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MFIN Medallion Financial

Participants
Andrew Murstein President
Alvin Murstein CEO
Alex Arzeno Director of IR
Larry Hall CFO
Alex Twerdahl Piper Sandler
Scott Buck B. Riley FBR
Call transcript
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Operator

Good morning, and welcome everyone, to Medallion Financial's 2020 Second Quarter Earnings Call. By now, everyone should have access to the earnings announcement, which was released prior to this call which also may be found on the company's website at medallion.com.

Before we begin formal remarks, we need to remind everyone that 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 the information this or call during date statement call. based is available forward-looking of made financial this of Each as of by any any statements to disclaim update We unless obligations required law. forward-looking I would Murstein, Medallion Financial. introduce President of like now to Andrew

Andrew Murstein

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

in of Joining me Hall; our Company our a our of Director is on and environment. segments, and Alex executed Murstein; commercial Arzeno. quarter exposure challenging rather Alvin total while on CEO, today's the our consumer profitable reducing operating strategy despite Investor growing Medallion call Larry our second Relations, lending CFO, related our

impacted continues overall be of quarter. in It second to the COVID-XX is sharp New from XX. at XXXX Medallion start the company's of $XX.X of as Medallion or of end the market June net quarter. a me XX% Medallion that value to end the net process XX% total When gross evidence of the the providing the X.X% lending net second the the assets, The at and from at end ridership. million, the second standalone at Medallion $XXX,XXX looking slightly from a collateral on York portfolio. in $XXX,XXX and net end the Bank quarter Medallion loans industry on net $XXX,XXX in with loans Let of their foreclosure, The exposure of was dropped cab gross the still or collateral of net reduction the receivable an XXXX portfolio, with total update Medallion bank's by a reduction excluding was X.X% basis, were loan $XXX,XXX quarter first a reduction

of strong the to the quarter. for Our focus to Despite Medallion on segment during and of had less volumes from Consumer continues the breakeven demand is entertainment recovery application we get a segments products, activities and away few staycations growth collections result provide over and lending travel shift that the process. economic traditional COVID-XX, our This in our the spending was uncertainty contact. our from Lending consumer while a quarters, leisure saw next as focusing resulting to to air

to the Consumer that and the positioned million all upswing addition, XX have home from XXXX. well continue home demand a originations and for $XXX.X believe from we In $XXX Medallion the to XXXX end second $XXX.X seen year had first Bank improvement is an as second Bank forward period, the end credit Tier pursuit also in the its the seen, quarter, quarter. million asset improving and of were grew We our grow. meet in and the tightened and million $XXX.X XX.XX%. leverage loan has in billion ultimately in ratio At of high improvements in outstandings million at XXXX. in the XX% time of has an $X.XX which able quality, and X that consumer portfolio Medallion June of up criteria resulted the been move to of quarter, reaching prior capital bank now demand portfolio

been normalize. loans to its expected partner. originations we first the pandemic lending to the anticipated, for back Second originating quarter, levels fintech get have however, things began bank Due than look slower as

that of our on fit to still and continue is signed over. the up see are another to have a potential steady before year partners criteria We stream target partner

first to six June XX, of was XXXX, at partnership progress XXXX as our solid the on million loan as updates put strategic Credit Company's quarter. million in the was during second at $XX.X quarterly of provide to our has quality $XX.X of program commercial the of lending end continue only months $XX.X the earnings. end compared year. XXXX net one the will We and portfolio remained million on of the nonaccrual

performance across at are closely. this this to we portfolio and is continue there time. of The the government concerns portfolio result a the diverse As loans portfolio, improved and capitals major from monitor will no Medallion it companies,

addition, In however, segments has turn a the to second and lending approved the quarter. very additional to compared XXXX basis. remains will of so $XX in second on income compared to of increase. quarters, will just Medallion's they were totaled prior Larry to I'll a we over to provide $X quarter flow now highlights call SBA Deal in well the and for capitalized additional leverage. million who Capital consumer demand from Net an and do second $X.X commercial continue continue increased million quarter selective million Medallion XX% the grow

