Q1 2025 Medallion Financial Corp Earnings Call
Operator: Good day and welcome to Medallion Financial Corp 4th Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good day, and welcome to Medallion Financial Corp, fourth quarter earnings Conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by veto.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star, then. Please note that this event is being recorded.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you might breast Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note that this event is being recorded.
Ken Cooper: I would now like to turn the conference over to Ken Cooper with Industrial Relations. Please go ahead. Thank you and good morning.
I would now like to turn the conference over to Ken Cooper with Investor Relations. Please go ahead.
Thank you and good morning, welcome to medallion financial Corp's first quarter earnings call. Joining me today are Andrew Bernstein, President and Chief operating officer, and ethnic patrolling executive Vice President and Chief Financial Officer certain statements made during the call today constitute forward looking statements made pursuant to and within the meaning of the safe Harbor provisions of the private.
Ken Cooper: Welcome to Medallion Financial Corp's first quarter earnings call. Joining me today are Andrew Murstein, President and Chief Operating Officer, and Anthony Cutrone, Executive Vice President and Chief Financial Officer.
Ken Cooper: Certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our earnings press release issued yesterday and in our filings with the SEC.
Securities Litigation Reform Act of 1995 as amended such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our earnings press release issued yesterday and in our filings with the SEC.
Ken Cooper: The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements.
Forward looking statements made today are as of the date of this call and we do not undertake any obligation to update these forward looking statements.
Ken Cooper: In addition to our earnings press release, you can find our first-quarter supplement presentation on our website by visiting Medallion.com by clicking Investor Relations. The presentation is near the top of the page.
In addition to our earnings press release, you can find our first quarter supplement presentation on our website by visiting medallion dot com by clicking on Investor Relations. The presentation is near the top of the page with that I'll turn it over to Andrew.
Andrew Murstein: With that, I'll turn it over to Andrew. Thank you, Ken, and good morning, everyone. We had a very strong start to the year with all aspects of our company contributing to the delivery of 12 million dollars of net income and 50 cents of earnings per share for our shareholders. I'll start with our largest and most profitable segment, our consumer lending business. It had solid origination activity of $136 million for the quarter, and we maintained a healthy $2.4 billion loan book. What is most pleasing is that we are originating loans to individuals in these niches that have strong credit quality.
Andrew Bernstein: Thank you Ken and good morning, everyone. We had a very strong start to the year with all aspects of our company contributing to the delivery of $12 million of net income and 50 cents of earnings per share for our shareholders.
Andrew Bernstein: I'll start with our largest and most profitable segment, our consumer lending business.
Andrew Bernstein: Solid origination activity of $136 million for the quarter and we maintained a healthy 2.4 billion dollar loan book.
Andrew Bernstein: What is most pleasing is that we are originating loans to individuals in these niches that have strong credit quality average by goes at origination are now 685 for Iraq and 781 for home improvement the vast majority of our book falls within Super Prime to near Prime which has moved up over.
Andrew Murstein: Average FICOs at origination are now $685 for REC and $781 for home improvement. The vast majority of our book falls within super prime to near prime, which has moved up over the years.
Andrew Bernstein: The years.
Andrew Murstein: Commercial had two nice wins to start the year. First, that division originated new and follow-on loans totaling $9.7 million and exited one loan and the related equity investment.
Andrew Bernstein: Commercial had two nice wins to start the year.
Andrew Bernstein: First that division originated new and follow on loans totaling $9 7 million and exited one loan and the related equity investments.
Andrew Murstein: This exit is a perfect example of how this mezzanine business works. Back in September of 2022, we performed due diligence on a manufacturer and installer of metal canopies used at gas stations and quick service restaurants. We ended up writing a $4.5 million loan at 12% interest and made a $750,000 equity investment in the business. Fast forward to February 2025, when the company was acquired by a strategic buyer at a healthy premium. We not only received full payment on the loan, but received more than $10 million for our investment.
Andrew Bernstein: This exit is a perfect example of how this mezzanine business works.
Andrew Bernstein: Back in September of 2022 we performed due diligence and a manufacturer and installer of metal canopies used a gas station and quick service restaurants, we.
Andrew Bernstein: We ended up writing a $4.5 million loan at 12% interest and made a 750000 dollar equity investment in the business.
Andrew Bernstein: Fast forward to February 2025, when the company was acquired by a strategic buyer at a healthy premium.
Andrew Bernstein: We not only we see a full payment on the loan, but we see more than $10 million for our investment.
