Medallion Financial (US:MFIN)2021-02-18 19:30Financial Data and Key Metrics Changes - Net income for Q4 2020 was $6.5 million or $0.26 per share, compared to a net loss of $500,000 or $0.02 per share in Q4 2019, marking a significant recovery [16] - Total net loss for 2020 was $34.8 million, compared to a net loss of $1.8 million in 2019 [16] - Cash flow from operations increased by 21% year-over-year to $79 million in 2020, up from $65 million in 2019 [17] - The net interest margin for Q4 2020 was 8.89%, the strongest in 13 years, while the full-year net interest margin was 8.65% [16][17] Business Line Data and Key Metrics Changes - Net Medallion loans dropped 88% from $105 million at the end of 2019 to $12.7 million at the end of 2020 [7][18] - The consumer lending segment generated net income of $40.7 million for 2020, compared to $29.7 million in 2019, while the commercial lending segment recorded net income of $893,000 for the full year [24] - The consumer and home improvement lending segments contributed $48 million in annual net income to the bank, with $15 million in Q4 2020, both the highest since 2004 [13] Market Data and Key Metrics Changes - Total Medallion exposure comprised just 4% of total assets at year-end 2020, down from 10% at the end of 2019 [14][18] - COVID-related payment deferrals were largely resolved, with consumer loans in a state of deferral at $6.7 million or 0.6% as of December 31, 2020 [21] Company Strategy and Development Direction - The company aims to focus on consumer lending and the bank's growth, deemphasizing the Medallion business, which now represents a small fraction of total assets [59][61] - The partnership program with FinTech companies is expected to grow, with the first partnership showing improved performance in 2021 [9][58] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a gradual recovery in performance within the overall portfolio in 2021, as many companies are returning to pre-COVID levels [11] - The company anticipates continued strong demand in the consumer lending segments, with origination growth expected to remain robust [54] Other Important Information - The provision for loan loss benefit was $3.4 million in Q4 2020, compared to a provision for loan losses of $10.5 million in the prior year quarter [19] - The average interest rate for the consumer loan portfolio was 13.64% in Q4 2020, slightly down from 13.87% in the previous quarter [23] Q&A Session Summary Question: Can you go through the moving parts of the loan loss reserve during the quarter? - The consumer segment had about a $3 million provision for the quarter, with the home improvement segment at $737,000 and a benefit of $7.2 million in the Medallion segment due to recoveries [30] Question: What should we expect for normalized provision levels for 2021? - Management expects provision levels to be similar to past levels, with growth in the consumer business [31][32] Question: Have you considered selling the Medallion portfolio? - The company is open to selling the Medallion portfolio if the price is right, focusing on the future of the bank and consumer lending [33] Question: How should we think about run rate expenses for 2021? - Management anticipates expenses will start to drop as they continue to manage costs and evaluate the impact of furloughs [34] Question: What trends are you seeing in loan pricing for recreation and home improvement? - Rates remain strong, with consumer loans still yielding over 14%, while home improvement has seen slight competition [41] Question: Can you provide insights on recoveries from the Medallion portfolio? - Recoveries were driven by a few borrowers, and the company remains hopeful for continued improvements [50] Question: What are your priorities for 2021? - The company aims to continue focusing on profitable business lines and maintaining growth in consumer lending [59][61]