Medallion Financial Corp.

Ladies and gentlemen, good morning and welcome to the Medallion Financial Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on the telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Cooper. Please go ahead.

Thank you, and good morning, everyone. Welcome to Medallion Financial Corp's third 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 third 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 strong third quarter that culminated with our best earnings for the nine months ended September 30th in any year since our IPO over 27 years ago. In the third quarter, we generated $11.2 million of net income and $0.48 of earnings per share. Year-to-date, we are at $40.8 million of net income and $1.77 of earnings per share. These results have again been driven by higher-than-normal originations in our consumer lending, solid results from our commercial lending, continued success in cash collections from our taxing medallion loans, and a successful effort to leverage our operating costs. We have been clear for some time now that our strategy is to grow net interest income by offsetting rising costs to borrow with continued growth in loan originations. We have done that for another quarter even as origination activity has started to normalize back to historical levels. As we look to the future, we will continue to take proactive steps to raise our credit standards and increase pricing. With total assets at over $2.5 billion, we anticipate loan growth to moderate from the levels we have seen over the past two years, which should enhance earnings with reduced credit allowances needed at origination. This provides more flexibility and options for us to consider around capital allocation such as a 25% increase in the dividend of board authorized starting next month, which enhances shareholder returns. Moving to the update for each of our segments. Our consumer lending business had another quarter of heightened activity of originations. We believe this robust origination activity is due to our target customer still being active in purchasing towable RVs, small boats, and single project home improvements. These all have active markets today as compared to the higher-end cruiser RVs, yachts, and multi-project or whole house remodels, which has significantly higher costs and may be more susceptible to a slowdown. As a reminder, our average loan at origination is around a very manageable $25,000, with a prime or near-prime borrower more focused on the payment level than the rates. In addition, we continue to see some industry players scale back or exit these business lines, which helps us. The dealers and contractors who we work with know that we have great service levels and will be here long-term, which helps them refer business to us. Our commercial business originated $9 million of loans in the quarter and ended the quarter with $100 million of loans outstanding. The segment generated after-tax earnings of $2 million during the quarter, which included net after-tax gains related to equity investments of $1.6 million. Our bottom line benefited again from another good quarter of cash collections on taxi medallion assets. This quarter, we collected $5.7 million, which translated into $0.10 of earnings per share. Also of note, shortly after the quarter ended, we executed a structured settlement with one of our larger taxi medallion borrowers and collected an additional $9.4 million, which will result in a pre-tax gain of approximately $8 million in the fourth quarter. We continue to be delighted with our taxi medallion collection performance, but I again stress that payment patterns are expected to fluctuate. Finally, as I mentioned earlier, our board has authorized a 25% increase in our quarterly dividends from $0.08 to $0.10 per share per quarter. With that, I will now turn the call over to Anthony, who will provide some additional insight into our quarter.