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MFIN Medallion Financial

Participants
Andrew Murstein President
Alvin Murstein Chief Executive Officer
Larry Hall Chief Financial Officer
Alex Twerdahl Piper Sandler
Steve Moss B. Riley Securities
Mike Grondahl Northland Securities
Call transcript
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Operator

Good morning, and welcome everyone to Medallion Financial's 2020 Fourth Quarter and Full Year 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 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 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 obligations any disclaim statements We unless by law. any would of Financial. President Andrew Medallion like introduce I now Murstein, to ahead go Please sir.

Andrew Murstein

Good and for thank participating fourth our XXXX morning, and year-end everyone, quarter earnings you in call.

Medallion appropriate Director our CFO, Larry Joining in our of Relations, build me foundation Murstein; Investor on a the a CEO, for year today's Alvin operating Financial Alex XXXX to the Arzeno. call environment. steps that and our took challenging is strong Hall; provided eventful

in portion our During a impact loans dropped value $XXX being non-accrual value. status the lowered impaired the of as COVID-XX value portfolio and they on our largely be XX% at we average placed the Medallion as so resulting on are from while the improvement scores resulting also and improvement command provide the quarter, origination hope, partner When partner, XX, its deemed year, will million home this non-binding and down Medallion seen raising consumer finance Net executed on at recreational collateral wrote below to originating home million years. navigating recreation term a only XXXX high Medallion year, last from in not we having standards, We sheet at That just growing five slightly loans the bank of deferrals year-end consumer recoveries FICO continue the COVID-related net $XXX over year. payment December the for potential second we've loan significantly and carrying with to pandemic, the in our their but Medallion in XX% all XX, services. and with portfolios, which The we first that the to of as segment. also FinTech this complements a of adjusted were XXXX. net growth, bank looking grew quarter, another you of relatively XX% result resolved record above million XXX off have consumer began $XX.X loans XXX the portfolio, borrowers, segment its slightly. credit Applications or of over December loans fourth despite the XXXX. a and the both Bank we in

a Our to look this to and we is partnership quarter in at the of January, end the of In originations to grow further year. provide expected program year. an update uptick began see this first

approved On strong on as an rates. the Capital current of was in leverage equity XX-year in commercial we on based and million XXXX, the term second loan a was liquidity and X% the remains of interest than put quarter, $XX against an which a for Medallion which took less non-accrual fourth SBA for provides investment one side, additional Only quarter. full third reserve in

operating now performance recovery as are We within expect in the portfolio many pre-COVID at gradual XXXX, of overall companies levels. a

seeing improvement Medallion and most remains those continues With gradual the we pursue in For Capital to by to conditions. flow strong business, negatively are new respect impacted deal overall COVID, a opportunities. operating

$XX.X $XX increase. consumer they Larry, XXXX $XX.X for and a highlights. compared Bank highest both Net to quickly the over income quarter, originating and Medallion consumer additional was annual million of since segments from home leverage a million XX% a ratio. segments net XXXX, commercial quarter, million $XX XX% year total closed call and million bank consumer to and XX.XX% Medallion's contributed fourth in the income upon the X million in with $X.X efficiency the $XX.X the prior the increase. capital turning million began The and income in quarter year full year compared Tier commercial Before net the from to ratio, fourth loans million company's and improvement segments I will in a to lending quarter, lending in touch was XX% $XXX.X the XXXX.

in of Medallion at to Excluding foreclosure at Chicago and exposure loan Medallion own assets, collateral XX, of assets year-end comprised our XXXX. compared the just X% process XX% total total December

full will I that, Larry, to additional the fourth who will quarter turn with in provide call over and So year. the highlights now

Larry Hall

net $X.X million of net total Thank of share million you, per a year in to million compared was quarter. $X.X the was $XXX,XXX prior loss or $X.XX to $X.XX $XX.X compared share in Andrew. Net a loss XXXX. loss or XXXX income per net

