Medallion Financial Corp. Aktie

Good morning, everyone, and welcome to the 2026 Annual Meeting of Shareholders of Medallion Financial Corp. Before we get started, I would like to go over a few items so you know how to participate in today's meeting. You have joined the Annual Meeting using your computer speaker system by default. If you prefer to join over the telephone, just select "phone call" in the settings icon of your toolbar, and the dial-in information will be displayed. In a few moments, you will have the final opportunity to vote or to change your vote.

At that time, please refer to the voting link on your screen. If any person present has submitted their proxy, such shares will be voted in accordance with your instructions set forth on the proxy card, unless you vote virtually today. There is no need to vote virtually again unless you wish to change your vote. After the formal business meeting is completed, we will conduct a short question-and-answer session. You may submit questions electronically by using the questions pane of your toolbar. Questions must comply with the rules of conduct for the meeting. You may submit your questions at any time during the meeting, and we will answer them as appropriate and as time permits during the question-and-answer session. I would now like to introduce you to Alvin Murstein, Executive Chairman.

Good morning. On behalf of the Board of Directors of Medallion Financial, welcome to the 2026 Annual Meeting of Shareholders. We are holding this meeting virtually by means of remote communication to ensure all of our shareholders have easy access to our meeting. I would like to thank everyone present for attending today. The time is now 10:02 on June 9, 2026. The meeting has come to order. I am joined by several of our directors, members of our executive management team, and other guests of the company.

From our executive team, in addition to me, we have Andrew Murstein, our President and Chief Executive Officer and Chief Operating Officer; Anthony Cutrone, our Executive Vice President and Chief Financial Officer; and Marisa Silverman, our Executive Vice President, General Counsel and Secretary; and Samantha Rozovsky, our Chief Compliance Officer and Associate General Counsel.

I would also like to introduce Michael Barbera of First Coast Results, Inc., who will serve as the Inspector of Elections for today's meeting. We also have representatives from Willkie Farr & Gallagher LLP and Sidley Austin LLP, the company's counsel; Kyle Manny, who is a partner with Plante Moran PLLC, the company's independent registered public accounting firm; and Alliance Advisors LLC, the company's proxy solicitor in attendance. As you may be aware, BIMIZCI Fund LLC, an affiliate of ZimCal Asset Management LLC and Stephen Hodges, who we refer to for the remainder of this presentation as ZimCal, has submitted notice of its intent to nominate three candidates for election as directors at this meeting. ZimCal representatives are also in attendance at this meeting. Ms. Silverman will act as Secretary of the meeting and keep the minutes.

Thank you, Mr. Chairman. In order to ensure that the business of the meeting proceeds in an orderly fashion, we ask that you please observe the rules of conduct which govern this meeting. The rules of conduct are available on the platform you are using to access our virtual meeting. We do not expect technical difficulties today. However, in the event we lose our webcast connection or otherwise experience technical difficulties, please allow for some time for those difficulties to be resolved.

I now ask Ms. Silverman to present certain documents for the meeting.

Mr. Chairman, I present to the meeting the following documents: A copy of the notice of the Annual Meeting, a proxy statement dated April 30, 2026, a form of proxy, and a copy of the 2025 annual report of the company. These documents are accompanied by an affidavit confirming these documents were disseminated to each shareholder of record at the close of business on April 13, 2026. Copies of each of these documents are attached as exhibits to the affidavit.

I direct the Secretary to attach the affidavit and exhibits to the minutes of this meeting and make them part of the company's records. I appoint Michael Barbera of First Coast Results, Inc. to serve as Inspector of Elections. The Inspector of Elections has signed an oath of office, which will be filed with the minutes of this meeting. The Inspector of Elections has in their possession a list of the company's shareholders of record as of record date April 13, 2026. Ms. Amanda Raimo Kaufer, would you kindly report on the common stock represented at the meeting in person, virtually, or by proxy?

Mr. Chairman, preliminary tabulations indicate that there are 13,094,708 shares of common stock represented either in person, virtually, or by proxy at this meeting, constituting a majority of the shares of the capital stock of the company issued and outstanding and entitled to vote at the meeting.

We will proceed with the business of the meeting on the assumption that a quorum is present, pending final confirmation by the Inspector of Elections.

