MFIN - Earnings call transcript Q1 2024 | Medallion Financial Corp.

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Operator

Good day, and welcome to the Medallion Financial Corporation First Quarter Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Ken Cooper with Investor Relations. Please go ahead, sir.

Ken Cooper

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

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

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

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

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

Andrew Murstein

Good off XXXX, had This a nice Thank everyone. we strong XXXX. you, loan included start performance. record-breaking to portfolio our morning, a growing on Ken. line Coming bottom

standout Our year quarter. prior the and Recreational billion. is segment up had X% versus quarter Originations Lending a now were at $X.X

portfolio prior compared quarter stayed up our We and at XX continue as at loan to interest segment's to points XX.XX% $XX,XXX. average roughly end. size years, to average originate loans rate basis new the at rates The interest in was elevated

year up for credit allowance loss Our was of X.XX% from a X.XX% ago. level

over our last delinquency grew year due upper be the Lending or levels scores segment, and the to the credit so on keeps activity million. from rate came lending Home consumer mid- $XXX year XXXs, business, approximately prime major in to the tightening. to This continues growth other low. focused This prior credit segment borrowers which as Our origination down quarter slowed to Improvement super with XX% loss

the Our pass basis from borrowers, Fed points rate was segment done some reflecting X.XX% to to in rate ability of with have for increase segment. average Lending increases a interest the just like Home at year our a on end quarter ago, XX Rec of Improvement the we Lending our

allowance for X.XX% from up a was level ago. loss X.XX% of the Our credit year slightly

investment net Our our rate $XXX to $X.X million segment loan equity XX% to a of interest exit, XX.X%. strong up basis a included was Lending Commercial average with resulted gain. quarter XX million had in and an The which portfolio points

quarter. be segment the elements Our the business. goal during time. there earnings although of is of The to after-tax key $X.X grow excess And million the can return unpredictable, over generated this on prudently segment are

the quarter. Finally, our Taxi million $X.X Medallion in segment first collected

As in collections last we to expect on on expected. related our unfolded indicated quarter, cash taxi call we a our as sizable assets quarter first slowdown medallion

of to segment be quarter, approximately generating cash after-tax $XXX,XXX. into collections million the the benefits During income And income of to net the net continued $X.X profitable, statement. translated

smart with Our face. to strategy markets is growth income pricing be interest continues to we competitive and through net increase pressures that given the optimal loan

levels growth credit anticipate maintain to our we We standards the XXXX use to pricing to advantage. and from in high similar saw We to to loan moderate expect continue XXXX.

we back $X.X quarter, to cash of used of some common our buy Finally, during stock. our million the excess first

use expect us million Our forward, to you $XX plan it authorized And regular remaining approved. than $XX.X has million on share any rather opportunistically should of cadence. the going buyback

income shareholders. continues positive performance our results Our dividend share quarter buyback our deliver activity for together per $X.XX net with to and

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

Anthony Cutrone

everyone. Thank you, morning, Good Andrew.

year, driven portfolio interest during months. prior grew income from originations rates growth interest our new net loan on quarter, XX the by to past and loan For increased the the million XX% in $XX.X

the gross X.X% margin quarter, be basis Our Compression NIM fourth year quarter higher increasing our to loans XX we to portion points basis down was last last attributable interest on our down for from net cost of the XXX XX-basis-point originations. on offset basis points with the the and XXXX. X interest first continues of rate along environment new in average points from quarter rates to yield of our from a higher as year, in a these by continue funds increase pass

recreation current portfolios in at at rate both average an coupons average X.X%. an XX.X% improvement rate of XX.XX%, at the During of originated average quarter, the and weighted we excess loans XX.XX%, loans of and those home on

the As which increasing in given that we've average said begin anticipate well today, of is loans, average funds of a do which process, should the at nature cost we to slower couponing yield fixed true still after margin expand. point our our and rise our in we've compression reverse than said, funds. holds the the of slow That couponing seen plateaus, will rate our of cost and the yield to continue past increase

