MFIN - Earnings call transcript Q2 2024 | Medallion Financial Corp.

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Operator

Good day, and welcome to the Medallion Financial Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ken Cooper, Investor Relations. Please go ahead.

Ken Cooper

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

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

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

Andrew Murstein

morning. quarter. $X.XX million pleased Ken, were with and you, earnings per solid of net good of share. another Thank $X.X We income produced We and

the yields half our shareholders. million our $XX.X net For driven of the earn. the delivered have to year, has and high the portfolio we performance income loan been by of we This first of

quarter. was our lending, segment, at segments, our of Looking Rec originating $XXX loans. had The another million largest than strong highlight more

success of most elevated through passing market have as these rates to Importantly, loans borrowers. continue came rates from interest we to high

XX was up XX Our June basis from average a interest as rate ago. XX.X%, points year of

loans segment the profiles the near-prime in to of In credit addition, prime spectrum. we to individuals originate stronger with continue credit and

Fed $XXX dominated ago. credit we a basis increases current Like super-prime points to of year borrowers quarter segment average our prior Lending borrowers with continues than rate the on to segment, our is rate grew be the Improvement by year Our higher X.XX% segment and Direct passed of at XX now sits This over and some million. have strong scores. Home X%

One, years, This $XXX,XXX testament to an million generating mention continued of like portfolio the of another X a to in quarter, about of and $XXX I'd pleased deploy rate steady X XX% growth two, from shareholders. interest a ago absence had after segment year items. with effectively grew loan average we earnings. briefly other at Lending included our Commercial be XXXX. is and again Our we to XX.XX%. The now the Russell and an capital company; continue to of for performance were is

share During us authorized of $X.X our which we the remaining stock, common on $XX million buyback our million repurchased quarter, $XX.X plan. million left with

current utilized have nearly just of We years XX% the now X buyback ago. plan authorized

to We any on repurchases. future expect share remain opportunistic

call $X.XX the positive with quarter. deliver buyback share turn our results that, performance net I Anthony, over income additional With into will who per will to activity, Our provide some now continues for dividend and together shareholders. our insight to quarter our

Anthony Cutrone

Good Andrew. everyone. you, morning, Thank

increased by costs net and For is from portfolio increased the rates net from our interest quarter, originations, to charged interest year borrowed. first income our expense the $XX.X the driven the quarter. in of interest grew growth result along grew loan X% the million income loan higher recent as larger Growth and by on borrowing a prior offset amounts with X%

quarter. X quarter the was margin quarter, X.XX% basis of basis first net second from on points from XX Our the year loans points last interest gross for the up down and

at for current excess around loans above recreation at in rates XX.XX% average improvement During recreation for an XX.XX%, both in home these rate portfolios. average weighted XX% average and we loans. July in at loans of an quarter, rate XX% and Current coupons average rated of origination home loans the improvement of are

continue we'll so yield in the we process we past being portfolio. of well quarters, funds at we increasing anticipate net portfolio, on will slower several is on have of rise cost will the coupon focused and current margin. plateaus a of our average with that at This rates than above experience do cost our the to our originations been For after with in yield which in to funds. average our experienced our continue We increase coupon that and point our expansion interest loan

to loans we term. million $XX the billion, Total long increased We from to we Titan criteria, loans, loans during million million us year will XX.XX%. outstanding loans. to quarter, constrain credit had of the $XXX During $XXX home a and quarter improvement help the $X.X increasing originated which with continue including of corresponding of maintained ago believe XX% yield losses our recreation and

or the originations as XX XX% ago. X.XX% X.X% of prime our June Consumer portfolio originations. of days our due loans quarter, than And portfolio of were the of XX% were prime total year $X.X in were more to XX, million credits. During $X.X as loan a Recreation or compared Recreation portfolio million past total

Both current $XX.X loans million, of specifically related and growth and a from and loss the quarter's current in an included credit for portfolio, particularly prior roughly the to million included in Our $X consumer of prior benefit benefit quarter quarter loans. quarter $X.X was million related million. $XX.X first medallion year net million for credit prior the the in of to provision recreation quarter. the $X.X taxi year million our in quarter, provision the increase is the $XX.X a

levels this to an The quarters, As earnings. penalty, this immediate we'll other continue business, in reduction our penalty. exacerbates portfolio which than origination to with current the typically growth quarter growth second in continues our stronger causes seasonality experience grow, having

criteria defense XXXX. successful against portfolio million $XX require from earnings from company's term. Operating credit legal in proxy primarily origination ahead, rates, up an expenses and quarter associated million long the current activist at with to current larger quarter due second million the higher of $XX expenses operating fees were looking campaign. should our and we quarter quarter, The the with elevated professional the first were our in up enhance coupled the a during However, $XX.X

believe to businesses. continue costs scale We will continue in in income lending our to net increase our the as growth our any we interest that outpace operating

For the was share diluted elevated to as per shareholders quarter, $X.XX share, growth as and to million $X.XX $X.XX allowances per legal $X.X net consumer which attributable loan per approximately additional or related tied professional the well to related included credit our fees. approximately to share income

results. June year now I $XX.XX Our second net questions. XX $XX.XX happy and covers of are from to Andrew our take ago. as book value share, per up a quarter was your That

Operator

is The ahead. with We begin now and question will from first Northland Grondahl answer session. [Operator Please Instructions] go Mike the question Securities.

