Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Medallion Financial Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions].

It is now my pleasure to introduce your host, Ken Cooper, Investor Relations. Thank you, Mr. Cooper, you may begin.

Ken Cooper

morning, good and you, everyone. Thank Financial Welcome Year Quarter Full Fourth Call. to Medallion Earnings and Corp.'s

could Joining risks cause Andrew statements are results Certain Reform subject Securities both today and made XXXX the Anthony the me uncertainties from safe amended. unknown are today Act that described pursuant Cutrone, Officer; in Chief call materially risks of the Chief Such of forward-looking differ and to Operating release our harbor and as Financial meaning forward-looking provisions Litigation Officer. constitute Those earnings statements our within in the and actual filings and are known during Murstein, to SEC. to made statements. statements press and such yesterday President of with issued and Private the uncertainties

statements this of obligation The the are undertake call, update and today these forward-looking of any do forward-looking statements. not to as date made we

quarter find our to Investor earnings addition fourth the and presentation medallion.com by Relations. In on top you The clicking page. is press can our the visiting near website our supplement of release, presentation

With it that, Andrew to President. I'll over Murstein, turn

Andrew Murstein

Thank Financial great highlighted our had the everyone. morning, year, of you, consumer continued a growth businesses. Good by lending Ken. Medallion

a to to we for we million best were We $XX growing to cash have done XXXX. able had over noteworthy purchase we an than reinstate common assets provide Our in Also people back long-term during shareholders. our dividend were exceptional our able long year, to in our what more to return our years, five mind. job quarterly so success were able stock with the to get is of and after done that

in income in income interest last portfolio, us. of of A million, so can despite trended the its net in appreciate loss increase provision our strong compared $X.X million year's towards in years $XX.X with million provision than back of saw which like loan to $XX.X million both how low we provision the historically XXXX we In rate. million as year rising our you $XX.X greater unpack of our you generated loan for interest XXXX, for were that as million. growth $XX.X We for of an level XXXX. was I'd to $XX.X net normalized

last gain. across into year, $XXX,XXX all performance fastest-growing Additionally, consideration, included In $XX.X This sale gains, debt that on be repeated sales resulted XX% was gain our year. of extinguishment $XXX of to with million items we in Improvement the of million. XXXX, continued investments had XXXX gain of for noncore of combined were these to a segment our which growth Taking excellent asset the loan of million the $XX $X.X board. Home this million, on the of not

We Marine RV loans XX% also XX% saw our commercial had and and our business, loan billion growth of had to $XX loan which growth in million. growth to $X.X segment

contractors rigorous originate and expanded providers year, we help standards as well dealers, the number our enhance continued business. as [indiscernible] Over financial credit our us the maintained We past and loans. of our to service who

of times of use one line our own terrain bottom increasing during finally, And protect loan to interest the our levers we is rates, rates.

year, in that done to a deliver past have our helped We degree the which has results. us

share, stock. cash declared common our paid XXX,XXX shares to million and and of On over we we a capital repurchase quarter, dividend of used the during per allocation, $X.X $X.XX of

stock million $X.XX shares million. share of For dividends, with repurchased the of we year, over we had X.X per $XX.X and

remains million top We Delivering under current priorities. repurchase XXXX. share our December value our one had plan $XX remaining of XX, as of shareholder

on plan portfolio. we In to for stay growing loan XXXX, prudently focused addition, our

recessionary same and environment thing quality to we the came our last chase volume. on continue did It's in assets not period XXXX, out that focus of XXXX stronger. to will and and in We we

additional provide will will now our the Anthony, insights to year. I that, over who call turn With quarter about and some

Anthony Cutrone

Thank you, Andrew. Good morning, everyone.

great As fourth we year. a Andrew We had quarter. mentioned, capped off a great

the XX% XX% million prior loan from interest driver income grew $XX growth quarter to in XX% this a year. and billion to the grew the from year reflects $X.X and net for million stands now of being quarter, For $XXX which portfolio, ago. The our year a at increase

net and margin was the interest X.XX% the quarter X.XX% was for Our for year.

our which of result Home in carry to factors. in our our funds. the attributable the two well cost extent, prime other lesser we net than average loans segment, lower coupon lending interest to of as a growth in an segments our saw year, During a and, The a compression continued Improvement margin, the as increase

the the year. For an funds borrowing, rate of largest of X.XX%, deposits, of certificates cost of at was with source average X.XX% our quarter, our average the of having end

issue for certificates new now, said fund our will that market time XXXX we've growth to throughout some increase and of our current As at replace we maturing. funds expect cost continued we those rates as to

despite our margin, cost net will expect in of income. net compression and this grow counteract this, loan impact continue us to portfolio our Increase interest that continued to borrowing the allow do but we our our will interest growth in

was historical the provision Our million loan up quarter, The gravitate fourth million in loan loss in the continued the quarter. levels loss to fourth provision $X to $X for XXXX from back quarter.