We will briefly discuss voting procedures. You are entitled to vote if you are a shareholder of record as of the close of business on April 13, 2026, which is the record date for the meeting, or otherwise hold a valid proxy entitling you to vote at this meeting. If any person present has submitted their proxy, such shares will be voted in accordance with your instructions set forth on the proxy card, and you do not need to vote now, unless you wish to change your vote. However, if you are attending in person virtually and wish to revoke your proxy and vote in person virtually, please refer to the shareholder ballot link on your screen.

I now declare the polls open for each matter to be voted on today. The time is 10:08. You may vote until I announce that the polls are closed. As stated in the notice of the meeting, there are three items on the agenda on which shareholders have been asked to vote: one, the election of three directors to serve until the 2029 Annual Meeting of Shareholders; two, the ratification of the appointment of Plante Moran PLLC as the company's independent registered public accounting firm for the year ending December 31, 2026; and three, the approval of a nonbinding advisory resolution to approve the 2025 compensation of the company's named executive officers as described in the company's proxy statement. We will now proceed with our first agenda item, the election of directors.

The following three persons have been nominated by the Board of Directors to serve as Class III directors of the company for a term of three years: John Everets, Cynthia A. Hallenbeck, and Alvin Murstein. The Board recommends a vote in favor of Mr. Everets, Ms. Hallenbeck, and Mr. Murstein. ZimCal has submitted a notice of intention to nominate three director candidates to serve as Class III directors of the company for a term of three years: Mr. Eric Kelly, Mr. John Kiernan, and Mr. Timothy Shanahan. The company has deemed each of ZimCal's candidates to be duly nominated. The company has not received notice of any other nominees.

We will move on to the last item, the ratification of the appointment of Plante Moran PLLC as the company's independent registered public accounting firm for the year ending December 31, 2026.

The Board recommends a vote for the ratification of the appointment of Plante Moran PLLC as the company's independent registered public accounting firm for the year ending December 31, 2026. The proposed resolution shareholders are being asked to approve is as follows: Resolved that the appointment of Plante Moran PLLC as the company's independent registered public accounting firm for the year ending December 31, 2026, is hereby ratified.

We will move on to the last item, the approval of a nonbinding advisory resolution to approve the 2025 compensation of the company's named executive officers, as described in the company's proxy statement.

The Board recommends a vote for the approval of a nonbinding advisory resolution to approve the 2025 compensation of the company's named executive officers. The proposed resolution shareholders are being asked to approve is as follows: Resolved that the 2025 compensation paid to the company's named executive officers as disclosed in the proxy statement for the company's 2026 Annual Meeting of Shareholders, including the compensation discussion and analysis, compensation tables, and narrative discussion, is hereby approved.

If you have not voted yet and are voting today, you must submit your vote at this time in order for them to be counted by the Inspector of Elections. The Inspector of Elections will not accept ballots, proxies, or votes, or any changes or revocations thereof submitted after the closing of the polls. We will pause for a moment to give anyone a final chance to vote.

[Voting]

Polls for each matter to be voted on at this meeting will close shortly. It is now 10:14, and the polls for each matter to be voted on at this meeting are now closed. I have been notified that preliminary results are available. Ms. Silverman, will you please present the preliminary results of the voting?

Based on the preliminary tabulation by our proxy solicitor, we believe that a plurality of votes has voted in favor of John Everets. A plurality of votes has voted in favor of Cynthia A. Hallenbeck. A plurality of votes has voted in favor of Alvin Murstein. A majority of the votes cast have voted in favor of the appointment of Plante Moran PLLC as the company's independent registered public accounting firm. A majority of votes cast has voted in favor of the approval of a nonbinding advisory resolution regarding the 2025 compensation of the company's named executive officers as described in the proxy statement.

Thank you. We reiterate that these are the preliminary results of voting. Final vote count may vary following the final examination of votes by the Inspector of Elections. The final results of voting will be set forth in the report of the Inspector of Elections and will be included in the minutes of this meeting. The final results will also be reported in a current report on the Form 8-K that the company files with the Securities and Exchange Commission in due course. I direct the Secretary to file with the records of the company the following: a certificate from the Inspector of Elections reflecting the action that the shareholders have taken at this meeting, a list of the shareholders as certified by Michael Barbera of First Coast Results, Inc., and finally, the proxies and ballots that were cast at this meeting.

