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MFIN Medallion Financial

Participants
Ken Cooper Investor Relations
Andrew Murstein President and Chief Operating Officer
Larry Hall Chief Financial Officer
Anthony Cutrone Executive Vice President and Chief Financial Officer
Steve Moss B. Riley
Alex Twerdahl Piper Sandler
Bill Dezellem Tieton Capital Management
Call transcript
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Operator

Greetings and welcome to the Medallion Financial Third Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Cooper of Investor Relations. Thank you, sir.

You may begin.

Ken Cooper

morning good and you everyone. Thank Financial’s Welcome earnings quarter to Medallion call. third

risks Act during are President results uncertainties and and today press materially Financial Operating actual in SEC. made to the me of the Andrew? differ any we subject do of known as to from unknown risks Reform to to that provisions constitute earlier are call and as statements issued could me are amended. not Private described pursuant update and statements that, Officer. Securities let such call forward-looking our made earnings of statements. forward-looking both our Andrew statements meaning call forward-looking XXXX Chief obligation the statements. Joining within Those Such with the Hall, today turn Murstein, With Chief The the to and in Andrew. today filings Larry Officer Certain and over the are date uncertainties made this cause the Harbor Litigation release these Safe of undertake of forward-looking statements and and

Andrew Murstein

within performance income was being I’ll row everyone. you, across $XX.X board. Thank a our is fundamentals highlights. growth. What and start both sequential strength was of consumer is our which Net our strong driven with pleasing morning, had million, fourth that the quarter the commercial a quarter lending Ken. We Good in and most segments. is by

income to million, net of increase business and consumer the impact our X.XX%, we in a on believe stabilize XX% interest during our addition, quarter. core $XX.X interest further Net reflecting non-core the will their in loans margin X% businesses to continue our resulting diminish. In grew

placing Our among top strong the our us us, significant to for interest peers. a net of be differentiator continues margin

XX% year-over-year lending year-over-year our billion. business. experienced continues growth of be which growing Our grew home improvement net growing our fast loan consumer driven portfolio loss benefit quarter highlight our is net borrower that on this our are segments. of consumer the in segment, lending. performance our last provision, on XX% this total foundation strong we $X.X loan focus to driving performance to fastest is The One by performance We XX% our loans instead a our in reflects loans. which of had a

volumes both helped We loans consumer and includes and replacement pools the which in deliver lending and predominantly recreation, like origination of swimming projects continue for rates is see year. to strong towable at half consistent growth segments, strength roofs, home stayed improvement, home boats with RVs Loan windows. which the first

During net the home grew our grew over portfolio our recreational and net X% X%. portfolio loan improvement quarter,

portfolio XX% assets. our mentioned of As XX% earlier, represents consumer consolidated our and total of loans total the net

loan portfolio in growth We continue. our expect to

lending We working qualified their our at have that lending growth continued worthiness. a segments to determine dealers ROE with customers of for XX%. remained contractors Furthermore, One and profile assessing the in point of credit home be consumer markets. improvement believe Year-to-date, consumer there is both business quickly and last we process our is the ROE strong. the demand in will strong the credit borrower recreational

we of originations an are business income bank is a we these grow hard to a just to time. this for are not I’d We of sensitive million in do our non-core to quarter. this strategic We continues for alternatives be $X.X like options. for our have to loan generated working investment last specific the this We of that The note quarter lending with forward we of announced for potential business. good and to commercial of us due with during originations. evaluate expecting initiative another move the net commercial but also are quarter you This solid had to assets. million that segment We working update us. quarter, the our transactions, at nature $X.X important

complete I now provide over who the call additional the we that, updated. highlights quarter. financial will we keep Larry to With you turn transactions, As on will will

