Medallion Financial Corp. Q3 FY2024 earnings call

• Executed well in Q3, delivering $8.6 million net income and $0.37 EPS. Year-to-date net income over $25 million. - Focus on enhanced borrower base, moving to prime/super prime, decreasing subprime. - Fed rate drop beneficial, expected cost of funds to drop enhancing net interest margin. - Rec. Lending: $139M originations, average rate 14.92%. Home Improvement: $814M, 9.76% rate. Commercial: $110M, 13% rate. - Capital allocation: Repurchased $1M of common stock, board increased dividend 10% to $0.11.

Rec. Lending: Had $139 million of new loan originations in Q3, up 50% from Q3 last year, average interest rate as of September 30th was 14.92%. Home Improvement Lending: Grew 8% y-o-y to $814 million, current average rate 9.76%. Commercial Lending: Stable with loan portfolio at $110 million, delivering a comparable average interest rate of nearly 13%.

• Fed rate drop could lead to longer term declining rate trend, good for Medallion. - Expect cost of funds to drop, enhancing net interest margin. - Originations in Rec. Lending strong but Q3 typically lower than Q2. - Dividend increased 10%, share repurchase plan with remaining $15M on $40M plan.

• Uncertainty in economy affecting provision for credit loss. - Fed easing's impact on allowance ratio not direct, but lower rates could help delinquencies. - Seasonality in Q4 and Q1 may affect delinquencies and allowances.

Q: Any non-recurring items in the quarter?

A: Taxi medallion recoveries were a little elevated, $4.1 million of cash collected which increased EPS slightly but nothing significant.

Q: Does the Fed easing or future easing affect the reserve ratio calculation?

A: Allowance ratio is a function of delinquencies and historical loss experience, not so much Fed easing but lower rates could help delinquencies.

Q: Should we expect lower loan yields because going for higher quality client?

A: No, origination levels high, continued to keep new originations at 16-ish% for Rec., and writing home improvement loans at levels above average.

Q: Why was originations in Rec. Lending down sequentially from Q2?

A: Typically Q2 is most active for RV and boat sales, Q3 dips as past peak selling season but still two months of summer.

Q: What's the EPS benefit associated with $4.1 million of taxi medallion collections?

A: $4.1 million translates to about $2.8 million of credits on income statement, benefiting EPS by about $0.08 per share.

Q: What can we expect going forward with dividend and share repurchases?

A: Committed to shareholder return, goal is to increase dividend opportunistically, share repurchase plan has remaining $15M, and goal is to review buying back stock as opportunities arise.

Q: How many fintech partnerships are expected?

A: Goal is probably to add one every 6 months or so, selective with partners to maintain compliance.