This concludes the formal part of the 2026 Annual Meeting. The meeting is adjourned. We will now take a few seconds to gather for our question-and-answer session.

Thank you. At this time, I have asked Andrew Murstein, our President, Chief Executive Officer and Chief Operating Officer; and Anthony Cutrone, our CFO, to join me for a short question-and-answer session. We will open the meeting for questions or comments from stockholders regarding the matters presented at the meeting. Again, we will continue to observe the rules of conduct posted on the virtual meeting website. During the question-and-answer session, we may take forward-looking statements. Please keep in mind our safe harbor provisions related to the forward-looking statements.

Please hold while we poll for any questions. Management will lead the Q&A session.

I have been notified that there are no questions. Since that is the case, we will close our question-and-answer session.

Thank you for your attendance and participation today. On behalf of everyone associated with our corporation, we thank you for being a shareholder of Medallion Financial. We are excited about where we are headed, and look forward to speaking throughout the year.

Having concluded the question-and-answer session, I'd like to thank you for attending today's meeting. Enjoy the rest of the day.

Greetings, and welcome to the Medallion Financial Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Val Ferraro of -- the Equity Group. Please go ahead.

Thank you, and good morning. Welcome to Medallion Financial Corp.'s First Quarter 2026 Earnings Call. Joining me today are Andrew Murstein, President and Chief Executive Officer; Anthony Cutrone, Executive Vice President and Chief Financial Officer; and Justin Haley, President of Medallion Bank. Certain statements made during the call today constitute forward-looking statements. 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.

Thank you, and good morning, everyone. The first quarter of 2026 marked a continuation of solid performance across our core financial metrics and operating segments. Notably, we delivered one of our strongest loan volume quarters on record, reflecting exceptional demand for our products and the success of our loan origination growth efforts. Compared to the first quarter of 2025, we reported increases in net interest income, originations and portfolio size, reflecting the strength of our platform and consistent execution across our business lines. Loan demand remained healthy, which allowed us to generate $377 million in origination volume for the quarter. Credit performance was solid and total loans reached a record $2.62 billion. Our results demonstrate our ability to continue scaling the business profitably as we execute our strategy, which I will now walk through in further detail. I'll start with consumer lending, our largest and most profitable business, which continues to anchor our performance with interest income of $73.4 million for the quarter, up 4.5% compared to the same period of last year. Within the Consumer Lending segment, direct loan book grew 8% to $1.67 billion at March 31, 2026, representing 64% of our total loans. Originations for the quarter grew 64% to $142.5 million compared to $86.8 million a year ago, and interest income rose 7% to $54 million. Delinquencies of 90-plus days were just 0.57% of gross recreational loans and the allowance for credit losses was 5.19% as compared to 5.0% a year ago. As a reminder, the allowance is forward-looking and designed to absorb all future expected losses. The home improvement loan book grew to $814.9 million at March 31, 2026, representing 31% of our total loans and interest income was $19.4 million. Originations for the quarter grew 32% to $64.4 million versus $48.8 million last year. Delinquencies of 90-plus days were just 0.17% of gross home improvement loans and the allowance for credit losses was 2.49%, consistent with a year ago. Importantly, we are originating loans to individuals in these niches that have strong credit quality with average FICOs on new originations now at 687 for rec and 781 for home improvement. The vast majority of our book falls within the super prime to near prime part of the credit spectrum, and that concentration has improved over the years. Moving on to our Commercial segment. Though we did not have any new originations in the first quarter, the portfolio increased to $119.6 million from $116.1 million last year, with an average interest rate of 14.18% compared to 13.14% a year ago. Additionally, as of March 31, we have more than 2 dozen equity investments with a book value of just $8.1 million on our balance sheet. These equity components are a result of our long-term strategic investments. And while the timing of exits is inherently unpredictable, we remain confident in our pipeline. During the quarter, gains from equity investments were just $0.3 million. Our strategic partnership program, which produces origination fees and approximately 2 to 5 days of interest before we sell the loans to the partner or the other third parties had another good quarter with $170 million of originations. Total loans held as of quarter end in the strategic partnership program were $10.8 million. Our partners today originated consumer loans, most of which are outside of the rec and home improvement loans we originate for our portfolio. Although this program represents a small part of fees and interest generated at Medallion Financial, it has produced approximately $1.2 million of revenue this quarter, representing a further diversification of our income sources. We continue to 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 in a way that keeps us safe and sound. From a capital allocation perspective, we remain committed to our shareholders. During the quarter, we paid a dividend of $0.12 per share and continue to prioritize organic growth and meaningful tangible shareholder return. Additionally, subsequent to quarter end, our Board of Directors approved a second quarter dividend of $0.14 per share, representing a 16.7% increase from last quarter and a 75% increase since we reinstated the dividend in the first quarter of 2022. Looking ahead, I am confident in the strength of our platform and the opportunities in front of us. Our diversified and proven business model, experienced management team and disciplined loan origination approach positions us well to continue generating consistent risk-adjusted returns. Our approach is increasingly analytical and data-driven, supported by digital tools that help optimize underwriting, origination, servicing and overall portfolio visibility. Our investments in technology over the years from a full migration to the cloud, to business process automation work, a new loan servicing system and tighter integrations with our sources of loan volume are generating meaningful value today. The evolution of our advanced technical and analytical capabilities will allow us to grow the business while assessing risk with greater precision than ever, which will help us maintain consistently strong performance across operating environments. Additionally, as announced this week, we are pleased to have closed a $75 million notes offering led by JPMorgan Investment Management, strengthening our funding partnerships and positioning us well for continued growth. I also wanted to briefly touch on our SBIC program. We remain committed to our long-term standing relationship with the SBA and have submitted 2 qualified management candidates for approval by the SBA. More broadly, we have deep confidence in the abilities of our management team. With that, I'll now turn it over to Anthony, who will provide some additional insight into our quarter.