$XX Our high from operations increased the million fourth XX% consistent net quarter We Cash of margin in been X.XX%. net year, interest ended X.XX%. our interest in strongest the XX up XXXX. margin to net flow XXXX, from our reporting. Full million with in years was in margins $XX interest have year-over-year

as lowering Chicago of When of or of will end at have that optimistic XX% focus compared moving segment's million We a the in $XX.X medallion at higher-yielding million process or continue Net to loans $XX,XXX loans from $XXX a net end the losses medallion values XXXX. of bottomed. our losses, values $XX.X XXXX XXXX loss million as million in for the loan York provision XXXX own prior December of loan million exposure discussed, including and XX% of quarter. the if was New Medallion recorded to of $X.X previously for fourth and $X.X million $XX.X segment profitable the a assets, year total and $XX,XXX fourth that loss Andrew quarter to manageable result consumer benefit for foreclosure the be from commercial provision was Total to medallion million assets a the of forward. be compared in XX, And year ago. $XXX.X remain X% any the Medallion to we As as quarter Medallion for net will in City quarter. the dropped segments our

segment the due we growth $XX.X XXXX, million loan reserves are XXXX. losses that was experiencing to $XX.X in year in large the again when full are provision the this on The established by to once million portfolio driven in the compared we for booked. loans the as $XX.X medallion reserves The lending difference consumer year. took higher are million first For provision reserves are mainly was

deferral this open at consumer were the portfolio's the loans as year. decrease continues write-down up. total medallion XXXX. $XXX.X million As manageable, were of from to more increase approximately a our was to XX.XX% impairment a as state in quarter, for believe economy in will of slight We reserves become year extensions all market recorded for of million rate we deferral loans the Consumer continue values, current the underwrite. borrowers The XX.XX% in and the almost year-end company quarter Medallion a XXXX $XX.X loans million the result to the interest of December and again gross be net a last cautious portfolio consumer of or of City other the selective in loan we New and recorded $X.X X.X% XXXX the and average we York collateral choose on drop state compared the of full to the as still in XX, and

however, should million the continue to which both and segment losses Net In improvement yields million to are lower XXXX. the year in – showing the see outpace addition, to has our XXXX. of are compared was growth our noteworthy from continue segment recreation due consumer which growth, $XX.X income home lending we into $XX.X segment, for

portfolio in XX.XX% The ago. yield XXXX compared of the income Commercial the $XXXXX segment year. XX.XX% $XX full was a for at the of of interest XXXX. fourth end commercial recorded to to the Lending lending was net net compared Our at and $XXX,XXX $XX.X end average year million million quarter The

the We expect recovery call gradual that, portfolio the Andrew. I'll XXXX. and the now of performance back growth to in With continued within overall turn

Andrew Murstein

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

Operator

and you. questions. Sandler. today Our [Operator coming question the from now Alex go Thank for first floor ahead. of Ladies Instructions] Twerdahl Please is Piper gentlemen, is open

Alex Twerdahl

morning, guys. Good

Alvin Murstein

Alex. Good morning,

Alex Twerdahl

associated of through the and rec loan charge-off each if associated the of the moving parts as with during loss the those much off, quarter, during the portfolios was could was home including improvement the reserve quarter? First wondering, provision the I levels with the well how as of the Larry, go Medallion you

Larry Hall

the quarter. The the – improvement consumer was provision recoveries a received during the businesses provision X.X% there consumer under negative. in are Sure. the we very ratio home the segment. $XXX,XXX a quarter. segment under in for that business recoveries the there was and Medallion do million The recreation with business low for home remained rec for And in about Medallion And a had net – reason lot had and $X.X X% to the of $X million the of That's the the business. that segment. The had improvement was benefit charge-off

Alex Twerdahl

about going for be be that underlying you business how provision and what thinking provision of forward that? cetera how XXXX drive just of level thinking would the growth of the for to terms then do the are the And consumer certainly normalized be is think to But about in you recoveries a should going would -- sort assumptions portfolio et project. hard we Okay. timing

