Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Medallion Financial Second Quarter 2023 Earnings Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host Mr. Ken Cooper, Investor Relations for Medallion Financial. you. Thank

begin. may You

Ken Cooper

good earnings Welcome call. and Corp.'s Medallion second quarter morning, you, to everyone. Financial Thank

Officer. Joining and and Financial Chief today Operating me are Officer; Anthony Andrew Cutrone, Murstein, President Chief

from constitute could both Certain amended. statements forward-looking that differ these do uncertainties within statements and of Such actual filings as meaning statements to undertake safe not Securities forward-looking the the statements. known and release are risks provisions of Those are the forward-looking uncertainties of described Litigation made such to call are Reform we our the materially statements. issued statements the any obligation risks pursuant Act and date in with to in results during unknown forward-looking made cause and of press The today Private to and harbor the of subject SEC. our today update XXXX this earnings as made and yesterday call,

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

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

Andrew Murstein

a you, and everyone. Thank morning, Financial second Medallion growth Good with quarter continued profitability. had Ken. great

million For per and share. the of generated second quarter $X.XX we $XX.X income net of earnings

the return equity state our healthy reflect All of and was strong our XX.X% remain return Our and on X.X%. on assets was business.

be businesses of our The had lending line quarter to consumer origination main driver volumes. of our continues bottom another which significant

then is to loyalty customer with customer to times reinforces consistent in. This to base loans. X,XXX a we are to of in premium national performance service Medallion X,XXX service of We and validates easy contractors us. do like which using it Our dealers important source make business strategy our deliver

we our loans. returns standards, low. borrowers us propensity timely high to has rigorous have targeting This losses our high pay by maintaining and their that a underwriting helped are Further keep

straight second over driven taxi by million was on assets. performance quarter our medallion $XX collections of Our also cash

team is entire this. job on Our doing a wonderful

patterns expected payment that stress are again be I linear. to not However,

to expect be between. in quarters and We low, high

a industry have one Murstein, medallion US. We the of, on in taxi team talented by is most who the possibly knowledgeable the if Alvin authority not led

businesses had our strength lending than the who second the quarter home believe I is over remodel As boats surged in several consumers have part seen resilient mentioned, to in quarters. consumer more due that and and continue we past this RVs. US invest to projects in We

this at left an us And industry up have back together. all some When it segments out out. our day believe related it our or also came players happens, consumer This opportunity scaled and creates course, day it's even exceptional we market We this larger that job XXXX stronger. and who of time for teams of to course in share. also doing an on business within in pick to happened and are

than normal. in doing And When bounce levels and Similarly, are a just loan would lower-than-usual they level. that. our said higher that we more normalized we have to they XXXX, provisions back are origination XXXX

portfolio. XX% combined rates, $XX.X of we with portfolio, to has raise the income ability our million. growth loan With net our the our by interest fueled of loan growth increased own been This to our year-over-year

continues will fastest-growing increases in We continue flexibility rates. segment. counteract originations borrowing to our of further to maintain be to the improvement pricing in new Home

company put income our pressure to interest total interest net our on continues growth net to the expand. While continues margin,

XX.XX%. also segment of rec highest average interest assets. continues to profitable now at is most billion It and Our of our biggest our business our rates $X.X deliver

again $X of we payoff loans $X amount the roughly originations and activity that loans. over should earned the solid increased to million quarter has Finally, originated to for in which first a of Commercial our future. on quarter the lead that just commercial business stayed had flat pipeline and compared in same million

who additional to With the over call provide will turn some now insight that, into will I Anthony, our quarter.

Anthony Cutrone

Thank Good you, morning, Andrew. everyone.

For the year. loan this in increasingly we of on counter income portfolio driver from $XX in of addition prior net cost XX% being experience. our which growth the have million The interest to to interest rising quarter, to the loans, continue helped higher to rates our grew funds

margin the margin quarter, prior quarter, increased the interest X.XX% prior year X.XX% margin a the points. Our quarter. for experienced net net expected was to our The some in when compared although in we time for year basis XX compared first point the now. reduction on interest to from gross has as been compression And loans basis six

on able Specific We at currently and is of writing reflected recreation for home pass originations, loans a higher, to increase been of along on to although quarters of and rates that to XX% few This portion the improvement loans funds a have average in increase. our weighted continues increase. are track cost on loans. we to seen yield we've XX% our around our coupon XX%