Thank you, Andrew. Good morning, everyone. For the first quarter, net interest income grew 5% to $54.1 million from $51.4 million a year ago. Our net interest margin was 8% during the quarter, up 6 basis points from a year ago. Our total interest yields for the quarter increased 5 basis points from a year ago to 11.7%, with our average cost of borrowings in the quarter being 4.28% compared to 4.16% a year ago. During the quarter, our average cost of deposits at Medallion Bank was 3.95% compared to 3.80% in the prior year quarter. As of March 31, the weighted average coupon of recreation loans was 15.11% and was 9.82% for home improvement loans. During the quarter, we originated loans at rates averaging around 14.75% for recreation loans and 10% for home improvement loans. Currently, in April, we have originated recreation loans at similar rates and home improvement loans at rates of approximately 9.5%. Our total loan portfolio reached $2.62 billion at March 31, up 5% from a year ago. Total loans included $1.6 billion of recreation loans, $815 million of home improvement loans and $120 million of commercial loans. For the quarter, the average yield on our total loan portfolio increased to 12.15% from 12.04% a year ago. Our provision for credit loss was $22.5 million for the quarter, a decrease from $27.7 million in the fourth quarter and a slight increase from $22 million in the prior year quarter. Net charge-offs in the recreation portfolio during the quarter were $17.7 million or 4.38% compared to 4.67% in the 2025 quarter and were $2.9 million or 1.44% of the average home improvement portfolio compared to 1.55% in the 2025 quarter. Turning to expenses. Operating costs totaled $22.4 million during the quarter, up from $20.8 million in the prior year quarter. The increase over the prior year was largely due to higher employee costs as well as higher loan servicing and collection expenses, all of which are associated with our growing loan portfolio. As we continue to expand our platforms, grow our business and look to becoming a sizably larger enterprise over the next several years, we anticipate higher operating costs. As we've stated previously, we expect in the long term, our net interest income to outpace any growth we experienced in operating costs in the near term. For the quarter, net income attributable to our shareholders was $5 million or $0.20 per diluted share compared to $12 million or $0.50 per share in the prior year quarter, with that prior year quarter including $9.1 million of higher equity gains compared to the current. As mentioned in the past, gains from equity investments in the commercial portfolio do not adhere to any specific trend and may fluctuate from quarter-to-quarter. Our net book value per share as of March 31 was $17.10, up from $16.36 a year ago. Our adjusted tangible book value per share, which excludes the value of goodwill, intangible assets and the deferred tax liability associated with both was $11.83 at the end of the quarter, up from $10.90 a year ago. That covers our first quarter results. Andrew and I are now happy to take your questions.

