MFIN - Earnings call 3 2023

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Operator

Ladies and gentlemen, good morning, and welcome to the Medallion Financial Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ken Cooper. Please go ahead.

Ken Cooper

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

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

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

quarter find our In Investor earnings to that, third President. the and presentation medallion.com by Relations. over addition on top you The clicking page. it Andrew is to press can our I'll the With visiting near Murstein, website our supplement of release, turn presentation

Andrew Murstein

morning, quarter, ended best Good Financial Ken. you, over years any IPO with XX XX strong earnings third ago. year Medallion Thank in a that for had September the everyone. months our culminated X since our

of collections a effort operating lending, our lending earnings earnings consumer medallion have income Year-to-date, to results third leverage solid generated net per net share. In and loans $XX.X per continued we and These in quarter, from successful $X.XX are driven been of originations again taxi share. by the success of cash in our million higher-than-normal commercial at our million we $X.XX and of costs. from $XX.X our income results

interest in grow to We now clear our loan continued borrow with growth have offsetting net strategy is some cost for by originations. income that been to time rising

another back even has quarter, started for done have as to activity normalize levels. historical to that We origination

to look take pricing. we As continue our raise to will standards increased steps credit proactive we to the future, and

billion, With levels provides total allowances for around and to we with month, This flexibility years, reduced allocation, over origination. the X which loan assets of XX% the to growth enhance at should Board as moderate we needed options authorized over consider from increase more the which capital credit returns. anticipate have $X.X earnings past us seen at enhances dividend next starting the shareholder such in

segments. Moving to our the of update each for

origination today business active which believe activity whole multi-project Consumer home may of significantly purchasing cost of had small active to in markets RVs, remodels, being compared and We another heightened yachts, to this Our due higher improvements. Lending our These originations. house project single as customer, towable all and quarter RVs, robust to activity or target a cruiser more be boats susceptible is higher-end the slowdown. have has a still

levels As a borrower origination than focused on very the or loan prime a our is payment a reminder, near prime around with the manageable average more rates. at $XX,XXX,

refer and In see know with lines, we exit we scale industry we helps them great addition, which that helps or to players have The business who work us. and continue long-term, some service back to contractors be dealers these us. levels here which business will

with related The equity after-tax in million outstanding. which during gains of loans the of $XXX the loans segment million. and of million net $X originated business quarter the included generated to $X after-tax earnings million of quarter $X.X investments quarter, ended Commercial Our

taxi another medallion Our assets. bottom of line cash from on benefit or quarter good began collections

collected our per translated fourth in approximately executed which of $X.X gain quarter quarter. borrowers larger note, a structured with million, of million pretax ended, $X.XX million, in will a share. and of into the of earnings settlement result $X.X we the one which additional collected Also shortly $X an taxi we quarter, medallion This after

with delighted collection I expected be medallion to continue are our fluctuate. performance, that taxi We to but payment again patterns stress

mentioned increase I to to has in I Board our dividend the earlier, per call from now With $X.XX insight a quarterly XX% authorized our additional into our share quarter. provide will will turn as $X.XX Finally, who Anthony, that, over per quarter. some

Anthony Cutrone

morning, Good Andrew. you, Thank everyone.

the income For $XX.X since we've prior experienced interest the year, continue rising we to on cost originations, X increased the of coupled counteract quarter, able XX% by have net factors driven the These prior experience. to grew the year. funds with million from loan new interest been to rates growth

loans net prior component on the interest and year net quarter, in Consumer of margin related to things: in compression quarter. X the Improvement fastest-growing business. is the X.XX% to compared Our margin as quarter Home lending gross X.XX% The First, our in the interest has was for X.XX% been Lending second

fund having these much With interest rate. lower credits a

of we rate in experiencing tandem interest funds with cost current the The environment. second rising are is the

writing loans, a increasing been from Although we a Improvement we have rate loans, our ago. a an X% approximately to year one-to-one in XX.XX% are rates, it average rate an XX.XX% originations, approximately not up of is at currently Specific up own of ago from basis. Home on on year at XX.XX% average Recreation successful on

we in passing consumer continue measures tighten to to addition our In credit increases, along take interest to lending. rate proactive

loans were are of loans subprime end of XX% portfolio. XX% the of At portfolio. the Recreation subprime that XXXX, Today,

experience $XX.X of year Consumer to loss prior quarter, $XX one, credit pandemic; the continued of our in experienced unprecedented provision provision two, from in a portfolio million for the lows for during portfolio. overall is Our the the and our of: The growth compared increased the primarily result up quarter. normalization million loss was the

expenses with inclusive and of provision of loans. offset period, in the loans and quarter, prior higher $XX.X a on the in from year recoveries costs current is million related primarily drop to the $XX.X the salary during associated The million were $X.X legal down a Operating book lower medallion professional by benefit the quarter. was benefit quarter. taxi during and The larger costs servicing result of fees higher million

