Medallion Financial (US:MFIN)2020-02-21 19:50Financial Data and Key Metrics Changes - Net income for Q4 2019 was $2.8 million or $0.11 per share, down from $9.2 million or $0.38 per share in Q4 2018 [13] - Net income from consumer and commercial lending segments totaled $7.2 million for the quarter and $31.9 million for the year [8][13] - Return on assets improved to 2.08% for 2019 compared to 0.54% for 2018 [14] - Net interest margin was strong at 8.82% in Q4 2019, the highest for any quarter in 2019 [14] Business Line Data and Key Metrics Changes - The Medallion portfolio net stood at $109 million, representing a 30% year-over-year reduction [5] - Loans 90 days or more past due dropped from $16.7 million at the end of 2018 to $2.6 million at the end of 2019 [5] - The consumer loan portfolio grew 23% year-over-year, reaching $940 million by the end of 2019 [9] - The commercial segment grew its portfolio by 11% year-over-year, reporting net income of $2.2 million for 2019 [11] Market Data and Key Metrics Changes - Medallion loans constituted 9% of the bank's total assets at the end of 2019, down from 15% at the end of 2018 [5] - The bank recorded a Tier 1 leverage ratio of 19.56% [10] Company Strategy and Development Direction - The company is shifting focus from the Medallion lending segment to consumer and commercial lending segments [3] - Plans to expand activities at Medallion Bank by entering new business lines and forming strategic partnerships with technology companies [4] - The company aims to enhance home improvement lending growth due to strong deal flow [35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the Medallion industry, citing reduced losses and potential regulatory support [59] - The company anticipates continued growth in consumer and commercial lending segments in 2020 [14] - Management noted that the consumer business is expected to grow at a similar rate to 2019, around 20% [35] Other Important Information - The company raised over $82 million through capital market transactions [3] - The fourth quarter income tax provision included a charge of $1.5 million due to changes in the effective state income tax rate [17] Q&A Session Summary Question: Are there any noncore and nonrecurring items in Q4? - Management confirmed that aside from the tax adjustment, there was a loss of about $2.8 million related to RPM for the NASCAR investment [24][25] Question: What drove the benefit of $3.4 million to the provision for Medallion loan losses? - The benefit was primarily due to improved performance and lower charge-offs in the Medallion portfolio [29] Question: What is the outlook for the Medallion loans in 2020 and 2021? - Management is optimistic about the direction of the Medallion industry, expecting improvements due to regulatory support [59] Question: What is the capacity and pipeline for the commercial segment? - The commercial segment is expected to grow at least 20% this year, with a strong pipeline of deals [60] Question: Will the company consider divesting nonstrategic businesses like RPAC? - Management acknowledged that RPAC is a noncore business and is open to selling it if the right offer comes along [62]