Yahoo Finance Medallion Financial Corp (MFIN) Q1 2024 Earnings Call Transcript Highlights: Diverse Growth and ...
Loan Portfolio Growth: Recreational lending segment at $1.4 billion, up 4% year-over-year.
Average Interest Rate: Recreational lending at 14.80%, home improvement lending at 9.60%.
Allowance for Credit Loss: Recreational lending at 4.40%, home improvement lending at 2.38%.
Commercial Lending Portfolio: Increased 12% to $106 million.
Net Gain from Equity Investment Exit: $4.2 million in commercial lending.
Taxi Medallion Segment Income: $600,000 after-tax net income.
Share Buyback: $2.1 million of common stock, with $17.9 million remaining authorized.
Net Interest Income: Grew 10% to $47.9 million.
Net Interest Margin: 8.1%, down 32 basis points year-over-year.
Total Loans Outstanding: Increased 12% to $2.2 billion.
Provision for Credit Loss: $17.2 million for the quarter.
Operating Expense: $18.2 million, down from $18.4 million year-over-year.
Net Income: $10 million or $0.42 per diluted share.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Medallion Financial Corp (NASDAQ:MFIN) reported a 10% growth in net interest income to $47.9 million, driven by increased interest rates on new loan originations and growth in the loan portfolio.
The recreational lending segment had a standout quarter with a portfolio now valued at $1.4 billion, showing a 4% increase in originations compared to the previous year.
The home improvement lending segment grew approximately 12% over the prior year quarter to $752 million, focusing on super-prime borrowers which keeps delinquency and loss levels low.
Commercial lending segment showed strong performance including a $4.2 million net gain from an equity investment exit.
Medallion Financial Corp (NASDAQ:MFIN) strategically used excess cash to buy back $2.1 million of common stock, with $17.9 million remaining in the authorized share buyback plan.
Negative Points
Net interest margin on gross loans decreased by 32 basis points from the first quarter of the previous year, indicating some pressure on profitability.
The provision for credit loss was significantly higher at $17.2 million for the quarter compared to $4.0 million in the prior year quarter, driven by higher charge-off activity and lower Taxi Medallion recoveries.
Despite growth, there was a noted slowdown in the home improvement lending segment's origination activity due to credit tightening.
The Taxi Medallion segment, although profitable, is expected to see a sizable slowdown in cash collections, which could impact future revenue.
There is ongoing uncertainty in the economy, leading to tighter credit criteria which could restrict growth opportunities in the near term.
Q & A Highlights
Q: Anthony, have you guys do you know what the non-performing loan volumes are in the quarter? A: Anthony Cutrone, CFO of Medallion Financial Corp, responded that the non-performing loans amounted to $6.4 million, with $1.4 million in home improvement. He noted that this figure is typical seasonally, as the first quarter often sees higher numbers.
Q: And then have you guys sort of heard any flexibility from regulators in terms of reserving? A: Anthony Cutrone explained that their reserving and allowance model is based on historical losses and economic factors, not on regulatory desires, indicating no flexibility from regulators regarding reserving.
Q: Any plans to boost direct capital ratios at all or even continue to run into similar capital ratios? A: Anthony Cutrone mentioned that their capital ratio at the end of the quarter was 16.4%, comfortably above the 15% required by Medallion Bank, indicating no immediate need to boost capital ratios.
Q: The net interest income dropped sequentially about a little over $1 million. What drove this and how are you thinking about this line item as we progress into 2Q and into the back half of the year? A: Anthony Cutrone attributed the drop in net interest income to a slight increase in total loans and a rise in cost of funds. He expressed optimism that this trend would not continue, expecting stronger loan originations and increasing net interest income starting in Q2.
Q: Can you touch on the month of April as far as originations and credit and any sort of trends you saw in the month of April? A: Anthony Cutrone reported strong loan originations in April, with $100 million in loans originated, 80% of which were in the recreational segment. He highlighted that the rates on these originations were consistent with those in Q1, and he expects these trends to continue into Q2.
Q: With the buyback, how should we view how much and how much do you want to execute on that $17 million left on the authorization? A: Andrew Murstein, President & COO, expressed intent to fully utilize the $40 million buyback authorization approved by the Board, though he noted that the timing is hard to predict. He emphasized that buybacks are considered a good use of capital when conditions are favorable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
