about debt it purchase

we nice taxes gain $X So took a million there. before

So benefit that. this that situations having have now advantage of opportunistically to that's of we the take is capital like excess

Mike Grondahl

debt there you a cancel is Or -- your that $XX maybe It could million, that at big discount? of is more how $XX million is pool?

Alvin Murstein

positive a so our $XXX there. we negative last debt There's and from down years. million is $XX for or The positive couple to million of ballpark paid the

as But most have Most -- the -- as it us very lenders. much of don't could are and did don't there's with want discounts million we to debt of discount. so and of $XX we think of get here be outstanding left. deals I performance selective it buy So there. them from from out a the don't the But happy our we'd third-party banks. there about of big pool

Mike Grondahl

of Got level? And just is new personal lending? still high developments then bank, any it. close at kind there, it or new Anything the business line,

Alvin Murstein

of, couple administration continues at banking at be to XXXX. Walmart We're There's to issued of profitable a still country. strategic of not to commissioner administration this not me, was change ILC for ILCs. the and significant they haven't for the minded the them. because business a Again, the one things get to FDIC of is been controls, extremely open There's The but pending premiums a but a moratorium any to in is, partnership since best through a in looking They value, past the one. charter gone tried they previous if bank. haven't on is. the this been Utah Utah weren't of deals -- not book -- couple

there. the in OCC York watching banks state might and ruled judged if get charter, not interest national because let strategic potential within last own lawsuit. these and partnerships be to New as favor of but bank thinking the forward strategic was issuing to So the state in we're York X go out talking always closely a sued were their partnerships them New -- without could investors There's charter, valuable days, we or in it either about therefore,

partnerships So interest it that kind Utah was strong. seems very our coming, people being of strategic with therefore, and knew remained and bank working has in

still we're those So yes, looking at possibilities. all

Mike Grondahl

lot Got Thanks a guys. it.

Alvin Murstein

you. Thank

Operator

session. concludes for This to Murstein our you. question-and-answer comments. Thank the floor closing turn Andrew like I'd back to

Alvin Murstein

to or everybody, call. thank, Relations questions by everyone, mornings have We're great your day. to email much up at very just and XXX-XXX-XXXX To contact Investor this a end, attending Thanks, were not happy I please if want investorrelations@medallion.com. for that at answered. follow

Operator

This concludes today's teleconference.

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