Medallion Financial Corp.

Greetings and welcome to the Medallion Financial second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ken Cooper, Investor Relations for Medallion Financial. Thank you. You may begin.

Thank you and good morning everyone. Welcome to Medallion Financial Corp's second quarter earnings call. Joining me today are Andrew Murstein, 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 and Form 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 second 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 second quarter with continued growth and profitability. For the second quarter, we generated $14.2 million of net income and $0.62 of earnings per share. Our return on equity was 18.2%, and our return on assets was 2.6%. All remain strong and reflect the healthy state of our business. The main driver of our bottom line continues to be our consumer lending businesses, which had another quarter of significant origination volumes. Our consistent performance validates our strategy of using a national base of 3,000 dealers and 1,000 contractors to source loans. We then deliver a premium customer service to make it easy to do business with us. This customer service reinforces loyalty to Medallion, which is important in times like we are in. Further, by maintaining rigorous underwriting standards, we are targeting borrowers that have a high propensity to timely pay their loans. This has helped us keep our returns high and our losses low. Our performance was also driven by our second straight quarter of cash collections over $10 million on taxi medallion assets. Our entire team is doing a wonderful job in this. However, I again stress that payment patterns are not expected to be linear. We expect quarters to be low, high, and in between. We have a talented team led by Alvin Merstein, who is possibly one of, if not the most knowledgeable authority on the taxi medallion industry in the U.S., As I mentioned, our consumer lending businesses surged in the second quarter and had more strength than we have seen over the past several quarters. We believe that this is in part due to resilient U.S. consumers who continue to invest in home remodel projects, boats, and RVs. We also believe some industry players have scaled back on this business or even left it altogether. When this happens, it creates an opportunity for us to pick up market share. And of course, it's related to our team's within our consumer segments who are doing an exceptional job day in and day out. This also happened in 2008. We, of course, came out at that time larger and stronger. When we had lower than usual loan provisions in 2021 and 2022, we said that they would bounce back to a more normalized level, and they are doing just that. Similarly, our origination levels are higher than normal. With the growth of our loan portfolio, we increased net interest income 20% year over year to $46.7 million. This has been fueled by our ability to raise our own rates combined with the growth of our loan portfolio. We will continue to maintain flexibility in the pricing of new originations to counteract further increases in borrowing rates. Home improvement continues to be our fastest growing segment. While the growth continues to put pressure on our total company net interest margin, our net interest income continues to expand. Our REC business continues to deliver our highest average interest rates at 14.62%. It is also our most profitable segment and our biggest, now at $1.3 billion of assets. Finally, our commercial business stayed flat compared to the first quarter, in which we originated $5 million of loans, and had roughly that same amount of payoff activity on loans. Commercial earns just over $1 million for the quarter again and has a solid pipeline that should lead to increased originations in the future. With that, I will now turn the call over to Anthony, who will provide some additional insight into our quarter.