Medallion Financial Corp.

Good day and welcome to Medallion Financial Corp. First 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. 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 Murstein, President and Chief Operating Officer, and Anthony Catrone, 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 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 by clicking in investor relations. The presentation is near the top of the page. 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 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. 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. 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. 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. 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. Our 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. We believe there is staying power to collect this level of cash for some time. 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. Our strategic partnership program had its second straight quarter of over $125 million of originations. 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. 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. Furthermore, we are taking a very methodical approach to growth to ensure we continue to do it the right way. Finally, we had a good quarter related to capital allocation. We bought back about 60,000 shares of our stock, and I'm nearly 15 million left under our share repurchase plan. In addition, we paid an 11-cent dividend to our shareholders in the quarter. Subsequent to the quarter, our board approved a 9% increase to the quarterly dividend, the 12 cents per share, the third increase to our dividend since we reinstated it three years ago.