Andrew Murstein: To this end, as of March 31st, we had more than 30 equity investments with a book value of $9 million on our balance sheet. These equity investments are nearly all tied to our commercial lending business. The exact timing of any exit is not predictable, and not every investment we make will share the same return as our most recent exit, but we have built a strong track record over the past decade of consistently adding gains to our financial performance through this business model.
Andrew Bernstein: To this end as of March 31, we had more than 30 equity investments with a book value of $9 million on our balance sheet.
Andrew Bernstein: These equity investments are nearly all tied to our commercial lending business.
Andrew Bernstein: Exact timing of any exit is not predictable and not every investment we make will share the same return as our most recent exit but we have built a strong track record over the past decade, I've consistently adding games to our financial performance through this business model.
Andrew Murstein: Our taxing medallion business was stable this quarter. We collected $2.6 million of cash, which was the same as it was in the fourth quarter. We believe there is staying power to collect this level of cash for some time.
Andrew Bernstein: Or a taxi medallion business was stable this quarter, we collected $2 $6 million of cash which was the same as it was in the fourth quarter.
Andrew Bernstein: We believe there is staying power to collect this level of cash for some time.
Andrew Murstein: Although our net Medallion assets are insignificant at this point, they continue to generate meaningful cash. With more than $100 million of charged-off Medallion loans, mostly in New York City, we believe this represents additional recovery opportunity.
Andrew Bernstein: Although our net medallion assets are insignificant at this point they continue to generate meaningful cash.
With more than $100 million of charged off medallion loans, mostly in New York City. We believe this represents additional recovery opportunities.
Andrew Murstein: Our strategic partnership program had a second straight quarter of over $125 million of origination. This is great progress on this business whereby we earned an origination fee and about three to five days of interest on holding loans before selling them back to the partner.
Andrew Bernstein: Our strategic partnership program had its second straight quarter of over $125 million of originations.
Andrew Bernstein: This is great progress on this business, whereby we earn an origination fee and about three to five days of interest on holding loans before selling them back to the partner.
Andrew Murstein: Virtually all of these loans are outside of our rec and home improvement and offers further diversification. This includes loans offered as employee benefits by large employers and loans for unplanned or elective medical procedures. We continue to do work on our growing pipeline of new partner prospects and expect to add new partners over time.
Andrew Bernstein: Virtually all of these loans are outside of our Rec and home improvement and office further diversification.
Andrew Bernstein: This includes loans offered as employee benefits by large employers are loans for unplanned or elective medical procedures.
Andrew Bernstein: We continue to do work on our growing pipeline of new partner prospects and expect to add new partners over time.
Andrew Murstein: Furthermore, we are taking a very methodical approach to growth to ensure we continue to do it the right way.
Andrew Bernstein: Furthermore, we are taking a very methodical approach to growth to ensure we continue to do it the right way.
Andrew Murstein: Finally, we had a good quarter related to capital allocation. We bought back about 60,000 shares of our stock, and have nearly $15 million left under our share repurchase plan. In addition, we paid an $0.11 dividend to our shareholders in the quarter.
Andrew Bernstein: Finally, we had a good quarter related to capital allocation, we bought back about 60000 shares of our stock and have nearly 15 million left under our share repurchase plan. In addition, we paid 11 cent dividend to our shareholders in the quarter subsequent to the quarter Our board approved a nine per.
Andrew Murstein: Subsequent to the quarter, our board approved a 9% increase to the quarterly dividend, the $0.12 per share, the third increase to our dividend since we reinstated it three years ago.
Andrew Bernstein: <unk> increase to the quarterly dividend at <unk> 12 per share the third increase story dividends since we reinstated it three years ago.
Anthony Cutrone: With that, I will now turn the call over to Anthony, who will provide some additional insight into our quarter. Thank you, Andrew. Good morning, everyone. For the quarter, net interest income grew 7% to $51.4 million from a year ago and was consistent with the prior quarter. Our net interest margin on gross loans was 7.94% for the quarter, up 10 basis points from the fourth quarter, and down 16 basis points from a year ago. with a decrease overwhelmingly attributable to our cost of funds, increasing 49 basis points to 4.16% from the prior year. Our interest yield increased 31 basis points from a year ago to 11.65%, and the average interest rate on our deposits was 3.75% at the end of March.
Anthony: With that I will now turn the call over to Anthony who will provide some additional insight into our quarter.
Anthony: Thank you Andrew good morning, everyone.
Anthony: For the quarter net interest income grew 7% to 51 $4 million from a year ago and was consistent with the prior year quarter.