Larry Hall

Thank to in first per the quarter. prior share Andy. share net XXXX $X Net share, million the you, $XX.X million and or $X.XX loss $X.XX or in loss the million a per or was of $X.X of loss $X.XX per compared quarter, year

loss current the our of Medallion increased with environment, additional along COVID-XX second on long-term uncertainty its impact an and by million company quarter. $X.X Given the provisions loan the the of consumer segments, lending the in

The may abundance reduces to $XX.X provision margin potential strong COVID-related XXXX of our outweigh million second in in X.XX% Over Medallion quarter, as this and to decreases liquidity reflected as we quarter in additional quarter-after-quarter. and grow, yielding the broker the million at compared commercial caution Our consumer in quarter, to second remains reserves of environment, and collectible. last XXXX continue in higher an second not loan X.XX% time, in our that $XX.X million an XXXX will the Total $XX.X the as X.XX% established the former the for was continues from prior in second the be increased and the quarter. deposits segments deferred interest interest quarter, net segments, the losses down lower took yield and latter quarter. impact for

X% $XX.X decreased Excluding year million loan at the decrease XXXX and portfolio the loan the from foreclosure, collateral second quarter. end in decrease collateral in quarter, a our XX% from second to the loan the end When process including net process of a XX% million, of Medallion total XX% the as of to side year the Medallion or result a on of Medallion quarter XX, deferrals. were of were foreclosure, a or as the delinquencies compared of company's million this lower ago. XXXX, $XXX.X COVID-XX Loan net $XXX.X assets assets June

second the quarter, on to XX.X% current or at and of that X% impact However, COVID-related past The of Medallion million due million. the $X.X $X.X or end loan Medallion actual loans of monitor. the gross The at in were or $XX total program or state of X.X% determine or come deferred deferral million to deferrals ago. reflects compared year-end, history of soon the million a or loans The total a $XX.X of year is continue as consumer the trends this we and any trends. XX the this is will side certainly unknown loans, days were that off this XX% result deferred more were a which COVID-XX was to and deferral delinquency were percentages payments lower lower million, future at loans deferrals. resulted have for difference amount $X.X whose delinquencies on too quarter in but time, total of the quarter. payment meaningful delinquencies Loan gross

million The $X.X a of X.XX% year million or past $X reflects and amount X.X% more ago. of the quarter total the $XX.X deferral or interest X,XXX the million percentages million However, The were loans The delinquencies, of of consumer current but $X.X Consumer any come stable. and loans, remained is continue loans XX have loans, the consumer due or the loan resulted total at only is program delinquency future to compared impact consumer the this meaningful or determine too X.XX% COVID-related X.X% gross which deferrals of loan payment is or year-end this of portfolio. deferral that at at unknown for which loans gross days whose X.XX% loan portfolios or million gross average $XX.X the in trend second were deferred difference of lower state actual rate The to will to end we of loans certainly in were on history soon total trends. time, monitor. quarter. off

at last the This quarter, on interest was to and the average end XX.XX% the period XX.XX% the compared XX.XX% XXXX in same year. rate portfolio of

of Our year the second ago. now in portfolio and With period the $XX.X of commercial to same average million the a at at I'll net of up yield income with the was first $XX.X Andrew. segment compared the $XXX,XXX was commercial XX.XX% million last lending $XX.X end interest quarter. in that, year. call from in XX.XX% a end in The back and net million the recorded XXXX the turn to lending second line The quarter XX.XX% quarter,

Andrew Murstein

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

Operator

proceed. Please first Our with Alex Instructions] from Sandler. question is Piper Twerdahl [Operator

Alex Twerdahl

Can question huge a quarter? for in pipeline second the as what First for the we you And from comment looks third demand the obviously consumer the that little on me, into business? has quarter the consumer like bit the just maybe continued quarter third head business into quarter.

