Medallion Financial Corp. Q1 FY2026 earnings call

• The first quarter of 2026 showed solid performance across core financial metrics with strong loan volume, net interest income, originations, and portfolio size growth. - Consumer lending, the largest and most profitable business, anchored performance with growth in REC and Home Improvement loan books. - The commercial segment saw portfolio growth, and the Strategic Partnership Program diversified income sources. - The company is committed to organic growth and shareholder return, with a dividend increase. - It emphasized a diversified business model, experienced management team, and data - driven approach supported by technology investments. - Closed a $75 million notes offering to strengthen funding for continued growth.

Consumer lending is the largest and most profitable segment. Interest income for consumer lending was $73.4 million in the quarter, up 4.5% year - over - year. The REC loan book grew 8% to $1.67 billion at March 31, 2026, representing 64% of total loans. Originations for REC were $142.5 million in the quarter, up 64% from $86.8 million a year ago, and interest income was $54 million, up 7%. The Home Improvement Loan book was $814.9 million at March 31, 2026, representing 31% of total loans, with interest income of $19.4 million. Originations for Home Improvement were $64.4 million in the quarter, up 32% from $48.8 million last year. The commercial segment had a portfolio of $119.6 million, up from $116.1 million last year, with an average interest rate of 14.18%. The Strategic Partnership Program had $170 million of originations, with $10.8 million of loans held as of quarter end and generated $1.2 million in revenue.

• The management is confident in the strength of the platform and opportunities ahead. - Expect incremental technology investment and talent addition to support growth. - Anticipate net interest income to outpace operating cost growth in the long term. - The board approved a second quarter dividend of 14 cents per share, a 16.7% increase from the prior quarter and a 75% increase since reinstating the dividend in the first quarter of 2022. - Aim to grow from $3 billion in assets to $5 billion in assets in the next five years.

Q: Andrew, in the press release, it talks about significant technology change and adding talented people. Any way to kind of quantify the investment in 1Q, what you think it's going to be for 2026, and kind of specifically where you're spending the money?

A: Justin Haley said tech investment has a consistent run rate with incremental improvement over time. There was no significant tech investment in Q1, but expected to see marginal increase in technology investment in 2026. Hired new SVP of sales and marketing, VP of marketing, VP of credit, and could grow headcount at Medallion Bank by 30 to 40 this year with 10 people added in Q1.

Q: Anthony, maybe one for you. Just at a high level, how are you thinking about credit quality, the REC, the home improvement book? How are things kind of trending?

A: Home improvement credit quality is comfortable. On the REC side, credit is improving with charge - offs down year - over - year compared to Q1 2025.

Q: And then just lastly, how should we think about higher oil prices, and, you know, kind of your credit outlook, you know, especially on the rec side?

A: Higher oil prices matter to some extent but not a major impact on their borrower base as their borrowers are mainly those with W - 2 wages approaching or exceeding six figures.

Q: Christopher Nolan with Leidenberg Salon. Hey, Anthony, on the tangible book value you gave, does that include all goodwill and intangible assets?

A: Tangible book value excludes all goodwill, intangible assets, and adds back the deferred tax liability. Tax rate is expected to settle in the lower 30s in the future as pre - tax income increases.

Q: Justin, are a lot of the tech investments you're making, are they going to be services where you're basically – integrating an API and application program interface, or are you buying boxes and hiring coders?

A: There is a team of software engineers focused on API integration, point - of - sale tools, and in - house investments to streamline operations as it scales up.

Q: What's the ROI you expect on these investments?

A: Anticipate providing returns over time baked into the overall model.

Q: Andrew, the $8 million in equity investments that you mentioned, thank you. What's the fair value on that, please?

A: Don't record at fair value, account for them at cost less impairment, and it's hard to disclose fair value as they are small business concerns not in public securities.

Q: It sounds like between the tech investments and you guys talking about the strategic partnerships, It sounds like the company is drifting more and more towards those type of loans and less towards its traditional bread - and - butter RV and home improvement and all that stuff. Is that a fair characterization?

A: No, traditional businesses like RV, Marine, and home improvement are strong cash flow generators, and strategic partnerships are complementary, with the aim to continue growing traditional lines as well.