Medallion Financial Corp. (NASDAQ:MFIN) Q1 2024 Earnings Call Transcript

Matthew Howlett: With B. Riley. But first, I got to congratulate you on the buyback, both my congratulations to you for buying, I think, it was almost 0.25 million shares. A question to you, Andrew, is I mean with these — you said that you’ll be opportunistic with the buyback as you get these cash collections in from the medallions. I mean how should we view — how much do you want to execute on that $17 million left in the authorization? Your stocks at a 30% discount to what I — how I calculate tangible book. You’re doing a mid-teens ROE. Clearly, it looks accretive to put money to work for buyback.

Andrew Murstein: I think we’ll get to the full amount eventually. It’s just hard to predict the timing, and I would like to do what we say. So the $40 million that was approved by the Board, as you pointed out, we’re more than halfway through. I’m a fan of buybacks. I think they’re a good use of our capital at the appropriate time. So it’s just hard to predict sometimes. As Anthony just said, the volume looked great in April. So we’ll put more money to use there where the ROEs are so high for us in that rec portfolio. So it’ll be sporadically. With the stock drops where we have extra capital available, I think it’s a good time to jump in the market and pick up cheap stock.

Anthony Cutrone: Yes, I’d echo what Andrew just said, and just to add to that. Again, our loan book, it grew 0.5% in the quarter. Originations look really strong in April. We would expect that growth to be much higher in Q2. So to the extent that we didn’t have to deploy it in growth in Q1, we did have that availability of capital to give back to the shareholders.

Matthew Howlett: Got it. Just remind me again what your ending share count is currently.

Andrew Murstein: We’ll get the exact number. It’s 23 and change.

Anthony Cutrone: 23,377,564.

Matthew Howlett: Okay. Good. Look, you can really work that down. And then certainly, that’s going to be accretive to any buybacks you do to our EPS. So congratulate on that, and I certainly appreciate the loan growth, but buyback makes a lot of sense here at these valuations. Next question on CDs and deposits. Where do you — how far out are you going? I mean it’s higher — people, I think, would generally agree, it’s higher for longer. How far are you going on the CDs? I mean how do you think about the rate cycle here if we start to get some easing next year or late this year?

Anthony Cutrone: Yes, right. 3, 4 months ago, it was a different conversation than today. We were looking at 3 rate cuts. Maybe we get 1 now. I don’t know, I’m not an economist. But typically, we match fund. We’re not to the expected life of our loans. We’re not seeing a significant change. Maybe a few months have been tacked on to that average life that hovers between the 2 consumer products around 36 months, a little higher and a little lower depending upon the product. But we go out, match funded. We’re still issuing 3- and 5-year CDs. Some shorter term, but nothing drastic.

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

Anthony Cutrone: Yes. It’s up a little bit. It’s going to fluctuate. But it’s — we think we’re closer to the top than not. Now that’s going to translate into higher interest expense as we go through the quarter, a little bit more compression in NIM. But I think we’re positioned well just given where we are.

Matthew Howlett: It’s like a pendulum, right? I mean you’ll start to move the other way with the Fed. When the Fed stops or Fed starts easing and your rate — I guess the coupon is coming down or going to be slower than probably than you just on the liability side. I mean in other words, I think about the margin moving back to 9% over time for normalization. Or how to just sort of think about the margin in the next 24 months?

Anthony Cutrone: Yes. Maybe it drops a little bit more. I don’t think there’s any substantial lags down. But then once our costs stop rising, we’ve done a really good job of increasing the yield on our current book and with new originations. That’s just going to continue to — as the older lower-yielding loans roll off, the newer loans become more prominent. I think it’s that pendulum, right? We’re swinging one way. But eventually, we’re going to start expanding that NIM.

Matthew Howlett: Yes, an 8% margin is terrific just by itself. Any improvement, that is just terrific. Okay. Look, we can do the modeling on that. Last question, TriBeam. Talk a little bit about the partnership, what could we put in our — how do we think about modeling it. I mean I’m assuming this is capital light. You’re really putting up no capital. You’re getting some origination for your success fees. And how many more of these could you do?

Anthony Cutrone: Yes. So I think — I don’t think Andy would disagree with this. He’ll tell me if he does. I think the strategic partnership operations have been somewhat disappointing. We just haven’t found that right partner that could generate the type of volumes that make this a viable business. We think we might have that with this new partner. They’re backed by some strong companies, and it’s in a space that we understand really well. They do primarily solar installations. So we know the business. It’s home improvement, and there’s a lot of potential for significant volumes. It is capital light. Maybe we look down the line to holding some of the paper longer term than what we initially will. But we’re optimistic that this is going to be what makes this segment profitable.

And again, full year, if it generates the type of returns we’re expecting, we could think about adding another $1 million or $2 million to the bottom line. Obviously, it’s never going to eclipse the rec business.

Matthew Howlett: This is after tax, something like $0.05 to $0.10 or something a year or is this —

Andrew Murstein: I think it could. It’s hard to back up other people’s projections. We — as Anthony said, we’ve — you see a lot of hockey stick projections in the fintech industry. So this group, though, I think, is heads and shoulders above many of the others that we’ve passed on through the year. So it easily could add $1 million to $2 million of earnings if they are coming through on the projection models that they gave us. And so far, it looks pretty solid.