Andrew Murstein

this and Sure. years, right change. they now, they're profitable XX not be. nice it's Well, continue but a nice We're a show been to for we've to really very how business in businesses really change, are in plus starting

loans are who being a on on used lot the going the panels in hotels, pools all homeowners boat more and going very trips, the roofing people going spending quarter home They're and not solar RV or time found surging. also [indiscernible] and are or obviously, lot are and So and a we houses loans demand not systems. fixing strong loans, the the home country by at across continuing or new of to this their airplanes improvement or

been we very rates. They've they'll healthy So think all continue. at growing

last lending up marine home I the and and front. from the of RV about XX% in about year, think XX% they're improvement space

demand strong So we see demand, continuing.

Alex Twerdahl

the to And little how then bit through of the benefited Act talk about just a owners to Medallion. from the provisions have crisis? gears CARES could Can of Medallion switching this some get you

Andrew Murstein

the CARES most with it they continued Yes, in this small from business it. of help for as just a being some is least many most all or industry, there talked Medallion were. got all about are plans it's to other little at frankly, a them that so away business owners, And state a months. it's this But Americans bit on And helping band money, the of out plans or to and is try federal of of other there. eligible were is tough aid though, took still city them temporarily, the focus types the through couple PPP them money Act for of them they're

So is of a small to will something that lot our business these help come hope through owners.

Alex Twerdahl

consumer? that. What little about maybe Larry, is percentage due number, how adjustment can you just you continue bit, We'll to $X.X million a what percentage the to COVID, And Medallion? to came to the that commercial? reserve monitor is What then is talk percentage

Larry Hall

was it to maybe standard we've mean, are the since the used judgmental I area that in the that the past to quarter is impacts likely knows real didn't But we what of obviously be. be impact COVID and uncertainties and nobody using a pretty this severe. sense going full make felt methodologies

estimate above of a our methodologies. about It probably side, impact. reasonable the beyond Medallion made best and a we more both amount did normal the we and that towards consumer So sides, split we nice needed increase side the was

Alex Twerdahl

we more to offset reversals Medallion of with should growth, have that the during portfolio income yet Were take see the and from that would second net increase expected there the from quarter, future of interest huge quarter really quarter, aware the meaningfully be didn't. then first it that out net income And in I ad quarters? potentially the in the consumer interest some to

Andrew Murstein

you on to that? Larry, touch want

Larry Hall

the took during on posture the quarter kind conservative of XX% we and a amount occurred amount accruals Yes, actually of the goal. interest that the that reserves second across roughly of

Andrew Murstein

hit other the COVID would took extra a market just of very the CD banks thing A like March the the brokered of did liquidity lot cautious situation and was to or CDs we and so. were what really in in Right, and lot didn't us when be. we that started know

now but of put took in of a is money that on our sat we which lot being kind So out. books, CDs,

see obviously margin interest net of a So an on when is now expansion But new down margin. most of the it's to books, little. interest put that been the expect net up, money sitting comes we

Alex Twerdahl

Are some they your and of are in final deals sponsorships then those recently in sponsorship RPAC? me. quarters? there personal the us? some they in for And way through Medallion headlines their sponsorships Seen from make for question just driver Will already P&L coming impact don't some that new or

Andrew Murstein

They should us. be meaningful to

a that news which those about know, For to we sports legacy be these days. Richard that [sports actually years a much in XXXX investment very had are continuing NASCAR ago is specs in Petty the specs] and that don't we did RPAC Motorsports had is we

team, is about a amount Black forefront has we And from sponsors. in tremendous of has driver NASCAR great change the team So the change. America. and job only a interest ownership in at driver about done own our a black the the has and been in had of Matter years. social social Lives majority he XX And really talking He of

see be the happen. and cash app, the ago, XXX is beneficiary really Jack if several things trigger other is about companies a they'll that's is about by year. and dollar the and involved are on thankfully year there this so which one know owned this supporting will then next the getting deal movement don't Square, which that cash Fortune I those pull us Dorsey's multimillion talking groups other several like So you'll but team company month if And shafted, with were with

Operator

Scott with next question B. Riley Please Our is from Buck proceed. FBR.

Scott Buck

the hoping quarter able of in was release. deferrals this walk I the us through loan the is we've think first since be I of them at seen remind might us mechanics to the you least or

Andrew Murstein

Larry?