Andrew Murstein

home rec that to so it's had I'd and growth improvement. there sorry We similar the be it that good pretty say or the would in in past. in probably what XX% XX%

been. they've add I things So know continue to Larry want to if similar how don't to anything I should that? you think pretty

Larry Hall

been year. it's long No and ratios record they've what after consumer track the of pretty have got I the a I we've quarter-after-quarter consistent year loss think of consistent. mean been business

anything will bottom Medallion can at there. working on and of on The recoveries the changes to hard we're at going valuation a but unusual So the expecting it's We And the we're depend that that think all. we're really whether be forward. going not time collateral tell. plus on side

Alex Twerdahl

your do do be kind point of if that more last Okay. you the portfolio hands to just you selling there'll Medallion And just think and thought washing market to a any it. And then given you to guys that for finally decide of have it?

Andrew Murstein

future to to the We're on Yes. open bank lending. consumer want focus our that. the always is and We which really

So it. is if the sell we price would certainly right

they hole hit it's I can be as Larry at in it's industry. the they feel has drivers and all. not getting things been bad the government for out stated the just now. of pretty As and as them low have mean helped pandemic -- then the right We started any like

really but It's in a if fair the is perfect sell, the So interested time sale not has book on be could selling. price a and we if we'd to bottom. this hit gain

Alex Twerdahl

Understood. maybe we how of give should at expenses, hoping little just finally then pandemic And the a thinking you with mean Larry on expenses for I be I was midyear. you us run sort color it's could a and bit I as do look program saving fair certainly of did share noise And cost XXXX. I furloughing had etcetera. recall rate XXXX of around about guys

impact would it least However line at salaries to expected to have see the where seemed we that hasn't impact. really

So lower or we trend why if talk haven't we're expecting bit about? is be there we XXXX impact. if a should to thinking maybe And little else seen expenses about that something

Andrew Murstein

it will think to start I drop.

You're the that's probably trigger them right for have we a people we're there. haven't I so furloughed yet. and the released we unfortunately to pull some savings us of next pick And when up phase going lot to think

Alex Twerdahl

my question. taking for Thanks Understood.

Andrew Murstein

you, Thank Alex.

Operator

Thank you.

of Please Steve Our from ahead. B. is coming Moss go question Riley Securities. next

Steve Moss

morning. Good

Andrew Murstein

Steve. morning, Good

Steve Moss

I'll here. pricing start off loan with

in improvement. curious originating in Is what you're rates home today? Just and of kind the competition? trends terms of rates in for increase you're seeing kind Just there the any of -- recreation

Andrew Murstein

come rates are the they or in consumer thing XX% more good a as loans. probably on more of rec down of Home is is improvement more. But bit. more profitable the funds side, has been the touch since Things is us. for really probably a in continuing those we're cost That's which not so yield than getting have still been competitive, The but coming little really down. of a much many of that's coming

we And of this CDs one I on of XX rates X%, low days. year money. last for that just books of morning the It's rolling the we off our It's a for So for we with how us lot have basis think points took were couple X.X% costs checking money. one new really rates are CD unbelievable year in years. of these

as probably now these margins impressive increase So are we in they think could XXXX. as

Steve Moss

also back Okay. here. Great. then going helpful. And to That's expenses

the what You've maybe profitability bank. company? good obviously here potential to reduction of or the initiatives at in at Kind seen expenses a as the some for is holding curious efficiency

Andrew Murstein

sword That's of the little a on so because side. the honestly that overhead loans workout million But dollars good It's double of million point. people. We've got trim or of we've trying collection a Medallion there. bit We're a a team in the focused couple against charged-off expenses edged that. of and $XXX we back with been to have

it's as you We lose then the to I back but likelihood So much as you could going as think $XXX million collecting pay of though. come can. off that further,

if we So not to all. strike is for collect But next million to then -- against windfall $XXX just don't waste the collect it doing I'm be we're X/X spending three a million for an in a this was we million. example math if indication we million But the we -- out at if a year that $XX years trying $X of can of $XX it's money. and amount spend going us. it and

we're monitor of But if are enough we gets have for to some and think just have we're fortunate some market further think the think going think not then reason I it. So success to these I we cuts. it resources closely. have kind If I that then worth we worse to make