[Operator Instructions]

Our question first is from Mike Grondahl with Northland Securities.

Andrew, in the press release, it talks about significant technology change and adding talented people. And I know on the year-end call, you talked a little bit about some of the investments you were going to be making. 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?

So talking about talented people, we have our new President of Medallion Bank, Justin Haley, on the call, and that's right in his wheelhouse. So Justin, why don't you jump in and answer that, please? Mike, it's nice to meet you.

Our tech investment has been going on for several years. We have a pretty consistent run rate. We're an agile shop. So we really are focused on incremental improvement over time. What -- so you don't see anything in Q1 that's significant, but you should expect to see generally increasing technology investment marginally over where we are today. The last significant capital improvement was in Q4 of 2024, when we launched our loan origination system. The next one that we have on the docket is likely in the first half of 2027 as we focus on our loan origination -- sorry, I think I said loan origination system first and it should be second. As far as talent goes, we had a press release earlier in the year. We hired a new SVP of Sales and Marketing. He comes from a bank that has deep experience in home improvement. And so we're expecting growth there. We've hired a new VP of Marketing. We've hired a new VP of Credit. We're adding talent into our technology operations and our lending operations teams. This is all to support growth. You saw some increase in salaries and benefits as a result. I would expect to see similar growth in that over time. We could grow our headcount at the bank by 30 to 40 this year as we scale up.

Got it. You said 30 to 40 people over the course of the year, Justin?

Yes.

Yes. And just to put that into context, headcount increased just at the bank by 10 people in Q1. So I mean, we're right on track to hit those levels.

Got it. 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?

I think home improvement, I think we're comfortable where credit is right now. And then on the rec side, we definitely see it improving, and it's a decent start to the year. I mean, year-over-year charge-offs in home improvement are down 11 basis points. And on the rec, they're down even larger than that when we look at Q1 of '25. So I think we know there's still a ways to go with rec. It's still higher than historically, we'd like -- it's been and where we'd like to see it. But we've made some changes in terms of pricing not necessarily credit, but we want to make sure that we're not pricing ourselves out. This business historically for us, we're a second look lender. We want to make sure that we stay a second look lender and that we're not falling towards the bottom of the stack. So we brought our new origination prices in line with where competition is. And we think over time, that will improve the credit and give us a better credit-adjusted yield on this portfolio.

Got it. And then just lastly, how should we think about higher oil prices and kind of your credit outlook, especially on the rec side? Does it matter?

I think it matters to some extent. Again, with the type of recreational vehicles we're financing. These aren't huge cabin cruisers that are controlling the seas. These are smaller boats. So the gas impact isn't as significant as those larger ticket items. But there's an impact to our borrower. Definitely at the lower end of the borrower spectrum, there's probably more tightness. That's not our borrower [ per se ]. And we've spoken about the composition of our borrower in the past. These are individuals that have W-2 wages approaching, if not exceeding 6 figures. So it's something that we're cognizant of, but we haven't seen any major impact. I mean if things change sizably, obviously, I think all lenders like us will be impacted.

Our next question is from Christopher Nolan with Ladenburg Thalen.

Anthony, on the tangible book value you gave, does that include all goodwill and intangible assets?

Yes. So that...

Excludes, I should say.

Yes, it excludes the all goodwill, all intangible assets, and then we add back that approximate $42 million of the deferred tax liability.

And then the tax rate, should we expect it to go back to the low 30s or so?

Yes. I think it's a little high this quarter, and that's just a function of it's Q1. A lot of the nondeductible expenses get factored in Q1. As pretax income increases, we would expect that to settle in the lower 30s.

Got it. And 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? Are you buying boxes and hiring coders?

We have a team of software engineers. We are focused on offering greater services to our clients. So it is that API integration, also more tools at the point of sale and then investments in-house that will streamline the operation as it scales up.

And what does this mean for working with your strategic partners? Does it suddenly mean that you'll have the ability to scale in terms of those loans that you take in and sell or not?

It will definitely help. Yes. As we add partners that have greater volume, we need those kinds of tools to allow us to process that volume and also to -- part of what we do in the strategic partnership business is we provide compliance services and oversight of their platforms. So we can do that at greater scale with these kinds of investments.

