Medallion Financial (US:MFIN)2019-02-28 20:53Financial Data and Key Metrics Changes - Medallion Financial recorded net interest income of $23 million for Q4 2018, with a full-year net interest income of $98.2 million [16] - Net income for Q4 was $9.2 million or $0.38 per share, compared to a net loss of $4.7 million or $0.19 per share in Q3 [17] - The provision for medallion loan losses was $3.4 million in Q4, reflecting a reversal of $8.2 million of reserves due to the deconsolidation of Trust III [17][18] Business Line Data and Key Metrics Changes - The net medallion portfolio decreased to $156 million as of December 31, 2018, a 60% decrease from $388 million at the end of 2017 [9][19] - The consumer and commercial lending segments generated net income before taxes of $41 million for the nine months ending December 31, 2018, and $11.2 million for Q4 [12] - The average interest rate for the consumer loans portfolio was 15.06% in Q4, slightly down from 15.18% in Q3 [20] Market Data and Key Metrics Changes - Taxi medallion loans comprised 16% of net loans at year-end 2018, down from 28% at the end of 2017 [8] - The TLC reported 810 total medallion transfers for 2018, compared to 117 in 2017, indicating greater liquidity and confidence in the market [10] Company Strategy and Development Direction - The company is transitioning away from medallion lending to focus on more profitable consumer and commercial segments [7] - Medallion Bank is expected to continue growing at over 20% per year, with a focus on maintaining high ROEs [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medallion market, citing increased medallion transfers and potential regulatory support from New York City [28][30] - The company anticipates continued recoveries from delinquent loans, although the amounts may vary [31][32] Other Important Information - The bank's Tier 1 capital leverage ratio was 15.85% at the end of 2018, up from 14.50% at the end of 2017, indicating strong capitalization [15] - The company has reduced its medallion-related debt from $252 million at the end of 2015 to $60 million at year-end 2018 [22] Q&A Session Summary Question: Utilization rate in the medallion portfolio and NYC regulations - Management noted solid business with over 90% occupancy rates for fleet operators and increased medallion transfers from 100 in 2017 to 800 in 2018 [26][27] Question: Recovery outlook - Management indicated that while recoveries may not be as high next quarter, many delinquent customers are making payments to avoid losing their medallions [31][32] Question: Seasonality in sponsorship and race winnings - The racing season typically runs from February to November, with revenues peaking in Q2 and Q3, but operating at breakeven [34] Question: Capital uses in Medallion Bank - The focus is on retaining capital at the bank level due to high ROEs and growth potential [38] Question: Reserve for the medallion portfolio - The reserve for medallion loans at year-end was approximately $27.7 million, with no specific reserves [43] Question: Opportunities for deconsolidation - Management mentioned potential opportunities for deconsolidation with FreshStart Trust, estimated at about $30 million [68] Question: Credit quality in consumer lending - Management attributed robust credit quality to good management and underwriting practices, with low delinquencies [77][78]