Anthony: Our net interest margin on gross loans was 7.94% for the quarter up 10 basis points from the fourth quarter and down 16 basis points from a year ago.
Anthony: With the decrease overwhelmingly attributable to our cost of funds, increasing 49 basis points to 4.16% from the prior year Irene.
Anthony: Our interest yield increased 31 basis points from a year ago to 11.65% and the average interest rate on our deposits was 375% at the end of March.
Anthony Cutrone: During the first quarter, we originated $86.8 million of recreation loans at an average rate of 16.06%. $48.8 million of home improvement loans at an average rate of $11.5 million. continue to originate both recreation and home improvement loans at rates above our current weighted average coupon in these portfolios. with new originations in April at rates around 15.5% for REC loans and 11.5% for home improvement loans. with the rate change in recreation loans tied to a stronger average credit from new borrowers. Total loans outstanding were $2.5 billion, increasing 12% from a year ago, and included both loans held for investment and loans held for sale.
Anthony: During the first quarter, we originated $86 $8 million of recreation loans at an average rate of 16.0% to 6% and $48 $8 million of home improvement loans at an average rate of 11.5%.
Anthony: We continue to originate both recreation and home improvement loans at rates above our current weighted average coupon in these portfolios with new originations in April at rates around 15, 5% for Rec loans and 11, 5% for home improvement loans with the rate change in recreation loans tied to a stronger average.
Anthony: Credit from new borrowers.
Anthony: Total loans outstanding were 2.5 billion, increasing 12% from a year ago and included both loans held for investment and loans held for sale.
Anthony Cutrone: Total loans included $1.5 billion of recreation loans, $812 million of home improvement loans, and $116 million of commercial loans. For the quarter, the average yield on our loan portfolio increased 20 basis points from a year ago to 12.04%.
Anthony: Total loans included $1.5 billion of recreation loans $812 million of home improvement loans and $116 million of commercial loans.
Anthony: For the quarter the average yield on our loan portfolio increased 20 basis points from a year ago to 12.0% to 4%.
Anthony Cutrone: Consumer loans more than 90 days past due were $8.7 million, or 0.37% of total consumer loans as compared to $11.4 million, or 0.49% at the end of 2024, and $7.7 million point three seven percent a year ago Provision for credit loss was $22 million for the quarter, an increase from the $20.6 million in the fourth quarter and $17.2 million in the prior year. During the quarter, we increased the allowance for credit loss in the commercial loan portfolio by 3.1%. We increased the allowance for credit loss on our consumer loans, given both seasonality and economic uncertainties, which resulted in an additional provision of $1.4 million.
Anthony: Consumer loans more than 90 days past due were $8 $7 million or three 7% of total consumer loans as compared to $11.4 million or four 9% at the end of 'twenty 'twenty, four and $7 7 million.
Anthony: 0.37% a year ago.
Anthony: Our provision for credit loss was $22 million for the quarter, an increase from the $26 million in the fourth quarter and $17 2 million in the prior year quarter.
Anthony: During the quarter, we increased the allowance for credit loss in the commercial loan portfolio by $3 1 million.
Anthony: We increased the allowance for credit loss on our consumer loans, given both seasonality and economic uncertainties, which resulted in an additional provision of 1.4 million $1 2 million related to recreation loans and $200000 tied to home improvement loans.
Anthony Cutrone: $1.2 million related to recreation loans and $200,000 tied to home improvement. In addition, the current quarter provision included 800,000 benefit related to tax Total net benefits related to taxing medallions during the quarter were $1.7 million. Net charge-offs in the recreation portfolio during the quarter were $16.4 million or 4.67 percent of the average portfolio and were $3.1 million or 1.55 percent of the average home improvement portfolio.
Anthony: In addition, the current quarter provision included 800000.
Anthony: Of a benefit related to taxi medallions.
Anthony: Total net benefits related to taxi medallions during the quarter were $1.7 million.
Anthony: Net charge offs in our recreation portfolio during the quarter were $16 $4 million or 4.67% of the average portfolio and were $3 $1 million or 1.55% of the average home improvement portfolio.
Anthony Cutrone: Operating expenses were $20.8 million during the quarter, up from $18.2 million in the prior year quarter. The increase over the prior year included costs associated with technological initiatives surrounding our servicing platform and capabilities.
Anthony: Operating expenses were $20 8 million during the quarter up from $18 2 million in the prior year quarter. The increase over the prior year included cost associated with technological initiatives surrounding our servicing platform and capabilities. These initiatives will allow for greater flexibility in the servicing of our.