we above do our quarters, further positions next to anticipated, believe do And we expect us closer of not. several the we well bottom industry still believe Although level compression that norms. are that despite the additional we than compression over NIM

year maintain XX%, and XXXX yield full ongoing with increasing originations originated quarter consistent XX% economy. which of levels loans in period. outstanding the XX% we and We tighter the XX% recreation view were And from is $X.X the XX% nonprime of criteria, XX.XX% we our the million originated same and to $XXX uncertainty over increase loans XX.XX% the portfolio. a from were XXXX years. with from billion saw During total credit during the of down Non-prime ago, quarter, during the to loans our

overwhelmingly nonprime. X% home only being super and loans prime Our portfolio be credits prime improvement to of continues with

seasonality, $XXX,XXX included was quarter current $X.X related a compared a Our provision medallion of prior in provision of the The to in million $X.X loss the benefit net to the million net quarter. to $XX.X the prior for credit taxi in compared for benefit quarter recoveries loan products, and million year charge-off a Higher change lower quarter. key were related in provision in growth portfolio, medallion the our ago. benefits, allowance from drivers year credit the taxi to recreation in along activity both to recoveries related increases attributable the year loss to in with partly consumer

Operating expense was sequentially quarter XXXX. the first fourth was which $XX.X slightly the from million in quarter, down from $XX.X million million of during the quarter in and $XX.X down

our interest website interest how the of growth any our how as income businesses. and Our that well the the net past net to see operating and several outpaced growth a grow continuing this in quarterly scale lower. income time, has migrated could you quarter over But on function supplement fluctuate. may in expense has as current into years shows operating costs lending continue Quarter-to-quarter, over our we

$X.XX For $XX the quarter, net diluted shareholders Financial attributable million, per income share. was to Medallion

are first and Andrew happy your I our results. take covers That questions. quarter now to

Operator

Instructions] today's question [Operator comes from Thalmann. And first Ladenburg Christopher with Nolan

Christopher Nolan

you you Let's see. volumes do loan quarter? guys have nonperforming were the what the Anthony, in know --

Anthony Cutrone

of our are we down. the we Seasonally, if numbers for delinquencies? those period the of higher at looking as look But throughout -- slow you're the end first come work and quarter out

Christopher Nolan

XX-day-plus Yes, delinquencies.

Anthony Cutrone

Yes. We're up. pulling it just

million, $X.X it's the home On million $X.X improvement. rec, in

Christopher Nolan

you. Got

Okay.

million. So quarter $XX.X was it's down quarter-over-quarter. Last

fair is that a So assessment?

Anthony Cutrone

November, we on improve trailers, aren't the and to what But side of are typical towing not business. getting it's their things January, their is in that the improve. weather rec see. Seasonally they're slower, And starts starts People when Yes. boats. December, the especially to

Christopher Nolan

like down more boost of you All right. come earnings there's or the an reserving. to than... of then any regulators reserves reserves heard sort and be regulators not have And past, like of bank, for from not financial companies flexibility the of see more guys in flexibility In sort having terms services would piggy in or yours whether terms

Anthony Cutrone

CSIL. reserving our what necessarily that with It's model upon the put particularly allowance want. implementation and our So we've regulators together, the the predicated models isn't of

economic there's look there at the really we historic flexibility factors, at losses, pertains but no regulators' to look we desires. it as So

Christopher Nolan

any run at on similar at on the have you capital Okay. to ratios? you the are going Or don't to capital boost flexibility then And given note, plans to continue that reserving, that all? ratios

Anthony Cutrone

mean Medallion maintenance our of at XX.X%, quarter, to we're least maintain we at the I at Yes. capital at a need upon based the requirement Bank. end so XX%

above we're that number. we stay comfortable that So

Christopher Nolan

question, went higher in All of Should a thing? seasonal the we rate expect Or in rate. Final tax a quarter. up just sort right. tax it It XXXX? is

Anthony Cutrone

Yes, smooth it's should Different picked the expenses. get nondeductible to out as That we of seasonal, rate up aspects the code first quarter. year. lower in go through a the

Operator

with Grondahl The Capital next from Northland Mike comes Markets. question

Lucas John Horton

Mike. This on for is Luke

looking at the Just P&L.