Okay. And this is a question you may not want to answer it, but what's the ROI you expect on these investments?

Let's say that we anticipate providing the returns over time that we're used to providing. So will bake it into the overall model.

That doesn't help the cost. Okay. Great. Andrew, the $8 million in equity investments that you mentioned, what's the fair value on that, please?

We don't record it at fair value. Again, it's hard to say because we account for these at cost less impairment. Some of them have values in excess of where we're carrying them. These are small business concerns overwhelmingly. So they're not in public securities that trade. So it's hard to say, and that's why we don't disclose that. We recognize the income when there's an exit.

You guys...

You guys have not been sporting today.

I'll give you a little more color. It's always the same, right? The CFO is very black and white. So just to add some color to it. We're getting a lot of great looks at fintech companies, one which we did not invest in was a company called Cashable, but they're one of our biggest strategic partners, as we've said before, and they just got, I think, a $30 million to $50 million investment in this week by Goldman Sachs. So that's going to probably pick up their loan volumes substantially, which will help our SP business continue to grow. In the past, we were in the first round of a company called Upgrade, which was Renaud Laplanche's company. We had a small investment there, but that went up actually about 100-fold. So -- and we still own a little piece of that there. I think we got in at $0.10 a share and got out at most of our position at about $10 a share. So the strategic partnership does a lot for us. In addition to just nice fee income business, it lets us get these early looks at fintech companies.

That's a spicy answer. Good stuff. And I guess as a final question and just general, 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?

I don't think so, honestly. I think those businesses, the RV, marine and home improvement are just tremendous cash flow businesses. So they let us take looks at other lines of business, which are still small, but there's just so much growth in the existing lines that we continue to go after. We did that $75 million debt deal this week. It was nice to be able to bring in such a prestigious name as JPMorgan. We've never really reached those levels as a company before. an investment-grade rating. So that's going to give us a lot of dry powder just to continue to block and tackle in our existing lines of business.

And what I'll add to that is looking ahead in the coming years, we're expecting growth -- asset growth, loan growth around 10%. 2025, we only grew at 3%. So I think much of that is going to come in our traditional lines, the consumer loans.

You have a very hungry group between the 3 of us on the phone today and a lot of experience too. But -- so the 3 of our goals are to take the company from $3 billion in assets to $5 billion in assets in the next 5 years, and I think we can accomplish that.

Well, between your good looks and Anthony's great hair cut, I'm sure that helps.

That plus the numbers as well.

There are no further questions at this time. I'd like to hand the floor back over to Andrew Murstein for any closing remarks.

Thank you. And before closing the call, I'd just like to reinforce our commitment to delivering strong risk-adjusted returns to our shareholders. We remain confident in the strength of our loan book and our ability to execute on the opportunities ahead. We look forward to updating you on our progress next quarter, and I hope you have a great rest of your day. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Good day, and welcome to the Medallion Financial Corp. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Val Ferraro, Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Medallion Financial Corp.'s Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Andrew Murstein, President and Chief Executive Officer; and Anthony Cutrone, Executive Vice President and Chief Financial Officer.

Certain statements made during the call today constitute forward-looking statements. 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 fourth 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.

Thank you, and good morning, everyone. 2025 marked a record year for Medallion with solid performance across our core financial metrics and operating segments. As compared to the fourth quarter and full year 2024, we reported increases in net interest income, net income, originations and portfolio size, reflecting the strength of our platform and consistent execution across our business lines.

Loan demand remained healthy. Credit performance was solid, and our results demonstrate our ability to continue scaling the business profitably while maintaining discipline. Across the portfolio, we continue to execute effectively with meaningful contributions from our recreation, home improvement and commercial lending lines.

Total loans reached $2.567 billion and total originations came in at $421 million for the fourth quarter and $1.5 billion for the full year, increases from both the same quarter last year and year-over-year. These results reflect a focused operating approach and our ongoing commitment to prudent growth across the platform, which I will now walk through in further detail.

I'll start with consumer lending, our largest and most profitable business line, which continues to anchor our performance with interest income of $74.5 million for the quarter and $289.9 million for the year, growing 5% as compared to the same period of last year and 8% year-over-year. Within the Consumer Lending segments, -- the rec loan book grew 5% to $1.6 billion at December 31, 2025, representing 63% of our total loans.