Anthony Cutrone: These initiatives will allow for greater flexibility in the servicing of our consumer loans with a fair amount of self-service tools, which we believe will add to an improved customer experience and greater efficiency long-term. These costs are expected to remain elevated in comparison to prior years as we continue to expand our capabilities and incur the costs of the customized platform. Employee costs increased roughly $500,000 both as a function of retaining talent as well as enhancing our talent pool.
Anthony: Consumer loans with a fair amount of self service tools, which we believe will edge when improved customer experience and greater efficiency long term.
Anthony: These costs are expected to remain elevated in comparison to prior years as we continue to expand our capabilities and incur the cost of the customized platform.
Anthony: Employee costs increased roughly 500000, both as a function of retaining talent as well as enhancing our talent pool.
Anthony Cutrone: Additionally, legal costs increased $700,000 over the prior year quarter for a variety of corporate and proxy-related matters.
Anthony: Additionally, legal costs increased 700000 over the prior year quarter for a variety of corporate and proxy related matters.
Anthony Cutrone: For the quarter, net income attributable to our shareholders was $12 million, or 50 cents per share.
Anthony: For the quarter net income attributable to our shareholders was $12 million or <unk> 50 per share our net book value per share as of March 31 was $16.36 up from $16 in the prior quarter and $14.93 a year ago, our adjusted book value per share.
Anthony Cutrone: Our net book value per share as of March 31st was $16.36, up from $16 in the prior quarter and $14.93 a year ago. adjusted book value per share, which excludes the value of goodwill, intangible assets, and the correlated deferred tax liability associated with both. $10.90 at the end of the quarter, up from $10.50 a quarter ago and $9.45 a year ago.
Anthony: <unk>, which excludes the value of goodwill intangible assets and the correlated deferred tax liability associated with both was $10.90 at the end of the quarter up from $10.50, a quarter ago and $9.45 a year ago.
Anthony: That covers our first quarter results, Andrew and I are now happy to take your questions.
Operator: Andrew and I are now happy to take your questions. We are now moving to the question and answer session.
Anthony: Okay.
Anthony: Thank you.
Anthony: Okay.
Anthony: We are now moving to the question and answer session.
Anthony: Okay.
Christopher Nolan: Our first question. comes from Christopher Nolan from Lattinburg, Thalman. Please go ahead. Hey, guys, Anthony, we're there. Hey, Chris, how you doing? Um, yeah, so it's, um, you know, our, our professional fees were a little elevated, compared to prior quarters.
Anthony: Our first question.
Christopher Nolan: Comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead.
Christopher Nolan: Hey, guys.
Speaker Change: If any were there any nonrecurring expense items aside from the ones that you highlighted just now.
Chris: Hey, Chris How're you doing.
Chris: Yes, so it's.
Speaker Change: Professional fees were a little elevated.
Speaker Change: Compared to prior quarters.
Anthony Cutrone: So there was about $300,000 of technology costs that I had mentioned, they're going to be recurring, that relates to our servicing platform. And then there was about $600,000 of costs, you know, related to our, our upcoming, you know, annual meeting and our proxy season. but nothing related. No, no, those costs were essentially zero.
Speaker Change: So there was about $300000 of technology costs that I had mentioned they are going to be recurring.
Speaker Change: That relates to our servicing platform.
Speaker Change: And then there was about $600000 of costs related to our our upcoming annual meeting and our proxy season.
Speaker Change: Okay, but nothing related to the SEC matter or anything.
Speaker Change: No no those costs were essentially zero.
Speaker Change: Okay, and then Andrew any update you can give us on the SEC matter.
Andrew Murstein: Andrew, any update you can give us on the SEC? We stated a few weeks ago that we believe the matter has been resolved. It's still conditional upon board approval of the SEC and the judge signing off. And we think we should have an update at that very soon, probably in the next week or so. But as you know, from the fourth quarter, we booked the penalty at that time with an offsetting insurance reimbursement for related matters, and hopefully it is now fully behind us.
Speaker Change: Yeah.
Speaker Change: We stated a few weeks ago that we.
Speaker Change: We believe the matter has been resolved as still.
Speaker Change: Conditional upon.
Speaker Change: Board approval of the FCC and the judge signing off.
Speaker Change: And we think we should have an update on that.
Speaker Change: Very soon probably in the next week or so but.
Speaker Change: As you know from the fourth quarter, we are we booked the penalty at that time with an offsetting insurance reimbursement for related matters and hopefully it is now fully behind us.