$X.X which portfolio, consumer connection million of of provision taxi our The were normalization for prior $X.X on medallion was losses offset in portfolios, of well of taken the increased loan our growing both as in as the recoveries in quarter. loss by with Our provision continued credit all the loans. of is $X.X million for provision to compared the quarter year million a result

growing million in X% of our operating Bank increases operating Medallion costs by Medallion from is and This a Capital. with increased subsidiaries, employee-related Our the offset professional year, and prior $XX headcount reflect lower at legal increase associated expenses and fees.

diluted million That our our financial $X.XX. results. quarter to net second For covers shareholders the was $XX.X quarter, our income share was earnings per and attributable

are now your happy take I to and questions. Andrew

Operator

Our Mike be Securities. first time, question. a question-and-answer session. your from line you. question Northland Instructions] with we’ll [Operator Thank conducting proceed this Please with At of comes the Grondahl

Mike Grondahl

consumer don't maybe environment? guys details I to could nicely. I about Hey, Andrew, Hey, bit the more back down a know, sales grew I the of guys. industry-wide but just pulling first loans question, think, competition competitive XXXX. in sort provide mean, Thanks. consumer talked little there back about XX%, you RV the you were space scaling similar about some you

that just a to more. So, understand bit trying little

Andrew Murstein

Sure.

think story the the is to still exactly even share. continue the of mentioned, XXXX Mike XXXX, and that we or very And we there it credit so. out and scenario had our competition We I take and did tightened there quarter rates. strong just though market in less really grow that as same you demand. is loan We was raised that's

business management in dealers and team us know a continue we're have send to The so. that lenders The It's in been for They years following. haul Other business. it just leave. in the come long XX lot really of so their we've or for this it been doing for long. a has and loyal

Mike Grondahl

then it. one said there that was offset million the $X.X a for recovery Anthony. the offset Got or it. that. was said, million provision in Anthony, to $X.X quarter. And that Got taxes And was you tied think, I you

So do I as could the there? clarify think provision $XX.X just of of gross like you kind million,

Anthony Cutrone

Yes.

$X.X of the Medallion yes looking the door that have benefit couple got. We on for the But you $X.X segment, that's million past these the excluding a So we were led that cash million. recognized the that's in to provision add quarters. come back if you'd these settlements

Mike Grondahl

Okay.

-- lastly XQ of vertical kind dollars then compared net charge-offs in could in percent of in And XXXX see didn't sort about release to of you talk and the hey XQ by Okay. as I sort press XXXX?

Anthony Cutrone

Sure.

a -- of seeing million seeing They've included the up million exclude couple net the that space. $X.X Net the if charge-offs charge-offs. medallion $X.X we're of we're from medallion we So and ticked piece, quarters. past were benefit

of million X.X% had if So out on was and $X.X improvement you charge-offs side back that home $XXX,XXX. rec the net we commercial was

In percentage rec terms on around and we're home XXX basis or on current weighted the the on XXX portfolio, the of points percentage improvement a quarter. probably on average so

Mike Grondahl

it. I’ll queue. Got in back the Thanks. jump

Operator

you. Thank

Riley Our Howlett line next Please with from Matt question. your B. the of proceed Securities. question comes with

Michael Schafer

everyone. Michael This off for on Matt. is I to with morning, on great lead just congrats want quarter. the the Good

the ticked date? if average to XQ all that noticed could changed you and at to up interest slightly speak across your that's pricing board strategy So rates

Anthony Cutrone

Yeah. Sure.

we with as of Fed the down we probably do took we've of rates, ago. the jump path but interest quarters started pull eventually a been We originations, a the So increasing right that for our on we charge with did didn't in new -- the loans. rates. trigger number year This went about raising ago now year these in new rate increasing a about

all book fixed amortizing of a business, Given our ones of in Essentially a that are it's the of come of old ones to through trickle slow at terms increase loans the size off lower rate. yield. on at the higher The are new are rate so rate, rate. our that for

-- come to slow up. to that So yield it's for

I that quarters been four rates as average But close cost income now, flowing we of of time, the we for that's as to -- think with compression coupon two growing modest our loans. fast net it. expected quarters cost these the funds our even our grow quarters there because that we've NIM. for to the is three or and increases of But at able borrowing seen is This to through. we'd our top pretty increasing, in same And interest in is couple now something is weighted a have what's saying actually as be thought we not be but of line interest

Michael Schafer

Got it.