So a from dropped sequentially, income while this think million over the in where first just net $X I interest XQ. down was quarter

as then what the of we how could just talk guys and little you XQ this this line into about year. item if of wondering back drove sort thinking and you're bit So progress half the into about a

Anthony Cutrone

sorry, you question real rephrase just could I'm that quick?

Lucas John Horton

$X income interest dropping a net The sequentially little million. over by

what quarter about the that drove wondering the for sequentially gone past quarters. Just several up since in it's

Anthony Cutrone

Yes.

our So a it's we function volume. -- of

home little in total it. that's X.X% So funds. in so a bit. that. grew drive the been rec seen improvement only We've But from We've increase our We've December, cost our months, an grow seen book pretty our portfolio of we stayed did as going about about stagnant loans transparent X that. to

XX% originated given that ahead, we of in were now, we beginning about in where those QX. rates increasing right looking with our expect think trend And We April, just be a strong. anticipate million continues. to start that volumes I to loans, interest rec. don't those quite income $XXX net are

Lucas John Horton

benefit, then as more $X.X of then if a a back Got far number gain looking in EPS, kind quarter, it. the collection equity the we $X.XX EPS That's that as the Medallion be you core should for like $X.XX? if then out, back helpful. And at and the that and quarter out of million $X.XX the just

Anthony Cutrone

that We that's lending $X.X game, to commercial don't -- business. Yes. regarding our tied million

equity assets. that as and one-off of view a part we do we parcel investments So what not It's item. and That's that commercial The with XX% probably investment. noncore the there. business don't overall are a

that and unfortunately, investments out. well. They're model So equity sponsor-backed companies. PE those -- don't That's out we wouldn't back in

these a we But record track we've wouldn't of But we So out. never shown do yes, exit. things they and back them do, it. when doing know that

of understood of $X.XX, going XXXX, what collected sizable we of and on. wanted X.X On based the forward quarter recoveries amount quarter The the cash. done We've got through readers out. positioned. and $X just a in, we've quantify the is bottom shareholders that portfolio our It's where collect We had. to all we because quarter anywhere we generate million million upon think between to going rate, line sure was make given we that run what We exposure. X $XX that going that's

in did said, $XXX,XXX after we that about tax, As segment. Andrew

back we you wouldn't. -- don't it again, necessarily I So can out, but

Lucas John Horton

you can just sort the month here, Okay. then of April? touch and far And the Yes. guys credit? sense. that originations saw No, lastly in as you trends makes And just as of April on month any of

Anthony Cutrone

Yes.

So the volumes good. were

QX, closed And just month -- just originated getting million rates in idea, improvement, the $XX said XX.X% rec, we just in think XX% I in what give in the I saw an we that's were home think with originations we over when about million these originated consistent yesterday, April. you and $XXX of averaged on we are them we loans, in to we rec. in

happy with trends those QX. We that think we're continue So volume. through

Andrew Murstein

$XXX million in And of the to as XXXX. is just about million $XX point April compared probably reference, so or a

about up it's So XX%.

Lucas John Horton

quarter. Got the on Okay. Congrats it.