Anthony Cutrone: And then, I guess, two questions. What sort of latitude do you guys have in building reserves? You know, it's not necessarily a regulator issue. We do have flexibility to use judgment in determining those allowances, and we did that to some extent in Q1 using some qualitative factors, increasing the consumer provisions. You know, it was $1.4 million, $1.2 on the REC, and $200,000 for home improvement. So we do have that flexibility. If we're concerned about something, you know, that we're seeing that just isn't being reflected in the quantitative calculations we're putting together, we'll make sure to include that.
Speaker Change: Okay, and then I guess to question two more questions, one what sort of who latitude you guys have been building reserves allowance reserves.
Speaker Change: Is it still strictly formula based on seasonal or are the regulators give me a little bit more flexibility.
Speaker Change: Yeah no we.
Speaker Change: It's not necessarily a regulator issue, we do have flexibility to use judgment and determining knows those allowances.
Speaker Change: And we did we did that to some extent in in Q1.
Using some qualitative factors.
Speaker Change: Increasing the consumer provisions.
Speaker Change: It was $1 $4 million 1.2 on the rack and and 200000 for home improvement. So we do have that flexibility. If we if we're concerned about something you know that we're seeing that just isn't being reflected in.
Speaker Change: The quantitative calculations were putting together will we will make sure to include that.
Christopher Nolan: and a I appreciate the detail.
Speaker Change: Great and then.
Speaker Change: I guess.
Speaker Change: The growth capital initiative, which I appreciate the detail on that.
Christopher Nolan: Are there any sort of realizations that you see on the horizon for the rest of the year? Can you just expand on that? I'm not sure I follow the question.
Speaker Change: Are there any sort of realizations that you see on the horizon for the rest of the year.
Speaker Change: Yes.
Speaker Change: Can you just expand on that I'm not sure I follow the question should we or should we be anticipating any further capital gains on from medallion capital for the rest of the year.
Christopher Nolan: Yeah, should we be anticipating any further capital gains from Medallion Capital for the rest of the year? Yeah, so, um, you know... We never know the timing. The past, it's called, you know, four or five quarters, they've almost been consistent. And we've seen, you know, a number of these large gains. We would expect to see, you know, maybe one or two more this year. We're not sure if it's going to be a Q2, three or four event. But we are hearing that, you know, there are some portfolio companies that are looking to, you know, sell.
Speaker Change: Yeah. So.
Speaker Change: We never know the timing.
Speaker Change: Doug lets call it four or five quarters.
Speaker Change: They have almost been consistent than we've seen.
Speaker Change: Number of these large gains we would expect to see you know maybe one or two more this year.
Speaker Change: We're not sure if it's going to be a Q2, three or four event, but but we are hearing that there are some portfolio companies that are looking to sell.
Speaker Change: After that.
Andrew Murstein: After that, you know, we've got 30 investments in these. And, you know, they range in size from, you know, on the books, you know, some of them are a half a million bucks of invested capital. The others are, you know, insignificant. We would expect these gains to continue, but the timing is hard to predict.
Speaker Change: We've got we've got 30 investments in these and they range in size from you know on the books.
Some of them or a half a million bucks of invested capital that others are.
Speaker Change: Insignificant.
Speaker Change: We would expect these gains to continue but the timing is hard to predict.
Christopher Nolan: Okay, and then these things sit at the holding company so they don't really... They're at our SBIC Medallion Capital, but they are outside of the bank, to your point, so they don't affect the ratios, correct?
Speaker Change: Okay and then these things at the holding company. So they don't really affect the bank ratios right.
Speaker Change: Oh, well that they were out of our SB IC medallion capital, but they are outside of the bank.
Speaker Change: To your point, so they don't affect the ratios correct. Okay. That's it for me thanks guys.
Christopher Nolan: Okay, that's it for me. Thanks, guys. Thank you.
Speaker Change: Thank you thanks Craig.
Speaker Change: Thank you.
Mike Grondahl: Our next question comes from Mike Grondahl from Northland Securities. Please go ahead. Hey guys, thanks and congrats on the monetization out of that Mez book.
Speaker Change: Our next question comes from Mike Grondahl from Northland Securities. Please go ahead.
Speaker Change: Hey, guys, thanks, and congrats on the monetization.
Out of that Mezz book.
Anthony Cutrone: Hey, Anthony, maybe start with you. I'm trying to think about normal life. I think on the positive side, you had the 9.4 And then did you say a $1.7 million benefit from collecting? Written off Caxi Medallion And I think that was maybe offset by What is it, $600,000 of proxy expense and maybe a couple hundred thousand tech? Is that the right way to kind of get back to normal? Yeah, you know, we're hesitant to say that the equity gains aren't, you know, quarter war business. But, but I understand, you know, you can't, we can't project these and know when they're going to fall.