Originations for the quarter grew to $97.2 million compared to $72.2 million a year ago, and interest income rose to 6% to $54.2 million. Delinquencies of 90-plus days were just 0.82% of gross recreational loans and the allowance for credit losses is 5.32% to reflect expected seasonal and economic dynamics as compared to 5% a year ago. The home improvement loan book stood at $810.2 million at December 31, 2025, representing 32% of our total loans.

Originations for the quarter was $61.7 million versus $82.5 million last year. Delinquencies of 90-plus days were just 0.16% of gross home improvement loans and the allowance for credit losses was 2.41% compared to 2.48% a year ago. Importantly, we are originating loans to individuals in these niches that have strong credit quality with average FICOs on new originations now 688 for recreational and 779 for home improvement.

The vast majority of our book falls within super prime to near prime, which has moved up over the years. Moving on to our Commercial segment, which continued to deliver meaningful equity gains. We had new originations of $4.1 million during the quarter compared to $7.3 million in the same quarter a year ago. However, for the year, total originations were $40.6 million compared to $14.3 million in 2024.

The portfolio increased to $123.1 million from $111.3 million last year with an average interest rate of 14.22% compared to 12.97% a year ago. Additionally, as of December 31, we had more than 2 dozen equity investments with a book value of just $8.1 million on our balance sheet. These equity components are a result of our long-term strategic investments. And while the timing of exits is inherently unpredictable, we remain confident in our pipeline.

During the quarter, gains from equity investments were strong, generating $8.8 million of income. For the year, gains from equity investments generated $24.6 million. Our strategic partnership program, whereby we earn an origination fee and about 3 to 5 days of interest on holding loans before selling them back to the partner had its second straight quarter of over $200 million of originations, reaching a record level of $258.3 million this quarter.

Total loans held as of quarter end under the strategic partnership program were $15.1 million. Most of these loans outside of rec and home improvement and are mostly offered as employee benefits by large employers on loans for unplanned or elective medical procedures. Although this program represents a small part of fees and interest generated from Medallion Financial, it has reduced approximately $1.8 million in income this quarter and $5.4 million for the year.

It has more than doubled from the prior year and it has expanded each quarter, representing a further diversification of our income sources. We continue to 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.

Lastly, regarding our legacy taxi medallion business, we collected $2.5 million of cash during the quarter, which resulted in net recoveries and gains of $1.4 million. For the full year, we collected $13.6 million of cash, which resulted in net recoveries and gains of $4.6 million. Net taxi medallion assets declined to just $4.3 million and now represent less than 0.2% of our total assets.

From a capital allocation perspective, we remain committed to our shareholders. During the quarter, we paid a quarterly dividend of $0.12 per share and continue to allocate a large portion of our earnings to growth. We continue to prioritize a disciplined origination strategy, prudent balance sheet management and effective capital deployment while expanding our portfolio.

Our approach is highly analytical and data-driven, supported by advanced digital tools that help optimize underwriting, origination, servicing and overall portfolio visibility. These capabilities allow us to assess risk with precision and maintain consistently strong performance across operating environments.

Ending the year with positive momentum and solid execution across our business lines, we believe we are well positioned to build on this performance to continue delivering consistent, favorable risk-adjusted returns for our shareholders. One last item I wanted to touch on before turning the call over to Anthony is my transition into the CEO role, which took effect on January 31. As I step into this new role, I would like to have a few minutes to discuss our 2026 strategy.

Our focus for 2026 is to build upon the strong foundation established over the past 30-plus years while further refining our strategic priorities. We aim to continue to grow our core business lines by targeting sustained growth in our Recreation segment. In addition, we believe there is significant growth potential within our home improvement line.

As a result, in recent months, we added experienced talent to support increased growth and originations in this line with the goal of continuing to expand the portfolio. Our Commercial Lending segment also remains a strong contributor to earnings with the average interest rates increasing to 14.22% this year. At the same time, our strategic partnership program continues to be a rapidly growing component of our business.

While per loan origination fees and interest income associated with this business remain modest due to the short term the loans remain on our books, originations continue to expand meaningfully quarter-over-quarter, and we see great potential in this business over the next several years. We remain thoughtful and disciplined in evaluating new business lines and growth opportunities.