Steve Moss

Okay. from recoveries Medallion the subsequent That's on portfolio. subject to Kind recoveries have maybe the And of just any if curious if the quarter good helpful. you will? end in subsequent recoveries you quarter of, then

Andrew Murstein

it's than right? we way getting to that are that now down years And speak. the shut for been can't mean, into Nothing is I But hopeful to so going can so way it's going unprecedented. we're falling now. which start been is mean, opposite go the I I imagine our still subsequent. many worse city it things

to starting normal. So a things It's still normal. to are bit get nowhere little back near

to it's on take off going think us. so we're think, year more, maybe the course and I time going or think even to a I but perhaps right for it's I pay

Steve Moss

right. Thank much. you very All Great.

Andrew Murstein

Thank you.

Operator

Thank you.

Grondahl go is Our next of Please ahead. from Mike coming Securities. Northland question

Mike Grondahl

Thanks, and guys Hey. good morning.

happened Medallion several question quarters. up roughly another Because ended of, it $XX borrowers, on that? pretty collecting Just, million numbers the that Was three previous guess, small sort from I what two, of that the collection. one, been had you

So just shed light would if there bit you could that be more helpful. a little

Andrew Murstein

touch you on that? can Larry,

Larry Hall

substantial bear borrowers to bring the of of I to to time. they the and because can same at have there's process the some time through said long do takes process as these tail a of slow before have Well, we've And go mean, payments a legal long recoveries kind down. you these pretty resources some to delay

just continue. think something can our and very not same quarter, but lucky on manage they that the at you we're were will pretty that work people I recoveries stay came time it's all and So easily, maybe it hard. was there through good-sized three And this hopeful line it that

Mike Grondahl

Got it.

borrowers made three $XX So million. up that

a $X to see things improvement as under expense Obviously, little core and a these for of or $X to get something kind maybe level staying – feel to was see million quality. your you levels? core sort $X quarter. the million of with a credit consumer you up a quarter Or the million. $X rec for sort it quarter trying be And will at provision stimulus have of after running is there. bank million, Do was closer that Just million helped a do home is level? million, in provision two closer at the this million historically, In $X $X $X

Andrew Murstein

just... can you Larry,

Larry Hall

put that. just But up going reserves bit the it's ratios terms on are have changed reserve go to reserves of think percentage been that the to a loan are I increase to little haven't in as loss continues need to the a a recorded being low. charge-offs coverage against the levels growth volume and offset those And the lot originations so book because every they of they books.

Mike Grondahl

level for you rate about The growth growth Fair of rate? a Andy loan originations grow robust enough. can improvement? pretty origination RV XXXX how out at seems And kind was XX% for boat you but as you are there, XX% thinking a a high forward? at do think you XXXX home How look about strong this demand and

Andrew Murstein

business It origination The things improvement growth was I for rec think. I usual. think mean, was XX% it And XX% should I in I growth. loans home for be continue origination very to XXXX. as expecting we're strong the believe

So going in good to They're accelerating lines happen they over. they're two That as be to pre-pandemic. do they're as great definitely soon the and business. even of pandemic well is pandemic this

we're that's So of with very the company. of future happy performance the And that division. the

Mike Grondahl

and do how contribution of the year scale? that FinTech the questions. And ramping more you on Got those comments up? as year partner think next and mentioned just that's One then FinTech both of we first the it. Two maybe from second just how this partner any

Andrew Murstein

first business to XXXX elective business and because start with a in that one their pickup really surgery slow was slow cosmetic big now them. got able beginning The hospitals and in accommodate XXXX the in off really seeing other we're was the to But a pandemic beginning being not XXXX. and surgery of of the

look numbers numbers. So the last than better the substantially January year's

partnership, be too The grow XX any so. signed make XX probably up to second very compliance make want errors days lot There's we and a we're possible fast we thing. in in don't that to of probably spoken sure to we We've it's to next think, a us is good as We've the which And driven. don't area. good kind partners, want there. I to see of as got but potential or choices FinTech going for

on the profitable shortly. So books an It's extremely we should second the get one business.

