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MFIN Medallion Financial

Participants
Andrew Murstein President
Alvin Murstein Chairman & Chief Executive Officer
Larry Hall Chief Financial Officer
Alex Twerdahl Sandler O'Neill
Scott Buck B. Riley FBR
Mike Grondahl Northland Securities
Call transcript
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Operator

Good morning, and welcome everyone to Medallion Financial's 2019 Third Quarter Earnings Call. By now everyone should have access to the earnings announcement, which was released prior to the 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 date 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

Andrew Murstein

earnings everyone you quarter morning our XXXX for Good joining and third 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

this momentum. and core We on it are ago. headway, year hope third for exposure one where results with businesses Medallion even substantially diminishes make our was pleased to It the the quarter to while as noteworthy our a stood from a build company continue

the third the We the stood net said, $X.X million which X% second company's at $XXX total million portfolio of being the represents quarter, the million, begin loans quarter at end at that from total the Medallion XX-day let's the end XX% of quarter. third assets of portfolio. receivable. delinquencies dropped and $X.X of to saw of the net With end with At the

We continue to to current. our take borrowers actions bring

Both recorded income Bank first million business The commercial consumer net and segments of the million months shareholder nine continue quarter Medallion and add Medallion to interest and third for value. the the of $XX $XX.X Capital for year.

remain Our consumer segments strong. products for grow as bank's continue to the demand

home improvement in year, to quarter. XXXX Medallion last the million compared months, recreational Bank loans nine third the and million $XXX.X XXXX In million same in originated $XXX.X $XXX.X including period the of

has X.XX%. as of the the loan million, consumer XXXX at XXXX Medallion continues Bank's for just from consumer a and quarter, the increase XX, of who hiring nine of program and for is a grown improvement and the September of of net with recorded former year-to-date. build president have another our the payments senior Utah-based the announced move many financial in $XXX or to of the stood home with on. Last running productive strategic partnership we The forward technology percentage loan months XX% As on CEO We first to as third and first desire quality for bank's partners. average of a blended a quarter and executive charge-offs ILC XX% we the borrowers the XXXX. recreation charter maintain out this X.X% products up companies. X.X% bank loss with to remain low the ratios on to rate of a quarter portfolio path portfolio potential to have lend second bank had of we conversations credit continues signifying look relationship the portfolio The our

optimal ratio. last The two end commercial well the The XX% redeployed. as cash has preceding bank bank's regarded leverage the recorded been bank the the two its as third XX.XX% was The that at early below of one ratio grown ratio substantial segment quarters payoffs generally of has quarters over a once Tier again the portfolio the is in that efficiency XX% from quarter.

to to on grow we result can which $XX a are to In offset deals company These last over so. their do of date years. future be on well had Capital Medallion the write-offs taxable against closing of are tax million the pipeline operating sourcing net remains focused several NOLs carryforwards has income have NOLs returns. and loss the capitalized future Medallion

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

Larry Hall

Andrew. you, Thank

prior the million and of of share highlights. a our third more quarter. year was in in quarter loss the per or loss operations a take million period $X.XX from the me quarter you Net or in XX% through first quarter. share or the $X $XX.X up net income million per second increased to $XX.X was $X.X million per XXXX second flow million million Cash in from from share Let third $X.XX XX% XXXX some and quarter compared of net $X.XX $XX.X the in $X.X to

income quarter and third nine remains move the growth for segments million consumer and as XXXX was segments commercial for and The our we $XX Net strong for both $XX.X in the expect forward. million continued months. pipeline they

third performance higher-yielding first segment X.XX% continues net while in remained interest to two the segments in year, we lower-yielding our the less quarters interest margin slightly the margin. higher Our of strong quarter, net reported of at the the what than this Medallion weigh-in on XXXX demonstrating

million Medallion loan $XXX.X the $X.X bank In year. in million the quarter was was compared $X.X XXXX. the XX, Total second million third first at the quarter, capital million in this losses of as of quarter and September for the $X.X provision to

low Our decreased as days and prior remain to as the quarter XX to and X% compared on Loan Medallion million continue this loans second due X.XX%, side the over $XXX decrease delinquent past net both XXXX were X.XX% loan September quarters the of from XX portfolio in quarter. year. first a to after quarter from consumer decrease delinquencies of an XX% quarter first a the

consumer average interest rate loan portfolio's remains the a our reporting. again constant Once in

rate quarter This average was XX.XX%. the the interest portfolio on

$XXX,XXX second of Our the recorded lending $XXX,XXX of commercial the segment year. to quarter net third in in compared the income quarter

recorded prior XX.XX% year. lending commercial down yield in The in first quarter well quarter $XX.X $XX.X as line XX.XX% $X.X the first portfolio this of quarter with months and was The remains million of capitalized. nine in net to XX The the second September compared million recorded segment average in year the period. XX.XX% million million and the commercial of $XX.X second year income. interest XXXX of the segment from in For the the was the

grow With opportunities, to continues back source it call And to turn put now the I'll its use to to and that, capital its portfolio. Andrew.