last for specific in a loss for our a result the net for from the loans loans XX as a higher the recreation ago. XX our more as increase was to allowances and charge-offs get over we loan loans increase loss new as home loan of year grow For portfolios. $XX for a an need charge-off increasing for to well point an of million, provision we increased year basis rates improvement million basis increase normal consumer loans, is level back as increase point The year, $XX allowance our experience,

in and during do million benefit and quarter to expect quarter, the income and costs professional to with volatility were shareholders salary decreased $XX.X Our our the professional fees. operating in lower this million prior to fees million primarily the for $XX quarter, We to the the costs from attributable was Financial lower near cost for continue reduction Medallion year. due term. over but pleased Net $XX.X

Our the That per $X.XX the was earnings year for covers fourth share $X.XX year. and quarter full our diluted and for quarter overview. financial

that, With to are questions. Andrew and now take happy your I

Operator

Instructions]. [Operator

first Securities. question Our Riley Matthew comes with B. from Howlett

Matthew Howlett

Excellent things. performance on here. touch few And I a want to

some mix to these shift First the higher lower auto funding home space. mix the banks sort pass to on through love the improvement what's in in just of guys of the to to home But quarter, outlook for ability and the from in costs. here continue but recognize growing. the the what I seeing I'd ability you the improvement, raise segment. the higher hear your pricing things are prime

Anthony Cutrone

into We go can that.

we products, both higher. we're -- throughout And the the new points basis is the At we So points at have of have probably and we XXX about XXX year, able were on consumer XXXX the improvement. home end the XXXX, end rates Improvement about Home been loans raise than rec on to of loans. for higher basis rec

years and more and just income the because It shown yield three ago, quite statement on new or probably our in written translated going loans ones the the less. yet coming off in up hasn't

show somewhat that up. the rates expect over are So do time We comparable. to will that,

Matthew Howlett

Year-over-year? Is and XXX. hear you -- correctly? did I XXX that To

Anthony Cutrone

Yes.

Matthew Howlett

incredible. I'm just,

a Okay. to or guess at that -- the is coming mean, so raise that Well, it. my slowdown. sounds pullback's talks about question obviously, really it originate consumer. point continue some next can and on you I the like know everyone I We

far? How your can demand is do seen you can -- higher holding the Just obviously, is -- the [indiscernible], up to topic quality you I in in segments, mean, it's pullback losses? What us especially the with been and/or just tell seen than not give normalization the it's cadence yet we've mean you this here, you anything improvement. what us on home that it your credit really in year? some the And prime please. about resilient. a Had past, I so

Anthony Cutrone

continues Home to improvement strong. demand be

-- in two have We past seen haven't But years. do pullback. continue be able at think, overall, grow. will the originations grow portfolio we'll think don't that think the We originations into don't be We that we strong. grow to significant be know year. throughout will to we XXXX, able We terms we'll going over we of levels any to the

to The in which we portfolio XXXX, And that see. we in a expect do saw with grow rec XXXX. terms to somewhat nice of the to similarly, In normalized activity experience return in portfolio, seasonality associated didn't rec, although XXXX, we in volume.

with our grow get We did still see demand but I started think rates, in QX think drop, side, and normalized the the on back that able rec rec. see more in to we the drop, even that we in demand the think we're of QX, to levels We with drops book. we did increased that

Matthew Howlett

the you. second And Volumes? third quarter Got rec, in the and the remind again just are strongest me seasonality-wise?

Anthony Cutrone

follows QX pick It right? and the nice, starts QX, weather Yes. it's seasons, to slow be up, outdoors. slow, it want is people then to So gets

Matthew Howlett

you. Got

on going But just -- what's us here. see the took know to said obviously. that of you the on But like Looked the it's lumpy, that I see of management. to excited from professional then last professional And a these cost tell the be fee steady line, anything expense question. get Okay. operating expense we just can love sort line I we operating you can 'XX? fees I'd volatility now lot -- mean, expect out. when expense line I I you in think any

Anthony Cutrone

some it Yes. in Professional we stated fluctuate that like fees, term. expect to near the earlier,

as We're this bank. We're we'll see As to grow far grow our those trying to we're costs, -- sheet. grow balance our as operating trying other to trying business.

those the as on increase But lower increase our correlate top and rate that to have should assets increased costs. we're line. than costs the to on going obviously, a at the happens, So increase

Operator

Northland from with comes Mike question next Grondahl Our Securities.

Michael Grondahl

points increase is, CD out? the say Like and My you the to how XXX pricing on on offset that's basis balance the point the that would basis do rec Home first think going question do XXX higher Improvement, those pricing? Anthony, the you two

Anthony Cutrone

dealing it. for traditional We're dollar. Yes. than bank. It's It doesn't offset loans dollar a higher-priced with not

part for got that of funds, XXX a just we high-yield through you've XXX basis when portfolio. just that's But can't of that's So it of push every -- points. points basis cost

push always through can't every You cost.

over up rates gone mean we the we've But seen past -- probably interest year. what know have I

XXX Improvement through So think still to And on push on being those lending XXX, the good. rec and the numbers. able We portfolio. prime our that's through able push like being to we Home

not to unfortunately, Just going for it's dollar. be dollar

Michael Grondahl

which it. did then that And nice see flow was Medallion collections, the to P&L? through the million Got of again, $X.X how