Mike Grondahl

your X for RV bit and boat about kind are Could margin and second of credit about improvement, how just also thinking home areas. half you little outlook big those you talk in the growth a --

Anthony Cutrone

Mike, Sure. to to speak you. good

the So peak RV, see to of in somewhat We'll then it August terms and quarter. to those September. XX% quiet. in as in then grew in we and QX. relates origination settle is try begin QX originations largest July is QX our levels And typically to

bit end So blend expect QX to higher around look between of $X.X probably billion, a we little a would $X.X QX, so QX billion, than X. we somewhere We'd little from where more are. a dose in year the the the originations and

its between gets a when time of to it that origination growth about gets the That's Rec. the quarter year really There's And funded X- home these where improvements. home because we QX space actually improvement. X-month is the on in hits when for it improvement, XX% with lag think end larger just to loan the stride. takes approved a I fulfill typically actually

see should bigger we QX. some So growth in

Mike Grondahl

competitive? Got that one. then a then for on of Is of more that. each less down follow-ups gotten credit year-over-year because it. demand you And tightened or more? home And credit kind improvement guys kind of outlook X just Is

Anthony Cutrone

wouldn't gotten been more there. the has improvement Yes. super that say prime it's I Home competitive. with FICOs competitive always

back I little think a held we've bit. it

in the looking we're Obviously, XX% to are right home is of are Rec X/X credit look space. we credit As portfolio good at now our the the how deploying prime originations of to in knows sure improvement. credits side we're perspective, and total a credits that looking from everyone prime. on we're the make grow,

where be QX, our I focusing that we're we pick sure decisions But I there. to cognizant where to So margin said. we think to making that like of our we're in up we're that and expect want yield and do on make is

Mike Grondahl

it. Got

Just credit overall?

Anthony Cutrone

the I think FICO portfolio the was originations term in XXXX we Rec XXX. XXX. for originations, average the average use is optimistic. cautiously months, The X the

different a portfolio than is we this So X years XX and had ago.

Andrew Murstein

of very think, well. Mike, did last I know, that so recently. minus had so, new rating as you any June week, as And or debt a investment-grade offering we And

Operator

is The Christopher next with question Ladenburg Thalmann. Nolan from

Christopher Nolan

decrease to Should in first be the that? quarter. guys inclusion in we the operating expenses quarters expect on to is the Hey guidance Russell. question and on fees. professional going on congratulations coming I guess Congratulations

Anthony Cutrone

Yes.

QX fees $X over It's about million, with legal the proxy in little million million, range. $X the were a in $X So that -- professional and million season. probably somewhere -- elevated $X

think downside affected the $X.XX EPS to that. was I because of by about our

in expect So we wouldn't to that recur QX.

Christopher Nolan

you can the number in I you it a didn't have net quarter, then And release. charge-offs press see in guys Great. the Do provide? hard

Anthony Cutrone

Yes.

But We have charge-offs quarter, it and in X.X taxi. million home in for benefit in yes, in the $XX.X improvement That's have then the on our $XXX,XXX million. rec, a net supplement $XX.X it in a the website. -- we

Christopher Nolan

the in mean your have what of terms industry, question. by Great. work breakdown for work like Final percentage I government? Which percentage Do any that? those you private for things guys of borrowers? employment

Anthony Cutrone

look that, of I metric not a and we the we as at, know don't that that employment. it's type to disclosed particularly

we do have prime would a be credit not the wage All are you their of they lend might lending. than even side, employed. higher borrowers near to plus in a though borrowers, see our typically And on typically usually rec

Christopher Nolan

large higher amount particularly we're federal ask different at in in terms government an employees. of and go a And government I can is debt whether not heavy things lot refinanced, see rates. which or election reason of guys you there's want The be Okay. a employment to government much year, government debt, to to in have a given exposure has directions of that

Andrew Murstein

we fit and that through that category. don't at I would Right. loan believe looked recently few just do. have very applications thinking I we've

Christopher Nolan

Thank much you Great. my very questions. taking for

Andrew Murstein

Chris. Thanks

Operator

is with The Howlett B. next go from Matthew Please question Riley. ahead.

Matthew Howlett

morning Good my question. Anthony and taking Andrew for

Andrew Murstein

Good morning.