Operator

Matthew with The is question from next Nomura. Howlett

Matthew Howlett

congratulations you to my on With almost think, you B. X.XX the for to shares. buyback, buying, first, Riley. congratulate million both But was I got it I

I medallions. you, these A get said with mean to we authorization? how that -- to -- cash want $XX -- collections execute in do view opportunistic I mean Your these with much should calculate stock's book. you you a how left the what Andrew, I XX% be how I on in tangible buyback the the question that at from to is you as million you'll discount

looks doing ROE. a mid-teens for buyback. it You're to put work accretive Clearly, money to

Andrew Murstein

to amount timing, predict to hard do and we I to the full the would I think It's eventually. just we'll what like say. get

as Board, buybacks. more the through. by fan approved of pointed than out, was we're I'm a that you million $XX the So halfway

good a they're think our appropriate the capital I time. use of at

So sometimes. predict it's just hard to

As just said, the looked Anthony great April. volume in

ROEs the rec So for we'll us in where that so put there high more money to use portfolio. are

sporadically. it'll So be

pick With time and stock. a we capital have jump think the the to extra it's market I stock drops available, in cheap good up where

Anthony Cutrone

loan our in what X.X% Yes, just growth expect just much I'd echo book, Again, really add Originations and higher quarter. said, strong April. to Andrew in look that. We in grew it would QX. to to the be that

we didn't did to growth have in it we to the availability that that QX, shareholders. back capital have to give extent in So to deploy the of

Matthew Howlett

Got you.

share your Just currently. remind ending count what is again me

Andrew Murstein

number. exact It's get change. We'll and XX the

Anthony Cutrone

XX,XXX,XXX.

Matthew Howlett

then going our work to can any down. Good. to be certainly, And Okay. you accretive EPS. to you that really Look, do buybacks that's

and So sense lot here loan that, buyback a at congratulate of growth, on the valuations. I these certainly but appreciate makes

Next year CDs How you are higher I it's this year? or the I out mean higher to deposits. far generally some -- on how if I longer. here cycle for far agree, on CDs? you how are think, start question mean the and late Where you do it's going do would get -- easing next you going? rate we think about people,

Anthony Cutrone

a that the products typically, match little average a We that X to at match between rate on not significant depending Yes, consumer tacked seeing than right. around a lower and now. we life conversation X, change. been ago, issuing Maybe not still our hovers X-year to little economist. CDs. a have We're But We're We're don't X it XX I'm upon But X higher fund. were Maybe months, looking today. and few I know, expected not was X- go loans. months funded. out, the life product. the a get we of different months we X cuts. an

Some shorter drastic. term, but nothing

Matthew Howlett

CD Did little up bit. probably at the Recently moving it's rates, all? I'm changed a with sure pricing

Anthony Cutrone

Yes. a think it's It's little to we're not. top to going closer the fluctuate. than It's -- up we bit. But

I quarter, think into Now just more well a that's through are. translate But where in given to expense compression we positioned go NIM. interest going as we're bit little higher the we

Matthew Howlett

-- start like to you'll a in think When move about over guess the than the coupon Fed. the be other rate to It's for I about or with on the the time Fed margin the margin stops coming right? I other starts X% Fed Or mean the of pendulum, in just I think I and XX you back slower how or than way is side. to mean going normalization. the easing down to just months? probably liability next words, moving sort your

Anthony Cutrone

bit newer lags loans -- lower-yielding yield But Yes. good any we've substantial book really prominent. done Maybe our as roll with the of then stop new originations. I going current once off, our continue it think rising, That's the a don't and down. little costs more loans drops a on there's more. older to just job to increasing the become

But it's pendulum, eventually, We're right? start expanding think NIM. that one going we're way. I that swinging to

Matthew Howlett

Yes, just terrific an X% itself. by margin is just terrific. Any is improvement, that

Okay. on can we Look, do modeling that. the

Talk could TriBeam. modeling a about bit how partnership, about question, in assuming mean the Last this it. capital I we I'm do think put little light. is we what -- our

no up putting really capital. You're

how origination And you some getting success these You're many more fees. do? for of could your

Anthony Cutrone

Yes.