Larry Hall

and request I have some owe, on to the there pretty was payments that mean, the forbearance a much board. basically, across they

we've XX-day and XX-day deferrals. with borrowers the the borrowers consumer You know, Medallion to accommodated both

case of Some have an on into kind and of come deferrals additional those basis. case Medallion looking And the those deferral. we're have at as asked them for side, a particularly more back by expired

periods of at the as process, there happened on, have different is the really in month did and been their beginning most borrowers requested just deferrals to what fewer starting to these forward. early fewer we too before, to said as look very conclusions. like On payment than happens history went what process of draw side, and this now some But and that the of in consumer any we're it's each and see going going

Scott Buck

paying, some have especially on you'll Medallion comes delinquency into the starts of think you making payments that terms side regular loan again, deferrals kind fall who do When the with real at which is and color time? in versus, of back

Andrew Murstein

pretty probably usually would July slow I September August. this industry so, months, in or cab and think is anyway, summer the

all it how So upon city the reopens. depends quickly

I usually good think in industry. month September the is a

to yielding slightly And some be that'll be at So near now, if that normal it's parameters on things start The I the think don't XX.X%. all but is industry. coming just put consumer if it. they're time, back, they'll I think normal time a to very about portfolio high, helpful portfolio billion dollar

using there, So million. down on just Medallion cab in those The talking about $XXX coming is just math $XX loans. to now income the you're million portfolio of

income you're a paid, or X% at if $X.X So only talking nobody of so rate, about million lost. even

area size with So that it's consumer the in overwhelmingly that the in have rate that high we portfolio. of

growth most though again, on deferral, a the forward. So the have of of in not portfolio impact it should big the going really it even Medallion is company

Scott Buck

you the that kind clarity a in I is partnership Last new provide there scaled any can up. helpful. partnership on work. It contribution completely Is me. results like sounds in of fintech once there one have perspective think could of terms for what that have you

Larry Hall

very about much still That see a income strong We're a partnership XX it very we're I XXX for the honestly, we're when year. should business the business come this think basis points they be but in. though strategic where up, business is to ramping going don't loans fee on getting us. to

$XXX you or we a million income, as of if get have we could million there's associated much to generate year, fee with more where a that. cost the as So point $XX

a it business should volume but be profitable, the profit high very a talking at not that's you’re probably and now. all. from about year But So

partner thing first I There dozen partners will customer there's think banks. medical with names or we're a to cosmetic signed from dentist work, and same the for the cosmetic the that in demand so industry. the industry, healthcare lot Utah a was up be that of second is to. is in probably talking work, And

we've been So very selective.

environment. we cautious be this to especially eventually to be business, us. profitable continue is business this hope We very this a in for But in very going

Operator

question is Mike with next Securities. Northland Grondahl Please from Our proceed.

Unidentified Analyst

had just Mike, Are consumer morning. just think about This question I on this, but this regarding customers I is forbearance book? the the talked [indiscernible] now light more paying, deferrals on a for and he shed it?

Andrew Murstein

I Sure. per that's I still of out is In of mean million million streets much is revenue dollars coming the looking as New to empty if of income area, no, it's that but still you're year lost consumer a only York Medallion business before, struggling, versus the pointed in. $XXX pretty couple

front, yes, that X% about is currently consumer the you On have probably think I delinquent.

history in down April. and That June people peak asked was and for down, was July was thankfully. the for was was most So us May then down, the deferrals period back

So the those direction asked that trends deferrals only or XX now. and are right delinquent more X% going right or in days the for all

Operator

back have session. We like of I to would closing turn end to it for our Q&A remarks. Andrew, the reached

Andrew Murstein

Thanks to So at anyone day. you, for at Thank Sherry we us. follow-up has any again any for or call. everybody hope XXX-XXX-XXXX the time this everybody great us free a call at hosting you. much, to investorrelations@medallion.com. thank has Thank very questions, and email If please wanted for feel

Larry Hall

you. Thank

Operator

does This today's you. conclude Thank conference.

a disconnect pleasant You at day. your may lines time. this have And