Anthony: Hey, Anthony maybe start with you.
Speaker Change: Trying to think about normalized earnings.
Speaker Change: On the positive side, you had the $9 4 million gain and then did you say a 1.7 million benefit from collecting some written off taxi medallions.
Speaker Change: And I think that was maybe offset by.
What is it 600000 of proxy expense and maybe a couple of hundred thousand Tech expense is that the right way to kind of get back to normalized.
Speaker Change: Yeah, you know we.
Speaker Change: We're we're hesitant to say that the equity gains arent quarter water business, but I understand you know you can.
Speaker Change: We can project these and know when theyre going to fall.
Anthony Cutrone: So, yeah, I mean, if you wanted to pull that out, you know, one of the things I'd say is that in our commercial provision, we had $3.1 million of allowance that we took, you know, that We don't expect that to be every quarter that was, you know, some of it tied to tariffs, some of it tied to, you know, what the future economic outlooks look like for some of these, you know, smaller enterprises that we invest with and in. So, you know, maybe that's not recurring if you're going to take the gains out, you know, maybe take that out.
Speaker Change: Yes, I mean, if you wanted to pull that out one of the things I would say is that there are no commercial provision, we had $3 $1 million of allowance that we took.
Speaker Change: We don't expect that to be every quarter that was you know some of it's tied to tariffs some of it tied to you know with the few correct future economic outlooks look like for some of these smaller enterprises that we invest with an N.
Speaker Change: So maybe that's not recurring if you're going to take the gains out maybe you take that out.
Mike Grondahl: And then, you know, on the cost side, it's the proxy costs as well as you know, one, you know, additional allowances on the consumer that, you know, we, it's just us being our closet once more. Yeah. So I think when you when you, you know, if you net all that out, the 50 cents goes to somewhere around, you know, 35.
Speaker Change: Okay Yeah.
Speaker Change: And then on the cost side. It was the it's the proxy costs as well as.
Speaker Change: One.
Speaker Change: Additional allowances on the consumer that you know, it's just us being pocket one for yes. So I think when you when you.
Speaker Change: Net all that out the 50 <unk> goes to somewhere around 35.
Mike Grondahl: got it got it yeah and hey I know you have those mezz gains from time to time but it is hard to model and so I'm just trying to strip that out a little bit And then you still have $124 million in loans held for sale.
Speaker Change: Got it got it yeah, and Hey, I know you have those mezz gains from time to time, but it is hard to model and so I'm just trying to strip that out a little bit.
Speaker Change: You still have 124 million of loans held for sale.
Anthony Cutrone: Is any sense of the timing there and what that gain may look like? Yeah, so, um, you know, we expect, you know, uh, to have a loan sale, you know, close, uh, in Q2, it won't be the full amount. Uh, it'll, it'll be, you know, roughly half of that. And then we're talking about another loan sale for, uh, about the balance, um, uh, later in, um, in Q3 or the beginning of Q4. You know, and, you know, from a gain perspective that, you know, I think that the current the current sale that we're, you know, we're looking to close is, I think it's, it's a 5% premium to par, so it should roughly result in a, you know, a two, two and a half percent, you know, gain when when you factor in all the deferred costs and things.
Any sense of the timing there.
Speaker Change: What that gain may look like.
Speaker Change: Yeah. So we expect you know what.
Speaker Change: To have a loan sale close.
Speaker Change: In Q2 it.
Speaker Change: It won't be the full amount.
Speaker Change: It'll be roughly half of that and then we're talking about another loan sale for.
Speaker Change: About the balance.
Speaker Change: Later in in Q3 or the beginning of Q4.
Speaker Change: Okay.
Speaker Change: And from a gain perspective.
Speaker Change: I think that the current the current sale that we're looking to close as I.
Speaker Change: I think it's it's a 5% premium to par so it should roughly resulted in you know what.
Speaker Change: Two 2.5% gain when when you factor in all the deferred costs and things.
Andrew Murstein: Yeah, that was nice, by the way, that there's strong interest in those loans and, uh, the 105 price, uh... is a fair price but also a strong price for us in that it, you know, shows the quality of loans that we're producing there.
Speaker Change: Yeah that that was a nice by the way that there is strong interest in those loans and.
Speaker Change: The 105 price.