If in these reports as of public space to are you have call pull banks many this know you that of online. all financials the others the up available

and Bank Celtic others. and Cross WebBank like companies levels profitability their River see could you and So

ROEs north are XX%. well I of think all their

small right excited this very about now. for It's us So we're business.

but in one in large turn it have into really very will a a XXXX it think small could I and beyond. XXXX, contribution

Mike Grondahl

it. Andy, Got just your two what then three or XXXX? for And are lastly, priorities

Andrew Murstein

the done to we profitable say vision like these were Lyft coming, the good when saw we find were Medallion other enough I'd in have do but really And foresight companies job to that. those the had Medallion the business. we've niches set away we're and from to nobody more the we and businesses than business. in bank, fortunate Uber XXXX, up new a steering that even Back

and eye and where it's and again So with stay lines business say so XX% And continue to profitable I the think these us We been off want XX% taking for not our growth tackle of XX% in north we're market future. leaders. the aligned I'd the to for ball. that have and of block an perfectly ROE we're rates

Mike Grondahl

and push bank, So just Medallions on your just what that's I priority? mean deemphasize the

Andrew Murstein

Yes.

I think finally but it deemphasized far we've I realizing we've years, for come. people are think how many

the our small total business just now So assets. fraction is of Medallion a

I think under it's X%.

quarter. company. our a wall good quarters the So point but can go possibly in like a in all to out knocking long quarter. gone, position consistently not And continue this just our to stock mind, I we that where all, be do we this for future. the I have do will if think good we quarters think do can is quarter but very It thought or the writing good more and the a If turning was that I in just $X.XX on it's keep I'm was that, could at very we projecting

Mike Grondahl

Medallion benefit was hit Andy. of you out. the last One a basically, million Got quarter I benefit not provision, $X.X this then you what but a is had question because pointed it. $X.XX the mean,

of So you're kind breakeven I without... mean

Andrew Murstein

The I hopefully division about I to value me, write-down, had quarter wouldn't for the took wouldn't an correct a amount. know or Medallion that. is I the money we can small no. Larry Medallion no, don't lost I -- $XX,XXX the No, be from right? down onetime will a still say that. say $XX,XXX don't know million $X of what which We so. But

again continue. I lost we I again So Larry, on was $X dollars quarter. think not and million, Medallion in which $X But But a million of between net-net, correct a me. think that million couple the should

Larry Hall

the in We did. quarter. $X.X million lost we No,

Andrew Murstein

way, but Medallion with negative write-down right. the you other you're of had had per some the big Mike, you the I mean Medallion a onetime So positives $XX,XXX one way. value

the net So we're not would a it cease be repeat us a things to those projecting benefit benefit. anything, in but future, for both

Mike Grondahl

is cleaning of very that's I mean it's bank profitable No -- stuff. kind up and just the legacy

So, okay.

Andrew Murstein

for quarter. the The bank made $XX.X million

quarter rate if run if So is won't, that, a that for doing million that year. not math will they again hopefully, they or but the $XX of continue they projecting continue plus just the $XX like million

Mike Grondahl

Right.

Okay.

Operator

for time, this like turn the back Murstein At floor to Mr. comments. closing over I'd to

Andrew Murstein

I appreciate or Investor please everyone this if your Thanks please To call. and want unanswered with Thanks happy question participating XXX-XXX-XXXX that calls thank Relations were questions. to contact to follow-up morning's much for attending e-mail end it. again. today, We're Well at at not for to answered. our department follow-up Great. feel any that free was any investorRelations@medallion.com. very We via