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

quick final $X balance private mature anticipated we used of a comment of notes, settle been March million XXXX, at million notes be placement large of the in repaid On Just which the X.XX% has $XX those sheet. closed X.XX% portion which to to September maturity. $XX a remaining a XX, notes, the of with million on

this that priced issuance XXXX, to at note prime, at a which basis rate issuance points prime. to points basis compared priced important in It's previous XXX notes as above XX new our above

a spread our to from a transforming that at ago just the instruments business speaks to progress prime we've few lower years the price to the ability Our underlying as in and a made company. whole

the debt now results. less operating the in questions. of At equity. Andrew -- $XXX million parent being subsidiaries company to your quarter, of take our to at of had covers and debt the our debt company, with happy quarter which end than the the I investments fund are That continues XX% financial third our

Operator

[Operator of Instructions] line question Securities. Our first Northland comes from with Mike the Grondahl

Mike Grondahl

and you net give Could those? Could outlook Anthony, Two of think questions typically then, dollars charge-offs you off get of kind forward? your going also in us kind sense a provide percent. I by-category to And maybe margin we of start with.

Anthony Cutrone

Sure.

think out continue for So couple a around we've funds bottom to to there's have with to But our margin, a X% to we compression. of the rising. still of going margin. quarters interest be terms in we net regards we believe, of said We at that ways still as go cost

increased that we've note is, I what's year, think on rates recent most the passed number to of important large But especially originations. in new along, a

think increased -- be the long-term. help in our little higher the interest we rates rate, then on us top get and that as book cycle, bit credit matures we've So a compression. of should the more closer as But we terms to a of average there'll

Mike Grondahl

Got it. Got it.

Is compression of did quarters the you -- more right? until that that X%. of couple a hit hear I about So

Anthony Cutrone

Home Yes, of And obviously, charge-offs on about your that's that's Rec and a in Improvement million. $X.X going to for X, be I and were recoveries a was other $X for it. fair. lot quarter, we're is Commercial think we to the had and million seeing million things, question charge-offs $X taxis. to the what Fed of how catalyst but decides And do

Mike Grondahl

then the of you're of rate average at kind the it. paying your And XQ, end was on CDs, what compared Got to market?

Anthony Cutrone

the a goes We're what that probably XXX to for it $XXX-ish towards now. as increase below, think over cost current would our about the were level again, several to We $XXX CD is our to be? to going about. top talking back quarters. do going we basis quarters that So seen we've line increase But next is several continue past funds of we X-year we again, just points XXX to up. -- And what creep

Mike Grondahl

Yes.

how You've for raising the about One, get sure. secondly, medallion as done you X collections? then holding Andy, a these at good you job That's debt are you for yield. then XXXX? $XXX are thinking about taxicab the of questions company, thinking And how And million of you.

Andrew Murstein

increase, So there. the net net be income, The interest interest we touch let margin. course, to of me also just just on expect, to clear

the as to as Anthony to that the But several the of because interest shrink, to the for continues X%. increase quarters portfolio originations. the now, So the should go it of but portfolio, grows, margin, continue been margins net volume about down the has saying income accurately

always that level. as We're is really think know, operated, known too for Mike, we amount, We've you us years. debt many, at not The you've much. conservative many leveraged

were were So BDC, investment company, a we debt-to-equity. for about limited years, about so XX regulated X:X we to

of So ratio. kind at leverage we've low always a operated

that refinanced us. put we nice that know, to So as debt, you was behind

due September we coming which debt XX. March as have announced We we in XXXX, on refinanced

debt the new anticipate So debt, so. significant for we adding next at all year or any if don't

say, to the be too. deal we've one Improvement. Marine, I'd to that from loan pretty show XX continue of the demand of them. in We've the probably for results and terms very continues Home show. owned optimistic RV, outlook flow in numbers This that In highest the to continue we're the Mezzanine seen XXXX, division we've is had overall, as strong years strong,

the across and to $XXX lot We've more loans that. whatever as of on done much there. collect So the collecting we a can great collections owe a continued Hopefully, million, board, do about from We of portfolio. growth. job still Medallion we'll