Speaker Change: As a fair price, but also a strong price for us and that shows the quality of loans that we're producing there.
Mike Grondahl: That may have, that's really imminent if... So we're expecting that in this month, actually. Got it.
Speaker Change: That may have a that's that's really imminent if if.
Speaker Change: So we're expecting that in this month actually.
Speaker Change: Got it got it and then on the strategic partnership that loan volume of 136 million.
Mike Grondahl: And then, hey, on the strategic partnership, that loan volume, $136 million. Andrew, I think you said employee benefits related stuff.
Speaker Change:
Speaker Change: Andrew I think you said employee benefits related stuff and elective medical procedures.
Andrew Murstein: Medical Procedures Any other categories that you're doing this in, or are those the two main ones? And then, what's the origination fee? We've got four or five partners now with several... Discussions underway. We've been very selective with the groups. We could have probably taken in a lot more than that. But for example, other banks are taking in partners that are writing loans north of 36%. We've stayed away from that. But they're all in similar industries, just by coincidence, or related industries. It could be any industry that we take in a partner in the future, but so far, a lot of them are in that area.
Speaker Change: Any other categories that youre doing this in or are those the two main ones and then what's the origination fee you make.
Speaker Change: We've got four or five partners now with several.
Speaker Change: Discussions are underway, we've been very selective with the groups, we could have probably taken in a lot more than that but for example.
Speaker Change: Other banks are taking and partners that are writing loans north of 36% we've stayed away from that so.
Speaker Change: But they're all in similar industries, just by coincidence or related industries. It could be any industry that we've taken important in the future, but so far a lot of them.
Speaker Change: That area fees range anywhere from.
Andrew Murstein: Fees range anywhere from 15 basis points to 65 basis points, depending upon loan volume and minimums and other factors. got it.
Speaker Change: 15 basis points to 65 basis points, depending upon loan volume in minimums and other factors.
Andrew Murstein: In I do. The hope is that we even increase that further. We're kind of starting to gain steam there. It took us a couple of years to get up and running. And we're in a good position now where some of our competitors, and I've mentioned this before, have grown too fast and have stumbled a bit and they get consent orders. And therefore, a lot of these customers are coming to us now. So thankfully, we really have our picking of who to do business with.
Speaker Change: Got it.
Speaker Change: Do you see that volume.
Speaker Change: It's been durable 100 million plus a quarter.
Speaker Change: I do and you know, but the hope is that we even increase that further.
Speaker Change: We're kind of starting to gain steam there took us a couple of years to get up and running and we're in a good position now where some of our competitors and I've mentioned this before.
Speaker Change: Growing too fast and have stumbled a bit and they get consent orders and therefore, a lot of these customers are coming to US now. So we thankfully, we'd really have are picking of who to do business with.
Mike Grondahl: and maybe'm.
Speaker Change: Cool.
Anthony: And maybe Anthony.
Speaker Change: Rough outlook on margins.
Speaker Change: Total loan growth kind of for the rest of the year.
Mike Grondahl: Um, if margins were up 10 bases...
Margins were up 10 basis points sequentially kind of.
Anthony Cutrone: What are you thinking about there and then just overall? So I think the 10 basis point increase from the last quarter, a lot of that, you know, we had some loans that went on nonaccrual and we backed out some interest in Q4. So that's why Q4 was a little lower than we had anticipated and expected. But you know, we think that the margin, you know, it's going to stick around here. We don't see a significant amount of downside from where we are. You know, a couple of basis points, we're going to fluctuate. I think we stay around here longer than we initially anticipated.
Speaker Change: What are you thinking about there and then just overall loan growth.
Speaker Change: Yes.
So I think that the 10 basis point increase from the last quarter a lot of that we had some loans that went on non accrual and we backed out some interest in Q4. So that's why Q4 was a little lower than we'd anticipated and expected.
Speaker Change: But we think that the margin you know.
Speaker Change: It's going to stick around here, we don't see a significant amount of downside from where we are you know.
Speaker Change: A couple of basis points, we're going to fluctuate I think we stay around here longer than we initially anticipated.
Anthony Cutrone: You know, our cost of borrowings, they seem to be sticking around. You know, when I talk about that, I'm talking about our CD rates on 3 and 5-year paper. You know, as of yesterday, we're talking about 4.1%. So it's about 30, 35 basis points from where we are at the end of March, you know, average. We're able to, you know, we're getting a better rate on our new loans. So that's helping the yield. But until we start seeing some meaningful decrease in interest rates, you know... We're not going to, you know, we're not going to see some expansion.