Operator

Please with your this time, up session. Alex will O'Neill. state first At call from the a Sandler Q&A Our [Operator you. open comes for Thank we Instructions] question. question Twerdahl

Alex Twerdahl

Good guys. Hey! morning,

Andrew Murstein

Good morning.

Larry Hall

morning. Good

Alex Twerdahl

could, I off First of items. housekeeping if just couple a

if a it? a lot received receive big guys Bank? so the how FDIC banks Larry, credit quarter. in you First assessment for in their small was And of third in the Did Medallion that off,

Larry Hall

did. We $XXX,XXX. It was

Alex Twerdahl

anything like And it ago. know in could else But, Okay. I that beyond seasonality lot third sponsorship of there quarter. some than there or in higher bit year? year to a made the maybe they in next have there's and third And race that higher was little expected it then, would were were quarter the than seasonality higher winnings a a than that potentially be looked

Andrew Murstein

of very started lot We've some interest Yes. in contracts. receiving team, large we signed a when the

XX a lot of is lot only NASCAR corporations in interest there's drivers years funds Our the driver Wallace gotten looking And African-American a of sponsor and so he's ours. the driver thankfully or in spend big like we've recently. diversity Darrell to in last and

signed well. they're year-by-year, some contracts. think we into large but some year I as should So of And them next continue

Alex Twerdahl

good. higher that third little in well? bit a make that lot the is of Or That's will that quarter quarter? seasonality line fourth Okay. in as the And still a

Andrew Murstein

XXXX. of the Daytona, And in Yeah. income hope then is fourth mid-November, ends in high probably as at in much second back up the the seasons pick in so This quarter, February when of first again kicks off not that'll quarter. third season kind quarter the be and but the

Alex Twerdahl

like dividend Is to I'm bit sorry believe, a is quarter. the at it Okay. bank seems was that? which reason Understood elevated interests it I attributable the the then, the typically this for income and a loss SBLF there non-controlling just

Larry Hall

interest from balance dividend The the team, minority total SBLF represents really the the racing to for the the in most part.

Alex Twerdahl

Does carry you that for million forward. Larry, that effectively loss net operating $XX.X then, future? And your tax expense foreseeable about talked wipe out Okay. the

Larry Hall

what I income. making represents claims be the But And that expense. future against Not IRS. the down is, it we tax mean, to really road payments might the taxable

Alex Twerdahl

to your The your go, tax won't to X% tax that's make a So it not will quarter, XX% kind tax rate's rate you of but tax rate go back repeatable. that to rate level? the up had this X.X% going make

Larry Hall

Yes.

Alex Twerdahl

Okay.

Larry Hall

I And is, is the corporate taxable to rate at or that whatever as cash. you're actually you don't think your, full tax you pay XX% but still taxes paying if report works have

for cash another So hopefully that's us. to way build-up

Alex Twerdahl

kind question some just quarter in that we by that? alluded target the might then, on next the of from second partnership think year, or me, kind have first one And strategic early in then, kind to like the place relationships Andy. you and relationship final And actually just that place to have Okay. build see do gain of is talked about of of you faster the initiatives see steam goal than kind Or goes? lot of it how a

Andrew Murstein

to We A there sued been have There's recent probably was And lot partners. recently. lot court OCC Fintech and The a, states interest. rollout then, won rulings. of been potential a met dozen-or-so, about a some charter. of trying with

again, have people in other ILC and So, business a that helps the that strategic our probably think especially wonderful banks Utah all the charter. business the partnership I

have hope the is want to lot half of of of The It's rush business. compliance one a it. to We first in two parts up driven or XXXX. that probably lined into don't

So we steady. make we slow just go and to want sure

Alex Twerdahl

questions. taking my thanks for Understood,

Andrew Murstein

Alex. you, Thank

Operator

Thank you.

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

Scott Buck

Good Yeah. morning, guys.

significantly up Thanks. from going of new may wondering the what And this fourth rate? or months just tick you the the run Medallion So visibility expect the lower kind we portfolio, obviously quarter quarter? the Or so? forward have in benefited a over could whether the XX next on is provisioning in

Andrew Murstein

very been over about. very I it's predict. substantially happy down last been the we've Obviously, of trends the It's to couple coming years. hard mean

be So to from and there time choppiness time. some could

for becomes which delinquent large A borrower is out. forecast to us hard

losses is think, And this us. have of that. worst But time-to-time. that I quarter we'll behind very going I again, So, evidence confident was forward the from we're think,

Scott Buck

what and about Great of And quarter the then as seasonality, you quarter? I loan and we us in lending quarter first how or book could quarters? consumer should we side, volume go origination what into think the imagine slower, consumer fourth was are the on the tell

Andrew Murstein

little We're quarter. the But numbers for pulling up it's a seasonal. the

was a the million see million improvement $XXX.X in off loans Number $XXX.X rec slight and months, QX. QX nine home of and probably drop for for quarter. You'll and

because fourth the RV rates lending loans X% overall also with and But than taxi XX% of less usually drop spread. is marine quarter the and So helps more on our margin more that. go our should slightly the increase, it off, books as kind