York pricing New soon. congestion have hitting You City

the taking city, So boost will the could people to Medallion for that dividend. as more increased ideally out try And Ubers. be we cars of prices well taxis keep a as they consumer when be

can they'll back be a able receive the XXXX, watch So growth and kind dividend. share to $X.XX per as in sit everybody of

say the I'd year overall, So we're ahead. bullish on

Operator

Nolan next the Ladenburg comes Our of line Tallman. question with Christopher from

Christopher Nolan

there did I Andrew, you was hear Medallions in say $XXX outstanding? million that

Andrew Murstein

That's where correct. we're owed,

closing XXX for the for been a know, much today, but collections But lower the owed. many assets which X% so our to in City. they're come or much know, through by and carrying York now how as down saying As them, either number. The We're you that's all many, of loans lower years, we're these this all New written number. about a on we've to than less It's you personal them. have legally Medallions, worth are guarantees attached at -- can

settlements general, but and they're if So seeing a don't pricing thankfully, the borrowers on bullish us. just we're congestion of coming this in the know with year. in plan. we're settling are I lot business

hopefully, continues. that So

Christopher Nolan

Got you.

is For Shouldn't $X.X the in recovery medallion that fourth recovery? be that the a a why quarter, gain? million

Anthony Cutrone

be I a our recovery. provision. yes, know a going It's So in to it benefit is

of these a book So to down value had this assets been $X.X written million. --

the the collected that's asset So million. it's that $X goes between the and away, difference cash the

Christopher Nolan

Okay.

that's -- loan could So right? than have potentially normal, simply provision lower loss a just we

Anthony Cutrone

Right. Yes.

all $X That's the in million that correct. flow So through benefit a provision. as should loss loan

Christopher Nolan

reserve are the taking then of you And ratio? where thinking

Anthony Cutrone

Yes.

and are about so So we're just Rec so think on We those -- or numbers. million Home around million currently, $XXX Improvement. on $XXX good

look allowances are, should adoption with that So good pace -- forecasting, of that's expected were those we've downturn, we and a do in But quantitative losses. a could future we January of take are to with we've If where we rates on lot which remain. X, sudden those we where at connection if been the continue the numbers, think a -- expecting more got the economy CECL step the we and up.

Christopher Nolan

Okay. And then given question. a final

does comments of moderate terms what your mean, relatively, loan I growth sort Given of to looking? is, what should in moderate, rate mean? you're growth we expect

Anthony Cutrone

Yes.

growth consumer And good. around X in categories. the to months, we've And So grew I XX% been those that loans XX% think XX%. experiencing year-over-year in was X

and that the the and that reinvest to did made opportunity we these these And Medallion -- generated took recoveries we capital, intentionally business. this collections those from it take and in

ability ballpark growth, of somewhere with going forward, increase to the in the would X% necessary. I think it to as we that XX% decrease expect or

million as when at $XXX you've $X growing to when think different balance a balance got at I XX% billion billion XX% sheet. got $X.X growing opposed sheet -- is you've

Operator

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

Matthew Howlett

be you And that. quarter. performing is But you you there between get to the And the have lot loan you're fine think, growth, at. Another the what just capital. the mean you more a are I with you guys market you'll this the have in -- I looks to excess seems dividend, problem I the high-class question moderation of first to views disconnect want And it XX%. like just above capital, above, well XX%, raised a capital, generate

gain third quarter. You coming into the that got

sort got So you the already. in already of $X.XX bank

platform, been you capital, as -- back of is about what earnings. another slow. more could as -- to going free breakneck think loan plans what Just lot me at buying capital, great shares? about you you've to talk could this to question excess good in My do think should buying running aggressive a you about of you've with Anything growth got terms we in that get It's capital? up speed you

Andrew Murstein

really looking we're of at acquisitions, into go to and off base go good while always time think a and businesses lines not I new new business. it's

All well. of doing are our businesses so

going them. on to focus So we're to continue

us lot say could think to on since be dividend The back you as going raise don't Last It I options, another paying $X.XX buyback about We're state. a businesses. I'd stock. of year, bought back plan company more we into now the XX% XXXX. we good million lets go. share. probably a of the buying $XX in that have new That we is

a option the but money for need borrowers we're nice raised be. So to if our we to and on able and That's loan have in always we're growth more more. into put pass increases us the stronger If we at too, of XX%, good really to and options. so can is charge bank lot prices surprised a it's