with I -- if don't Andy this. So would I me He'll disagree does. think he think tell

viable found companies, volumes that this that primarily We a some business. partnership I do type backed operations that in make a just think and that the installations. we haven't might partner. solar They're generate understand have could with We by of new strategic somewhat well. the strong right it's this They space we have that really been disappointing. partner think

will. So $X rec and profitable. But we never holding the year, million the this the bottom we business. generates of million significant the to term volumes. a eclipse if makes to line. $X think expecting, look type of Maybe Obviously, going adding returns it's that improvement, full paper what another the capital line going be is the It's down it about to initially could know segment potential we what And of to we're again, or is than light. there's business. optimistic home longer lot this It some we for we're

Matthew Howlett

is something This a $X.XX is after something to tax, year? $X.XX or like Or this...

Andrew Murstein

we've I back a could. other in stick think We projections you it up fintech hockey -- projections. It's said, hard people's to Anthony see industry. the lot as of --

that many group, though, shoulders of above the we've this through others and on So the passed year. think, heads is I

So projection gave to coming it they $X if through million us. they models the earnings million easily are $X add that of on could

solid. far, it so looks And pretty

Matthew Howlett

especially be really on you're would terrific, given that absolutely risk. taking no look, credit No,

loans fee. what You said the maybe time, now this some these add book, the And origination of to just you that's it? could but over is

Andrew Murstein

Yes, FICO days, to from of anywhere for we'll XXX-type probably little they're scores, XX so paper, XX a bit quality hold paper all paper. a and a

Matthew Howlett

you Going do talking to deals It more forward, Anything exciting? people? said terms other do side. classes? on asset out had the you think of the with do this? like Are in fintech there, But like seems think of -- you you know is what I some there doing these room other to and companies you some misses bank fintech

Andrew Murstein

kind And the They're that you've the bottom losing just misses not but line. to you're pitch, meaning of aren't it's anything not adding strikeouts. taken money, the

it's well there's here. ROEs, as if in public that XX%, banks a downside exactly you north and they're of So -- of are fee you said, sector, this the north so business, that are XX%. Matt, very little look And other at the

right, So if very business. a it's done profitable

the add next this or so. like Yes, to would on be player another hope year

good as because compliance is, can't here. too have business risk this As grow you you fast

job They -- bank bank to by the a sake for for us, of don't reputation the great kind an just of exceptional with you and adding want stumble regulators. our on So volume. has growth do

potentially very off. it I so or it's prudently. so it the we've start could take been in to now, doing of mature it where kind been they've So years to X And think for point

Anthony Cutrone

Yes.

us, the and with compliance associated there's is that. for think key I cost a

basis jeopardize that XX our not points, able work players just of We're a willing us. might massive, volumes X operate to margin for to on thin amounts on doesn't operate margin. franchise of space be just that this in and where originate to So massive other of to a model

what if to works going issue And is the So do. to we're get it, that, more to can here. -- if look key we and compliance that's open just we partners this and like we're

Matthew Howlett

I got commend clearly ROE moving in to is Look, you. right the mean I direction. the

the things to already really improve the ROE. With just buyback, this like an pretty industry-leading go growth,

you to guys, congratulate work. got and I So the up keep good

Andrew Murstein

Thank you. Appreciate it.

Operator

showing At over Murstein I question-and-answer turn and conference in this remarks. closing Andrew this would our any time, like now queue, does further session. we back for the no to to questioners the conclude are

Andrew Murstein

Each this as for again very us you a We're great has the current this helped performance have and been Thank year of segments of navigate heard. morning. the part joining to our us off just business you start well. of environment

are balancing of excellent teams net Our and value, interest doing delivering credit job an income stock. including while focused our maintaining portfolio and periodic We standards. on of earnings, our dividend growth loan common of shareholder repurchases remain our high

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

Operator

concluded. now may has you disconnect. you for and conference Thank now attending presentation, The today's

Medallion Financial (MFIN) 1 May 242024 Q1 Earnings call transcript