Larry Hall

Andy. quarter, net this metrics, our of and We strong income, you, EPS. quarter income line. interest in driving fourth the Thank straight had improvement growth strong in another growth delivered bottom our and net key making We including

low a across remains The losses total has of strong of be continued our our to and companies something an via a be opportunity all lending the benefit To another for it’s low and has to partially at attractive believe our for this when $XXX,XXX loss be able net loan in future. balance strategic offset of small expect net of improve. points. were in normalization investment our XXXX in We growth of $X.X strategic $XXX,XXX had development us continued in by an clear, a believe program be Ideally, on of partnership provision investments loan income. sheet activity the business we of future. had through to We We continues fin-tech We made We was and Our of homerun the reflective a quarter segments. process. interest to charge-off loan at early loss early gain access entry get the been losses norm sale investment normalize not will million the the to provision loan experience. and program we make plan a this will partnership gives recoveries our stock type look the investment. us will

with outcomes. in similar investments similar having will in the we companies However, explore future similar the of hope making

and margin. a financial we income grow net continued to strong interest to maintained net other highlights, interest Moving

end quarter to to income to was $XX.X This increase. our last to XXXX and from on our quarter interest strategies. loan of than good lower during the Net our yields the line high $X.X $X Gross the when from home and year’s quarter XX.XX% portfolio our quarter, fees. quarter $XX.X reflective which second has is quarter compared XX% year the benefits in for Salaries consumer testament margin commercial by quarter. quarter. were and collection XX.X% The primarily operating in of loans peers. lower quarter, XX.XX% rec. million portfolio’s the mentioned, net the loan interest the average a down Andy This third X.XX% was and XX.X% the was was rate third compared with $XX.X faster the were third teams at XXXX quarter As industry growth compared million, third is another of and higher scores a a at the was the yields interest in for and total million at second for costs compared million commercial third area, to professional costs the $XX.X driven prior FICO million interest sequential average million originations. growth reflects side the improvement million to end of our $XX.X ago. The quarter The compares this of

average loans the yield the quarter, XX.XX%. the originated For was interest new in

update a Lastly, in segment. Medallion our quick

During the to $X.X related quarter, we collected million cash the of segment.

from a loan of XX% of continues of at This most process to the decline, ago. year end September, Medallion Our and at down $XX.X from and foreclosure. the collateral the XX% is is standing which million quarter prior exposure

impact I Andrew. call will exposure back this our now dwindle, that, it line to the With to has turn on continues limited. the As bottom is

Andrew Murstein

A couple Larry. of mention. to Thanks, items more

and fin-techs on steady strategic make and to lenders. We continue progress non-bank partnership slow our program with

from quarter, million loans, the quarter. increase of $X During originated we an the prior

a This team, partners In remains bolster entire like Larry. two the with to long-term process and on opportunity And luck the would finally, Medallion are I additional addition, we this say to behalf in you of good program. thank us. partnerships for securing to of

company knowledgeable best Larry’s him will next and XX our to who team. He wish are life. has in He as we extremely discipline. Plus, successor team a have be As and the many relentless about have has into have helped evolved challenges business. Larry’s have and retire leadership We his has control we the us and We a been flexible helped faced in Larry to structure. him were the financial is his fortunate today. and strong saw operational our of us he has in Cutrone, XX fortunate over us us board those and press decided chapter a on after years Anthony this strong to about and years. career finance. implement release, we XX-year are been balance on cycles be already build instrumental for you begins our overcome our with in for since all strong several as coming has drive position has with to he process business for and the Larry excellence earnings of sheet successor Larry you shown what navigate strong and Anthony to know.

we a fill, to has not to beat. he Although do expect big him shoes miss

next will congratulations Anthony. months your of We will Larry and January questions. thank on Larry over and make the this couple I to it to take go and XXXX. now to X, you Again, happy are effective transition

Operator

Instructions] with your B. proceed first line Moss Thank with Riley. you. Our Steve [Operator from comes question Please question. of

Steve Moss

Good morning.

Andrew Murstein

Good morning.

Steve Moss

the Maybe just is and starting with portfolio days? on coming these competitive curious where new of days hear kind environment your the about are to yields these and what loan pricing

Andrew Murstein

competition I’d continue norm, very of say. attractive bit continued, the is new outside little competition, there. There a We yields nothing to have new but not just

spreads So to large. extremely continue this be

yields XX% and in in marine X%, home and about the X% are RV We improvement. doing about

Steve Moss

know you a about another well. of Okay. I here, quarter And of loan then to demand, weaker be this production for I pretty seasonally just the upbeat good you said tends guys. quarter pipeline in terms mean, as Andrew,

the and thoughts? do curious of trend here quarter just to kind continue Just for expect overall we as to that fourth