Okay.

a yield they're slower -- for trickle you so little And to in. to bit spoke

that saw we pick in you quarter. have didn't there the specifically, Do in improvement up home for any particular? So second commentary

Anthony Cutrone

Yeah.

the home In X.XX%. about quarter, coupon it our At improvement end is average X.XX%. was the terms of of

just is new there writing below some paper So improvement. new at, XX% on originations. We're

of lifts function the rate. higher size year a So the the new average in yield rates, it's we of again, loans it slowly portfolio. as those the at And up write

Michael Schafer

Got it. Makes sense.

point portfolio for any of is? another quarter, overall for that guidance you growth, here, kind on second quarter-to-date where speak great could So the

Anthony Cutrone

particularly I first in seasonality. return is we quarter the think to what half the second year, -- saw of that the

We very we to is what do don't growth. QX down rates. taken typically bumps anticipate I to our they is things We'll continue historically those to moderate where were and originations come ones start credit. lot QX. up in back in down. it go then saw. strong little and But slow that we've comes that's growing and we've We to a a one then some. bit which era, we And think at But QX. a then We've in if steps tightened in pre-COVID level QX grew that So increased of

of we're seasonality back experienced it's in think we So We that a haven't that couple there. years.

Michael Schafer

Sure.

Okay. here. last question And

could far as go, levels give just general some outlook. commentary your current market as as any So updates there capital you as on well

Anthony Cutrone

Yeah.

think XX%. dividend I Bank, over a we Medallion quarter for We $X.XX with Tier-X just of declared a share. ended So the

I think of to that our fair growth, we and in maintain we experienced to amount order growth a a lot capital. need of retain

we back do, of for reinvest we to we earnings extent like taking a So the our is where and future the that best and And thing we that's growing in our outlook businesses. putting portion sheet. best it our significant do business think could it the retaining there balance earnings have the we're to our in

Michael Schafer

Again, Got congrats it. the Much on quarter. great appreciate it.

Anthony Cutrone

Michael. you, Thank

Operator

you. Thank

from question Christopher comes Please Ladenburg proceed question. Our of the your next line with with Nolan Thalmann.

Christopher Nolan

the is just increase dividend Anthony should the we you growth on that comment balance retaining imply sheet, on capital cards? not to in made from that

Anthony Cutrone

wouldn't going that a year These put I'm dividend reestablished to can the good over and to is to just actions I it's that has say Board we over increase. -- a the not time it pay the back take. intent ago, dividend are When comment.

think we that that growth didn't to it Given experienced in dividend. prudent QX, we the increase

see policy of couple that's As determine taken. that we dividend will the the unfold quarters how next

Andrew Murstein

I'd those us buybacks of and are important both to say dividends Chris, things. also, very

to them. both is of hope do the So

we the in market and want demand. on As Anthony two back pointed expect buybacks start year the depends the our first this things of really have to we focusing play market, may we share. don't half competitors into as and on those the But growth then the more of won't we continue have dividends. seasonality we leave the upon correctly grow loan if If the out, it comes to

Christopher Nolan

the of And correct recreational then driver the was the it in say that loan segment quarter? growth incremental is to the

Anthony Cutrone

crown a where of That's Yeah. mean -- income is Yeah that's amount that's and our where our volumes generated significant jewel. occur. of that's I vast originations

Christopher Nolan

in anything fee professional read Great. lower we expenses? of Should terms

Anthony Cutrone

No.

that's time and we've think three thing. a quarters the for for But And from professional see fluctuate rate. that's what that's to -- fees. I time good right run normalized think as now we now forward. They'll legal going current I experienced

Christopher Nolan

non-accruals. Great. medallion you million in And the guys $XX.X had but only I last thought loans medallion were recoveries, in question. The medallion $X.X repays that taxi all recoveries. million

repayment a recovery? treated any get you as So were

Anthony Cutrone

Yeah.

in assets the which income come to recoveries zero cash recovering. the as So we point We don't comes reduced reduce the as asset. any start at the in they until recognize

was recognized had disposition our the There provision. in $X.X million $X between the foreclosed that that collected or we was So million on reduced And we dollars then the the what actual total we in medallions. that numbers those exposure. difference so another two of

Christopher Nolan

Okay.

already So is part it reserved. of

Anthony Cutrone

Yes.

Christopher Nolan

Okay. final And question. then I guess

are guys guys your or is a should in it in and about sense or of reserve the And reserves thinking your what's looks improving in as You sort build competitive -- it mode to -- to operating environment a -- get at terms I'm trying we steady, to how like are you a that? the ratio outlook? of look keep

Anthony Cutrone

reserves now. fairly got healthy we've right think We

what home the nearly quarter. been those On improvement we're the basis charge-off side experience double past XXX XXX side That's in points. over on And -- of we're rec our has both this basis over points.

and to this is well would economy now for expect very hasn't particularly those going will My rates continue start long-term our economy couple takes we if what ball to the stay crystal a turn -- I at years. isn't determine tick consumer what's But level think a the them and So up. this to the been pressure feel I If the working it right does. of same. consumers

Christopher Nolan

Thank me. Perfect you. Okay. for

Operator

Thank you.