Anthony Cutrone

Sure.

from exposure through the then Medallion was of end or on QX. on and terms reduction So million in P&L our the recoveries in Medallion so assets, about loans flow million $X the both QX, and in $X of the

Michael Grondahl

Got it. CECL? disclosed forma capital? the forma Tier Got million Usually, adopting for it. is you guys X think have that, where And pro for to reserves that about, release was press I talks added CECL, is X capital, it pro $XX.X with But past. more the in what Tier

Anthony Cutrone

Yes. we related where going got million have think the on Bank impact and million The that -- products. specifically $XX. in significant consumer we've $XX $XX.X a it's consolidation, ability Medallion $XX to million the doesn't is to a It's

to So the and going a impact we've three to in on years ability calculation. X, X is Tier got that phase $XX million the our impact not huge have over Tier that

provisioning adoption we see continue big constraints capital. what as was And will to we origination going some Where that's see statement. going burden to CECL. in to It's is on the don't higher our that's our it to we our being that through for a we've run some, of to income be grow, than it income of going side, us. is until got be reduce up where terms and the going So

Michael Grondahl

'XX? we Can the don't think a a bit I So, what think recognize because how XQ time provisions about, that? saying you're little how is a origination. those in your provision tell at it. high are look you origination going obviously, you does us of at I higher normal What Got model level, environment be to know to to like? should need

Anthony Cutrone

about Improvement So on With the then XX% segment, XXX in a initial in we our -- And with XX%, we're the reserve. CECL, the increase math, transition. to is $XX XXX to new to Home XXX rec, do we're end the how XXXX, up got basis be initial consumer impact. when point going at the that And reserve of about We on until you reserve the basis goes day around loans points. initial -- when the XXX. one we million that's move

CECL, period. With we're comes That's about to it to -- going as XX-month how to looking a at expected opposed a -- future from looking comes losses play. at XX-month

So to initial going our volatility have up. to to to increase, reserving, allowance, we're are extent some go increase, charge-offs see that going the our in allowances losses our

but So with there just have gap now could be forward. -- that part going some swings, we to of that's live

Michael Grondahl

it. Got

And governor like that. the don't so like standpoint, there's on capital growth Tier X, of XX%, bank, CECL, you nothing constraining needed at from on have any a I growth you remember because anything or your

capital You keep have growing. to ample

Anthony Cutrone

think I that's fair.

year, the at So was the XX.X%. of end Tier the bank's X

So -- really day over and pull impact, are the the able three we X affect doesn't years. because to have and it doesn't that impact CECL number adjust CECL in -- it

equity the to because in that we've line the come -- years. CECL excessive growth levels extent Like past going with said of that's for allow growth our that to before, it's and growth seen I and to is to of couple in provisioning increase isn't the at we're down in. higher growth, going But also to the bottom trickle expecting the that

we necessarily us So don't hurt going think that all it's much. to

Michael Grondahl

it. are course you CECL of kind lastly, catches just is that feeling bit about the quality then, How Got credit normalizing a from even guys low hey, little charge-offs very more. a level. up over of 'XX? And

Anthony Cutrone

think is get still Rec low. seen. high Home in the back historical we've levels actually we Xs. of We think is a We are to charge-offs normalized the what Improvement

haven't there yet. We gotten

are the to been up two how do bit. about charge-offs tick expect little surprised in. to we low for But So be that years a we've past

see we'll happens. what So

Andrew Murstein

, I'll years. good loan so we in on website just or And put slide our that up for many Home and losses point, that a over there's on XX showing add rec Improvement years,

we So it manage. through a we recession did and how shows how

So I'd recommend at that. people look

level the 'XX. last but we And in alarmed 'XX, then lot is than that us and We feel a losses that XXXX, today never saw after recession went that. really they back comfortable went our was up shape better big portfolio in a in down it and the to in XXXX significantly

raised our in years. scores, We in back out FICO that we've even through XXXX And then. have we scores and only And Improvement, don't quality Home FICO the started XXX the A paper. rec

in even recession. than better today we last So in we're shape were the

Michael Grondahl

Yes. credit that. No, helpful. chart. track quality. Thanks. just to I appreciate record. I Good And the speaks saw It's the long

Operator

floor would Thank this comments. questions no closing further to Andrew back Murstein you. like to There over at for are I time. turn the

Andrew Murstein

slides, nice earnings Thank our we to interest this strategy you for you be company. to joining I hear gives encourage again performance. which found stack. a page, to in to can just presentation, our update. our to business snapshot our us your One I item on and note, just home and We as supplement added mentioned, review It appreciate several our as

Our entire to deliver team is working shareholder value. hard

bright future. the We have accomplished a very over a believe lot have years we and

on Relations section for As our last supplement IR you always, our of as is team the well the the medallion.com. Investor if reach questions, any information contact of out within earnings as have website, please our page

have your you, rest day. Thank and of great a

Operator

Thank you. condolence.

your at may Thank you lines You for your this time. disconnect participation.

Medallion Bank (MBNKP) 23 Feb 232022 Q4 Earnings call transcript