Matthew Howlett

here, in outperformance margin quarter. bit little First of a an on look, the the

we're this I they going cuts I quarter, the going mean September. think me federal hear at I you the basis could coupons? from next mean some kind it Anthony to and outlook the lowering to we're now? from But that XXX here it's by think Fed outlook? could rates XXX% your X-year I year? of begin CD where down are here. CD you give funds where just And will go points rates, mean, point, said. go with here, tick really start afternoon might said What's I to have down gaining last

defending You job have done guys a great NIM. the

You strategy going how we're the impact the have one raised in a sector, the Well, this banking you cycle highest is? to change what here is your in coupons. of probably monthly here going and

Anthony Cutrone

Yes.

So X, hovering as of yesterday, short-duration X around X%. they're CDs, months,

to If new out and you then X X we issuances go got years, X.X%. years, are X.X

we you're cut get should So start do come rate is overall cost right, in. hopefully, those The and X.X%. September, the seeing CD in we

anything than changed. don't I point QX. not. basis X we've been think that NIM closer again, definitely So The increase did We the for about We're while benefit. talking has a bottom from of to see compression a

Matthew Howlett

to I'm sorry, what? you're closer then part last the than bottom what was the

Anthony Cutrone

in not definitely being the NIM rates lowering on. we've have we that closer originating don't of any right of bottom the there. We terms about we're feel discussions that now that we're just talking to been that compression And the about Yes. yield,

But I what certain think we're rates. a at to where dictate are. comfortable market the obviously, extent where we we lend and will

Matthew Howlett

great with been Yes, look, next a raising We to look what's cycle tightening here. job cycle and I a forward mean, offsetting here. the rates

Anthony Cutrone

any I -- answer Rec things want can longer points. we XXX, hear the selection. the portfolio? another short get answer looked -- don't this, into is Can adverse and we go And Some of often, because you can think the we that quite to we've we XXX of on basis is you get higher the

now, the be to want with loans coupled typically we don't we're -- credit the that we that with So would getting get funding.

Matthew Howlett

hear I No, Absolutely. you.

On it from life forward you is over the and getting on I the rec harsh used booking exceptional penalty And growth assuming penalty, at is the booking hear get to. up the to probably I'm backing X% really the them how penalty. just what you're more the $X.XX very at these again using growth penalized at just for reserve want out that you'll was or would on all it charge-off something we're make loss you X% rates. assumptions growth. on us just to say trying look loan, U.S. And the of what the by that you're by on recommend

Anthony Cutrone

Yes.

and cost was it So loans. that's $X.X booking -- on the new put million, for it's

it's to got XX%, going grow -- that's portfolio. grow XX% allowance we to the not quarter. we're So each we've book as our

So like XX%. around said probably year-to-date, we're think think I I earlier, I

So where traditional of if you you come with think average the is, up that's quarter's an growth add back. probably a

Matthew Howlett

the and but artificially Look, I that's the conservatism the Right. shareholders. and of all down certainly impacting appreciate I something results earnings Got think you. weighing to benefit it's

Next on just question, just how the you going? any X on did, more deal solar that's update Andy,

Andrew Murstein

well. going It's

flow are for We're I back. area where, of they is -- charging the this think We're We're fee you couple the that. we then us as bought partnership of a for know, days, fintechs and a them. strategic funding loans the many sending getting loans.

-- out a gate. you but long term, a probably of the programs, start think It's slower like it's to a kicking new than when say of potential. of do. thought, It's a it has tire I'd business. we it's great we there's bit I So Usually little lot lot

you're compliance, we great on We've which in strong are have got to make Utah. just a You here. group sure

to the up. then quarter like the the the a they so, should pick cross and is for really teas once then underway usually, eyes do So volume and or program

Matthew Howlett

how type you yield fees, one -- do What probably for get works? fee and little success of a bit, you they yields what got mid-teens or that's probably origination a it get

Andrew Murstein

so. couple to XX range some basis from is the you'll basis be points could a days. loan. have fees here. across from upfront XX% points the up XX% new on to XX or for then now. can partners The We're very And key board of Origination the paper float Again, talking Yes. to compliance

fintechs us seeing the now therefore, time. And but the the that's they gotten of quickly. basically this because also down. because for other year orders them or now of an don't them grew opportunity telling the mistake, to make because over last the not some have too want slow for ourselves going to space regulators are We are in So banks many opportunities X to first consent that we're those

Anthony Cutrone

a selective margins Yes. about with careful. on this, lot partner whole this And of and just we're that's I would just there's of of a to opportunity if the what lot compliance A we in lot space, to type other volume. of razor-thin add, players the want. operate said, for they do key footfall And not Andrew you're

we So that's are. where

Matthew Howlett

on the for and I think We look you announcements book, about forward just forth. buybacks, new to tangible buybacks look The quarter? on possibly the partnerships. $X.XX. the to buying this Last And stock, come how it congratulations in one And intangible think me. update back I book and dynamic at intangible of book new want where was so

Anthony Cutrone

Yes.