Speaker Change: Our cost of borrowings they they seem to be sticking around.
Speaker Change: About that I'm talking about our Cds CD rates on three and five year paper.
Speaker Change: As of yesterday, we're talking about four 1%. So it's about 30 35 basis points from where we are at the end of March you know what.
Speaker Change: Average.
Speaker Change: We're able to you know, we're getting a better rate on our new loan so that is helping the yield.
Speaker Change: But until we start seeing some meaningful decrease in interest rates.
Speaker Change: We're not going to we're not going to see some expansion.
Anthony Cutrone: And just as a follow-up, I mentioned the sale was imminent.
Speaker Change: And just as a follow up.
Speaker Change: I mentioned the.
Anthony Cutrone: It actually closed within the last 48 hours or so. So it was a $53 million sale, which is a nice sale for us. Congrats on that.
Speaker Change: The sale was eminent that actually closed within the last 48 hours or so so it was a it was a $53 million sale, which is a nice segue.
Speaker Change: Well for us.
Speaker Change: Got it congrats on that it Anthony I don't rough total loan growth high single digits.
Anthony Cutrone: Um, and Anthony, I don't know, Ross Total, Lone Girls, High Single. Yeah, so I mean, we still think that we'll probably grow 5% to 7% for the year. Obviously, you know, we're not going to chase growth at the expense of the type of loan that we want to hold. So we're going to see what happens in the next nine months throughout the year with the economy. We're not going to look to grow at the sake of putting our franchise in jeopardy. So, you know, that could be lower, it could be higher, you know, there's a lot of factors out there and a lot of question marks, not just we have, but most companies like us.
Speaker Change: Yeah. So I mean, we still think that we'll probably grow 5% to 7% for the year.
Speaker Change: Obviously, we're not going to chase growth at the expense of the <unk>.
Speaker Change: A loan that we want to hold so.
Speaker Change: It's.
Speaker Change: We're going to see what happens in the next nine months throughout the year with the economy.
Speaker Change: We're not going to we're not going to look to grow at the sake of putting our franchise in jeopardy, so that could be lower it could be higher you know there's a lot of factors out there and a lot of a lot of question marks not just where are we have but most companies like us.
Mike Grondahl: And then lastly, could you repeat what you said about... charge-offs for Wreck. I got the 3.1 million and the 1.5 I didn't get the record. Sure, it was, um, it was $4.67. It was $467 for rec and you got the $155 for home improvement, you said? Yeah, and what was the dollar amount for Rex? I'm just checking. Too many numbers in front of us. It was 16.4. Got it. Okay.
Speaker Change: Fair Fair and then lastly could you repeat what you said about.
Speaker Change: Net charge offs for rack I got the $3 1 million and the 1.55% for home equity, but I didn't get the wreck number.
Speaker Change: Sure. It was it was $4 67.
Speaker Change: It was $4 67 for Rec and you've got the 155 for home improvement you said.
Speaker Change: Yeah, and what was the dollar amount for rack.
Speaker Change: Just checking.
Speaker Change: Too many numbers in front of us it was.
Speaker Change: $16 four.
Speaker Change: Got it Okay, hey, thanks, guys.
Operator: Hey, thanks.
Speaker Change: Thank you.
Andrew Murstein: This concludes our question and answer session.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would now like to turn the conference back over to Andrew most team.
Andrew Murstein: I would now like to turn the conference back over to Andrew Murstein, President and CEO for closing remarks. Thank you. We are off to a great start to the year. What's very encouraging is that we are getting contributions from each of our businesses. We look forward to seeing our investors on the road later this month with our participation in the annual B. Riley Conference May 21st in California. Our commitment to our shareholders remains strong, evidenced by our ongoing delivery of earnings, our opportunistic buybacks, and our recently increased dividends.
Speaker Change: And CEO for closing remarks.
Speaker Change: Thank you we are off to a great start to the year with very encouraging is that we are getting contributions from each of our businesses.
Speaker Change: We look forward to seeing our investors on the road later this month with our participation in the annual B Riley Conference May 21 in California.
Speaker Change: Our commitment to our shareholders remains strong evidenced by our ongoing delivery of earnings are opportunistic buybacks and our recently increased dividend.
Andrew Murstein: Thank you again for your investment and interest in Medallion, and have a great rest of your day.
Speaker Change: Thank you again for your investment and interest in medallion and have a great rest of your day.
Speaker Change: Okay.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.
Speaker Change: Okay.
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Speaker Change: Yeah.
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Speaker Change: Yeah.
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