Andrew Murstein

prior It little above year numbers but last and are still is the seasonal, a year.

grow home about continue improvement we grew extremely think year-over-year. So, well, I to XX% these businesses

growth we XXXX. would into the continue quarter the So expect and to fourth into

Steve Moss

about last then expenses fourth one last And just helpful. of as the that’s maybe kind curious here, how to quarter, think from into the Okay, down quarter? just on you run-rate one

Andrew Murstein

are. about I to think they there be will continue what

pretty the in in portfolio many years are really mode. thankfully behind We first us. time growth Medallion The now for is much

add grow, bank, and continue do in cost we we mindset to expand but a and we good very for been that. to continue like containment people we will as still the doing hope So have to have

shrank in on the overhead home and So, we improvement and that it’s now have. with that good Medallion cutback RV project our we lot good adding we in portfolio as marine are our the and balance future. a lending people growth a We that really

Steve Moss

Appreciate all Alright, thank much. very the you color.

Andrew Murstein

you. Thank

Operator

with [Operator Instructions] question the proceed Twerdahl Alex Piper with comes Please question. Sandler. your from Our next of line

Alex Twerdahl

morning, guys. good Hi,

Andrew Murstein

morning, Good Alex.

Alex Twerdahl

future. on Hey, first the off, the Larry, with luck retirement. everything Good congrats in

Larry Hall

you much. Thank very

Alex Twerdahl

more about you your normalizing. in about elaborate that talked you remarks maybe I was hoping prepared could provision when little a bit the

you when of of about any of all a when parts If sort world. in of put think post-pandemic we see might you level of sort sort sort and had the kind this on of guess that? normalized I you kind the provision sense moving timeframe in how

Larry Hall

if they of X% the I bank the last the quarter. rec reserve portfolio are loss so at Sure. has you a around levels normalized been obviously, in mostly or ended part actually years over below mean, recovery at and look up to on the levels loss significantly this the we that rates. and the in a that XX operations, net have And X.X% position

more will sustainable. So, are sometime It’s the get but probably quarter, happened. we we X.X% numbers way towards it’s result, next year, to that’s helpful a down but that the back road good It’s to expect X%. not we this normalized too glad

Alex Twerdahl

trends are That’s suggest just start sort we there you things seeing But get are as couple the to the of to expectation early next normalize? right and anything the Okay. now of in going that not sense quarters. common in

Larry Hall

Correct.

Alex Twerdahl

curious curve Okay, of rate I changed curious, then that the mostly has the consumer on funding book, XXXX. four hikes was just if CD between and great. the am strategy And just I it’s given on I think your driven? now just forward now anything has end

Andrew Murstein

We older roll be think CDs very the spreads will to strong off. the as continue

that raising debt And that be at that going years. And on so. about that we or points have be X have more been for the years some or to prepay We should are Also, of last several able to over we we XX ones long-term then below new lowered. putting any are debt basis not cost.

I to X.X% think rates. that’s about X.X%

cost books would it we they on to where will stay those hopefully, today, roll able be X.X up X savings, if putting about in significantly we pick and rates years, be are more So, some when it our years. were lower, over,

Alex Twerdahl

of So, lock that, this you doing are the kind at point or extend in not CD funding? anything to to current anything just maturities like

Andrew Murstein

doing are We mix. a

can, we that everything match the really to since healthy. margins trying are We are so

not in what’s lock really guess try I our rates spreads. So, with just to, happened and

Alex Twerdahl

consumer you a the has and little if then great. wondering performance increased really bit think changed. am strong competition, just anything I given book, just of And on I Okay, the cited

and you your guys In that fair the improvement terms the of sure that the are your the marine credit sort RV home is make underwriting standards, just get of or share of at volume? least to

Andrew Murstein

today. And about have And home about that an We then. probably are the standards over years, been has XXX. Especially say, XXXX, improvement of have till probably greatly start they were at you credit. don’t been versus, marine then look even portfolio ago, XXXX years Credit X very XXX. XX so or time, now FICO strong. RV we we And average recession that if the last didn’t XXX XXXX. In average FICOs in now on about lending, strengthening the have