Our Mike proceed of next from with with question. question your the comes Northland Grondahl Please Securities. line

Mike Grondahl

Hi, guys.

on, follow-up loan overall sort a of, Just growth.

Seasonality was what historically is guys think really saying you hey, I in. kicked are strong. XQ

margin? sort saying historic you, trends. And second hey what's sort and where current moderation half? was sort overall expect net we natural for outlook some of, Are interest secondly the like CD in the of it of prices then So the

Andrew Murstein

a numbers. mean growth XX% So didn't. forever. XX% I we been on impressive to we've for continue on was Frankly It are thought RV growing very Those and ago won't you'd slow year improvement. about expect home and the it it slow. and marine

our competitors leave as to they've doing. is So to been it hard our and growth. and We our earnings predict really pleasantly it's just are when the boost market surprised a

to This at continues So we really And know. we is the we rates plan to to for for typical But is but do tremendously than think you us. growth it will again really business return well it hope those don't seasonality. that. which continue less grow

CD Anthony could the rates of address. terms In

Anthony Cutrone

competitors I'll thing we're haven't though to what we Yes. we've picked Andrew all is leave taken said stepped even market excess. the And of the up just -- only add just that We've seeing some that credit. up

we're gone has that And the on again. FICO average up Our we've increased originations. rates new charging

number we as So said, And don't years but the Great win. experienced already I to a is it what about this during similar what Andrew Recession. see speak of we back to a want

five-year at past far down as and issuances new Three-year As we're rates, in come around -- CD the so. they've in we're are some month CDs seeing seeing X.XX% or X.XX%. all about

anyone. We've increase. a I expect cost of deposit shock funds to to our X.XX%. been to isn't all along mean we average continue saying rate this Our is this

just five-year X.XX% We north ago. seeing CDs few a were months of

have come couple passed down the guess we'll see significant along amount that. in of they Fed do the what I decides of But So we've And again, to next meetings. some. a

our net So sure enough our continues NIM interest we compressed a we is do to do although little growth to bit that our and that grow. more top-line has think make compression expect income year-over-year

Mike Grondahl

you've it. done Yes,

$XX is that? far. just last there's there short-term debt and buyback million us what any you're Hey two now. think the dealing secondly, the quarter? Can You've statements And how you done I in remind it that of stock with sort financial of in so just questions. Was then quick roughly

Anthony Cutrone

Sure.

no, quarter. question, in we the any first buy didn't back stock So

on Second components $XX of largest short-term pretty in one come The there's three that March due notes much question, being there. debt, million private XXXX.

whether roll of lenders options So, -- and speaking We've is new with we've existing current intent holders. a that we've couple the new to holders that had be The credit, got the lenders there. will we're or got with with determined. it's discussions

some options there. got we've So

XX million XX today. In has points we of terms would in that think of it quarter. below probably to pricing, the $XX eight basis It's reprice coupon a where

doing So in next we'll quarter something working be and through the that's two. or

large four in $XX at for landed Fed window quarter three through or at we the that mechanism it piece cash it Federal borrowings that was I to increase liquidity, had It had Bank. million Reserve think with we The of happened other just it the days. hand end and Medallion a just so outstanding on

Earlier amount Those test short the And securities end quarter quarter, just to saw one, we time. with we it them make work. how the a and the you liquidity of and borrowing steps had the to of since how our in and a of with operationally mechanics we at wanted been increased pledge two, taken so bunch have everything Fed, taken that borrowings the that replaced understood for we worked sure investment CDs.

Mike Grondahl

it. Got

Anthony Cutrone

And XX-year SBA and course. take usually another borrowings. another -- to to That's down maturity, debentures. the then ones. piece take debentures get Those small are Upon ordinary off and just repay there's a of we debenture maturing commitment

Mike Grondahl

Got it.

thank Hey, Okay. you.

Operator

you. for for back I'll turn concludes our Mr. Ladies allowed gentlemen, the any floor time final and Murstein Thank comments. to this questions.

Andrew Murstein

again earnings call. on you for joining Thank our us

again, the any supplement as please is you our free Relations always, on great contact of feel day. your to info have team. As our a rest page Investor well and of you website. questions our the section of have The if last IR contact as earnings Thank

Operator

conference today's concludes call. This you. Thank

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

Medallion Financial (MFIN) 25 Jul 232023 Q2 Earnings call transcript