Medallion Financial Corp.

The Medallion Financial First Quarter 2023 Earnings Conference Call. All participants will be enlisted on remote. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, instructions will follow. Please note that this event is being recorded. I now would like to turn the conference over to Mr. Ken Cooper, Investor Relations. Please go ahead, sir, at this time.

Thank you, and good morning, everyone. Welcome to Medallion Financial Corp's first quarter earnings call. Joining me today are Andrew Merstein, President and Chief Operating Officer, and Anthony Catrone, 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 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. 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. In addition to our earnings press release, you can find our first quarter supplement presentation on our website by visiting Medallion.com, and clicking Investor Relations. The presentation is near the top of the page. With that, I'll turn it over to Andrew Merstein, President.

Thank you, Ken. Good morning, everyone. Medallion Financial had a great start to 2023 and one of our strongest quarters in our almost 27 years as a public company. We performed well in all areas of our company, highlighted by the continued growth of our consumer lending businesses and a good quarter in our commercial lending area, and a strong quarter of cash collections from our medallion assets. We generated $15.4 million of net income, or $0.67 of earnings per share. Our return on equity was a little over 20%, and our return on assets was nearly 3%. Those are impressive returns and good indications of another strong quarter. Our net income performance included a strong year-over-year growth rate driven by maintaining our consumer businesses in this challenging environment with outstanding performance from our Medallion Collections team. We collected over $13 million in cash in the quarter, which is higher than normal. There was not one single driver for this. It was a team effort. As we have said all along, we believe a portion of our Medallion assets will be paid back and payment patterns will vary over time. We will have great months, average months, and low months. But the good news is that we have the most experience in this space with significant relationships across the industry. With the growth of our loan portfolio, we increased net interest income 21% year-over-year to $43.6 million. More importantly, like we were saying would happen since the prospect of rising rates was first introduced last year, our growth in loans has helped offset rising interest rates that raised our funding costs. This has allowed us to maintain our net interest income from the fourth quarter. Our provision for credit losses has been trending back towards its normalized level. However, with significant recoveries from our Medallion assets, Our provision for the quarter at $4 million was lower than anticipated. I'd now like to provide a quick update on our business. Home improvement continued to be our fastest growing segment. Originations remain strong and continue to be related primarily to popular projects like roofs, windows, and pools. Our recreational business, which is mainly loans for smaller boats and RVs, had over $100 million in originations, which is below peak levels, but we believe is still strong performance. Our average interest rate has remained at over 14%. Finally, our commercial business reached $95 million in loans outstanding, up from $78 million one year ago. It also earned just over $1 million for the quarter and has a solid pipeline that should lead to increased originations in the future. A quick update on capital allocations. For the fifth consecutive quarter, we declared and paid a dividend of 8 cents per share. We did not repurchase any stock back in the quarter. With the instability the banking sector has experienced these past several months, we felt it was prudent to retain our capital, to use a portion of that capital to fund growth, and to continue to prepare for the future. As I look at the overall health of our business, given the recent events within the banking environment, I thought it was important to remind you that we remain confident in our business model and our strategy as a specialty finance company. One way we are deliberately different than other financial institutions is our long-time use of broker deposits to fund our loan growth. Broker deposits not only help us manage our borrowing costs, they also provide us safety since broker deposits have no right of voluntary withdrawals. In addition, We mitigate risk with a relatively small investment portfolio associated with these deposits and limited unrealized gains or losses. Ultimately, we believe this leads to our business model being resilient under a wide variety of conditions. With that, I will now turn the call over to Anthony, who will provide some additional insight about our quarter. Thank you, Andrew, and good morning, everyone.