So strengthened overall, really over has portfolio time. the

Alex Twerdahl

terms on the how new Okay. has changed to of And acceptance willingness given today? your anything in is put consumer of sort rate, strong just the of customers, in sort

Andrew Murstein

have we have to No, It’s big market. we this the continued always thought basically business. maintain a about way

We base we or starting $X a when with of loans. so are such be of small are our billion afford to We can selective customers. with

has we us. worked probably I So, trend think will well that continue, very for

Alex Twerdahl

if segment? Great. am And sort any are slowdown, you in seeing supply the some and are at are curious me, that question I thing issues, just we hearing if auto am final to auto I banks. about the RV in just you then due seeing of just impacting issues, marine for same chain potentially supply certainly curious just

Andrew Murstein

Thankfully, not. That us yet. we really across have hasn’t come

and production remain far, so very assets So, buying those of strong.

Alex Twerdahl

taking questions. for you my Thank

Andrew Murstein

Thank you, Alex.

Operator

Please Dezellem Our with Bill your next Capital question proceed Tieton comes Management. question. from of with line

Bill Dezellem

flows Thank there million associated please how the is you. us Medallion Would to – bottom how or through collection the a in that the you walk the with $X.X that? line, portfolio, cost through

Andrew Murstein

on And that. Sure. I will Anthony let comment

Anthony Cutrone

Bill. Hi

process with actually actual reducing this. essentially is income the received. it and balance costs our a effect foreclosure of That loans cash had costs, exposure. of statement the there The our includes quarter other million, no It’s loan So, our This loan $X.X exposure we in from is $XXX,XXX, the to million $X.X those recovery. we $XXX,XXX And in assets. comes collection related is of portfolio. which

So, was excluding it that $XXX,XXX.

Bill Dezellem

but a at benefit it it’s proper cash benefit to not way a the if the So essentially, P&L, look flow is it? is to

Andrew Murstein

That’s correct.

Bill Dezellem

incremental fin-tech That’s Thank are kind opportunities, will kind helpful. how And your looking guess I at of magnitude large walk of then to detail would you be? pause more through I the you. relative the behind those next And of you of steps, there. what for could

Andrew Murstein

strategic two are partners We currently.

you it ago. of years we about know don’t business, those started of For couple that that a

very it think small. holds of I It’s for lot still promise a us.

bank bank, bank million them, earn funds a to of Now, were for a about back to $X we the But only loans it’s bank generated earns quarter. they are the sent and fee. income. the the purchased so loans then The way extra or the for fee great and

very within hope we to no another so. are risk have they six The two next to three sign going is credit the to or months almost months that it. partners So, on little

volume time. so. has So, from off But in from two four. or double been about of are don’t to be probably profitable. we large a kind banks now to will there. until program very it’s really year I expect build very the doing It to significant, it other And

So, that’s as goal our well.

Bill Dezellem

matter? two really you or program from whole that of the couple you four meaningful them to anticipating aggregate – are be to beneficial, or the year are new Of all will it’s now, these contributors, be when anticipating relationships, the this

Andrew Murstein

and come they it’s ones really But FinTech do, quickly. not within no sector new looking will business business, our is current control. model. on But are that their is well them there or The one partners. days. to than They tell. board. up guarantees are both of hard these two larger They really extremely It’s their they building meaningful. if actually if be at doing the It’s The could

higher our is the last our have is where volume year But of that been certainly it’s two control. lot So, so. or a out than their hope the

Bill Dezellem

you, Anthony, both. and to you, Thank Larry, Great. congratulations to you, and

Anthony Cutrone

Thank much. you so

Larry Hall

Bill. Thanks,

Operator

you. Thank

reached the over like to would turn now have comments. back the end for session. the We I question-and-answer floor to Murstein, closing Mr. of you

Andrew Murstein

you. Thank

see, are Medallion. can participating you where interest your our the very we As pleased performance with and growth you headed with strategy. and in we for today Thank are all

team. have free have day. Investor Thank you can contact our you Relations be feel at to reached If great and additional XXX-XXX-XXXX questions, at a or They investorrelations@medallion.com.

Operator

teleconference. gentlemen, and conclude this Ladies does today’s

participation time. day. You good Thank your this for have you may disconnect at lines a and your