Anthony Cutrone

have capital think I of you're A And high to at maintenance a bank, large Yes. that the we've but maintain. thing add have also XX% do minimum to we as we ratio got aware. I'd a that that one amount regulatory capital is the capital, that,

so need deviation on that allowance, size -- what meaningful So to record given slight that as an of book we have have now, in could the we because of impact a a CECL, ratio.

size to XX%, need -- just So XX% are, it if staying we for we the doesn't doesn't actually above stay at us. at work

for the we've we which in So need variability, we experienced that a larger yet months since buffer adopted to X account CECL. haven't

cushion, does But well Andrew what we've can. we dividend that's And returns we ample to if want capital and that other might. providing the sure I why economy that increasing think take a as to said, got make shareholder the as downturn, we

Matthew Howlett

only have. Yes. Look, going high-class generation is It capital look, it's to to a like problem looks increase. your

out their of credit banks levels there kind or most have pre-pandemic been year. auto So early is be I XX, at by charge-offs the saying card -- the when and to charge going look in Slide next of on

ever you'd a improvement into guys but are you're at guys are You have, a go you though, that XXXX, recession. more that given you movement it you're doesn't close the in to are X% not seem but you almost guys little we ever the quite the get When -- I kind show look -- up I if of charge-off major there, FICO, like even credit, in in -- home mean a charges. you chart, --

Anthony Cutrone

Yes. We hope not.

I said what is important. I earlier think

FICO. In definition, XXXX, X/X the subprime. Recreational XXX that's subprime, X/X. portfolio that's Today, our regulatory of Just in was

years. past a well in number on that getting of as quality So credit we've as up that, the of changed we that stepping new hope origination. -- the this year, portfolio drastically And over the rates we're

are So help think those next we when us hit and things that all the we should steps of downturn. good undoubtedly

Matthew Howlett

the people running you've ROEs, time. you're the then especially the XX-plus is disconnect out been question discount between disconnect Andy, numbers the your long me? over they you're between the go can your that market? But for your significant just obviously cycles looking not here, appreciating moving you at in prior credit, the book, what's just putting I mean, pricing. to maybe underwriting, performance in And at Are all -- that what's Yes. my banks? looking both and of or up what's you the company Are a just final for

Andrew Murstein

at you're time this that's the right. It's We've a The making ]. though. a answer. trading great We're question, we Yes, [ at a stock Years tough ago, long XX% one in was 'XXs, late were $X I XXx share. think at to been earnings. a

you point I earnings, Matt, morning, don't shockingly of know, Now as your we're, this note kind in out X.Xx low.

of hope institutional can in much It the buyers, get to So these just in volume the buyers. will being needle move up support if more front the we're days. I eyeballs, getting we And, large stock drive stock of we get bought take more institutional really can more and getting doesn't more a that conferences, calls doing more good some phone price. surely

just produce, we it's us I for continue be if -- nor to to market hard going for much think to So the longer.

Matthew Howlett

tailwind already taxi I now the you, read was given October did medallion correctly? -- you had that $X in Look, that pretax a -- Yes. in again is million for

Andrew Murstein

cake guess, lot because Yes, exactly. for cake, Yes, we're that's the big been money there. us or a to collecting pretty of icing on last, I

It been last $XX,XXX we ever up, down business is so, the Again, It's to up about a business. the since picking do Medallion years. bottomed the picking few So continue at I hope. Medallion.

Anthony Cutrone

management It's now. consistent all I the just has consistent with space we're is what what that add And this saying would and Andrew been right Medallion here Yes. along. in experiencing

And issues of space were a back knew it, that the taxi when years, benefit, that medallion we we and pain. encountering, we we a we was of about eventually, prices If in we the would go number aren't down the were transparent to point, you going get always that to taken further. as already go the height any then the where point at had

not past So I X the just also year think experienced last that's we've what well. but as months,

Matthew Howlett

from it performance. what just the your they'll going and It's like will value of significant on the those really obviously performance. huge off-balance the experiencing of there's forward your tailwind see some people versus great looks see what a we're hopefully, to sheet seeing Well, banks, And of taxis. problems they're top performance, earnings

So congratulations.

Operator

Thank you.

no Murstein, would hand any now over for questions, I are there conference further comments. the As closing to Andrew President

Andrew Murstein

again for you Thank joining this us morning.

Our company and seeing doing be a well great shareholder proud to results we have well, to We're us lot that working hard is deliver position continue to of. and value.

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

Operator

for conference you. concluded. of Financial now participation. Medallion has Thank The Thank your you

now may disconnect You your lines.

Medallion Bank (MBNKP) 31 Oct 232023 Q3 Earnings call transcript