Scott Buck

the any that next industry helpful. over one, on last of benefit or cab XX That's New here the of the city state York months? could changes kind right. update from And All regulatory

Alvin Murstein

Yes.

things I first city car, the I time the think there's a York which works. New taxi. of City ever the Model an three Tesla electric of believe approved electric the Yesterday, in is couple the approved

less So for in e-hail consumers XXXX. January and once of That have the they as putting save buying cars those congestion in both for then, lot use them consumers be And cars cars should into money drivers, starting Midtown. and and their commercial you that service. a for should start Yellow pricing companies Cabs good

cars faster turns money. taxis will make more meter drivers will So the over and the

a there's think couple us. of So for I positive ahead items

Scott Buck

All Thank right, great. you. guys. it Appreciate

Alvin Murstein

Thanks, Scott.

Operator

Northland Our comes question. question Please from Mike Grondahl with Securities. state next your

Mike Grondahl

Yeah. Thanks guys. quarter. a on Congratulations clean

Alvin Murstein

you. Thank

Mike Grondahl

the Medallion last the A think I update couple $XXX,XXX. the that? you questions like number we guys is of Medallions area. to have end you on there was of September? the But out any marked Where at got

Andrew Murstein

the believe prices Yes. for median six them businesses $XXX,XXX in we about prices average consistent Again, the still stabilized. number. The that so We're Medallion was at for the or marked $XXX,XXX... nine was at Medallion. I the $XXX,XXX Medallion have have or The months have been and sales last QX

Larry Hall

$XXX,XXX.

Andrew Murstein

$XXX,XXX per Medallion.

Mike Grondahl

Got it.

is the of that Okay. any some And collections previously going? how written-off on stuff, progress

Andrew Murstein

Somewhat positive. again pretty now. The right is business stable

slipped as into So the we XX release we current current. mentioned and that who a beyond once in back borrower had came loans days

XX%, that so loans So or after Medallion XX% goes through. current probably are

but cautiously okay, about it. So the be business we're to optimistic seems

Mike Grondahl

And that? should it. $XX current the about quarter, provision that? you think Will that did that XQ? a Or we that Got against million help after became have how

Larry Hall

was the timing It in really than just the a during just was October. more And thing It anything No. everything XX-day else. current borrower bought bucket.

Mike Grondahl

Got it.

that guys in economy would you but ton. million up are guys up it's the are Or and you million, is about we a you're general How it? origination? improvement do happy be how not about where we have think up And feeling that? just $XXX more? home Would $XXX over Okay. with thought RV boat

Andrew Murstein

growth plus We're XX% Yes. pleased It's with that. still year-over-year.

it. wanted you if than sure a cautious if want that your a be want for faster recession and we make underwriting. we when to we're well but grow comes, lot could with little So that to a to, We prepared

growing been too but we've nothing So at rate, healthy a aggressive.

Mike Grondahl

it made in it. sitting bank? that? the at terms Got it it. within you is Got of of the Is to raised earlier Has are How that the some the year, do capital And Medallion? in thinking ended the where how up all sub-debt about you holdco?

Andrew Murstein

Medallion tapered the a have bank to put haven't of Medallion banks, into it kind loans thankfully because need We had off.

were put losses there if there, into were to prepared bank. So it the we

but paid some just other we general debt other short-term, down nothing that. So corporate else than purposes,

Mike Grondahl

Got thoughts year? to bank profitable. for any it. Got pay really thoughts has the And become the dividend it. bank need next or Any a

Andrew Murstein

The bank a profit. plus had we about of right. best one You're ever quarter $XXX than when million million sold off actually $X other its loans for quarter

So earned about the $X.X in to quarter. a dividend. bank is tax a the million after position for It's pay

think I have watch the parent upstream growth dividend to we're company. to we the the going and if just ability to see

we're very to bank don't on wait what bank partnership inevitable believe how stated into it, strategic As you bullish wanted from the know expect parent. have going to much don't growth so adoptioning a know just business. know capital goes. the We we that we some there. dividend But the but yet and too We're is see to the to we to hold I how

Mike Grondahl

And there that is for then have that? you that Or your any down lastly, at discount? of can a other kind outlook you what's pay guys debt

Andrew Murstein

a time to time. back debt couple on some a ago, of quarters dollar. There's opportunities for about a from believe bought we bank from I $X.XX

So powder sell well. days. want that Most kind I of for don't discount. them we've doing the available They company if got some that banks is these see of dry think to

tack So do they they to. But on not if want it. be we'd ready might to

Mike Grondahl

it. Got

guys. Thanks Okay.

Alvin Murstein

Mike. Thanks,

Operator

I'll further turn you. gentlemen, you. to back questions time. this there Thank are Murstein remarks. no Thank it Mr. Ladies at closing for and

Andrew Murstein

and weren't day. again Thank you investorrelations@medallion.com. great say we're to To that end, and we XXX-XXX-XXXX that again I a at answered. up the quarter to follow contact everybody. pleased are you if again how want any or Investor e-mail with please Relations happy Thanks have our at have questions

Operator

disconnect. parties Thank a you. This may day. conference. All Have concludes today's great