$XX.XX. book is value So

because whole and it story of about the just we our metric went as view here book meaningful this with that show how spoken about doesn't on came tangible goodwill. I what think we've in we isn't a something past, the

when an book traditional of And XXX So calculated a adjusted equity, goodwill, or calculation from equity intangible calculate back is what share. out -- we we tangible book common the we do the tangible the assets. we

We intangible back add liability to that that relates $XX tax and also assets. million goodwill specifically a

calculation, when $XXX we with So up that million. go through come you

Matthew Howlett

Okay.

GAAP below below book book? well -- tangible below stock back buying still you're So and still

Anthony Cutrone

Yes. Correct.

Matthew Howlett

assuming to more allocating buybacks, raising a do dividend, I I at the mean there. NAV would more dynamic your like at at look -- lot just XXX. mean the how you to you've capital the opportunities to being a the do you probably book look XX% than look buybacks continue dividend. mean and great of growth, great for you or got more closer you doing I'm value you've I Andrew, between out got

Andrew Murstein

the Yes, shareholders. correct. They're all very for good options

I a growth. very the buying goal and think raising back of a of strong combination eventually in maintaining been is both dividend terms It's stock. and

one it quarter from be annualized but basis. this much, know, not the you is next XX% an As XX% that's to won't --

rec Anthony growth year. probably As said, it's XX% the through

good So have. it's problems all to

the put increased stock? buy more And ROEs goal, again, dividend, our that thankfully, do which super to where into back You X. that be the money -- that would Where year, and we bank more are grow the XX% continue all We that. let do to to able have per or at we've been juggle do high. you to

opportunity So we try blend at do X a that to timing and upon the the the time. of depending

Matthew Howlett

allocator and you've I people the were a knocked mean really mean, getting missing and of been great share capital, think down, keeps it. I count I Look, on Yes.

less You or so. stock or we bought back of lot a

the to the up keep forward look you work quarter. externally good You next and sharing

Andrew Murstein

Matt. much, very Thanks

Operator

We follow-up question a Please Grondahl Northland from with Securities. have Mike go ahead.

Mike Grondahl

X questions follow-up just guys Hey quick.

you it collections. portfolio you out EPS, like of $X.X much the say $X.XX called from quantify a fees you medallion the million $X.XX the Could pressure and growth. that, from But how professional did Anthony? taxi of With was -- benefit,

Anthony Cutrone

Yes.

But So what's tax, balance it's out it's going And collect million it the to comes we're that ongoing. where going sheet It's hitting marked our what and about in is $X.X we is function of $X.XX. view X.X on estimate in net to fair of the a the to and coming think -- I probably wouldn't -- recurring. cash in. income these QX statement assets just similarly of that's -- are a QX be the

an that's say back. wouldn't I add So

run think I rate now. just the that's

Mike Grondahl

enough. enough. Got it. Fair Fair

Anthony Cutrone

add these expect sure those is can we and Yes, I numbers we anything don't we it we understand this fair was significantly we see where think changing. were back. be, at the levels, to higher, last and quantified year, But

Mike Grondahl

to looking call you business? core just level Any seeing? want roughly 'XX, don't the Got guys it. business of of seeing are know, kind I grow to that right anything you're just anything anything know, to $X.XX, And you, I want is talk trends as you in maybe, of your this Or about. off out ahead, for XQ, kind of. driving XQ both $X.XX earnings you're don't you

Andrew Murstein

I'd an $X the off enormous portfolio. amount of say a very increasing the has this of throwing dollars I we've size goal been, plus of of millions hundreds loans mean successfully just off been doing year. billion of It throws have cash. which you

agencies have. don't for September, have Maybe shortly. us, strong and believe will that, is key rate we maintain in but cuts that carried believe knows and once Which the to we credit be spread away the wind many. get when continue larger the we all So the I think, this to rating one of our get kick to quality. an And no with then But where We're points starts is that should only how time. basis of already large going going over that back. happen, have at XXX-plus portfolio and enormous

Operator

This the conference remarks. management would concludes session. any to like question-and-answer turn back to our over I closing the for

Andrew Murstein

morning. this Just wanted again to us for thank everyone joining

As we halfway are I through with pleased mentioned, performance the the year.

value high smart we're we to capital and our the to allocation. delivering standards half, second businesses driving As on focused to going remain move by our delivering shareholder

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

Operator

concluded. for attending now Thank is you today's presentation. conference The

You your now lines. may disconnect Goodbye.

Medallion Financial (MFIN) 31 Jul 242024 Q2 Earnings call transcript