We will continue to assess adjacent markets where we believe we can expand the business in an accretive manner, consistent with our standards and return objectives. Looking ahead, I am proud of where the company stands today and confident in the foundation we have built together. While we recognize that market conditions may evolve, our strategy remains clear and consistent, execute with discipline, allocate capital thoughtfully and maintain a long-term perspective focused on sustainable value creation.

Our proven business model, diversified portfolio and experienced management team provide both resilience and flexibility. We continue to evaluate opportunities to optimize our returns, improve margins and pursue strategic initiatives that align with our core competencies. At the same time, we remain committed to prudent risk management and maintaining a strong balance sheet to support future investments.

I believe the company is well positioned to perform well in the years ahead. We are confident in our ability to navigate changing environments and deliver consistent, attractive returns for our shareholders.

With that, I'll now turn it over to Anthony, who will provide some additional insight into our quarter.

Thank you, Andrew. For the fourth quarter, net interest income grew 8% to $56.4 million from $52 million in the same quarter a year ago and was up 1% over the most recent prior quarter. For the year, net interest income increased 7% to $216.9 million from $202.5 million in 2024.

Our net interest margin was 8.04% during the quarter, up 20 basis points from a year ago. For the year, our net interest margin was 8.06% compared to 8.05% in 2024. Our total interest yield for the quarter increased 16 basis points from a year ago to 11.70% with our average cost of borrowings in the quarter being 4.24% compared to 4.12% a year ago. As of the end of 2025, the average interest rate on our deposits at Medallion Bank stood at 3.87% compared to 3.71% a year ago.

During the fourth quarter, we originated $97.2 million of recreation loans, $61.7 million of home improvement loans with the weighted average coupon in those portfolios being 15.16% and 9.87% as of December 31. In January, we originated recreation loans at rates averaging around 14.5% and originated home improvement loans at rates averaging around 10%. For the full year, we originated $468.5 million of recreation loans and $224.5 million of home improvement loans.

Our total loan portfolio reached a value of $2.567 billion at December 31, up 3% from a year ago. Total loans included $1.6 billion of recreation loans, $810 million of home improvement loans and $123 million of commercial loans. For the quarter, the average yield on our total loan portfolio increased to 12.26% from 12.01% a year ago. Consumer loans more than 90 days past due were $14.2 million or 0.6% of total consumer loans as compared to $11.4 million or 0.5% a year ago.

Our provision for credit loss was $27.7 million for the quarter, an increase from $18.6 million in the third quarter and $20.6 million in the prior year quarter. During the quarter, we increased the allowance for credit loss in the recreation portfolio by $7.1 million, which accounted for growth in the portfolio and included the recharacterization of certain loans held for sale to held for investment and reflected the higher allowance coverage of 5.32% at the end of the quarter compared to 5.1% a quarter ago.

Provision for credit loss was $1.6 million on commercial loans and reflected an additional $1.4 million of credit allowance on these loans. Additionally, the current quarter provision included a $0.2 million benefit related to taxi medallion loans. The total net benefit related to taxi medallion assets during the quarter was $1.4 million. Net charge-offs in the recreation portfolio during the quarter were $17.9 million, 4.41% on the total average recreation portfolio and 4.53% on the average held for investment recreation portfolio and were $2.2 million or 1.07% of the average home improvement portfolio.

Turning to expenses. Operating costs totaled $22.2 million during the quarter, up from $17.2 million in the prior year quarter. The increase over the prior year was largely due to realization of insurance benefits in the prior year totaling $5.5 million, which reduced costs as well as and to a lesser extent, higher employee costs in the current year.

As we continue to expand our platforms, grow our businesses and look to becoming a sizably larger enterprise over the next several years, we anticipate higher noninterest operating costs. We expect in the long term that the growth in our net interest income will outpace any growth we experienced in operating costs. Over the past 5 years, our loan book has more than doubled, and our annual net interest income has grown 96%, while our noninterest operating expenses have increased by roughly 50%.

More importantly, over the last 5 years, we have seen our book value per share increased 88%, while our tax-adjusted tangible book value has quadrupled. There is a cost to growing, and we'll continue to experience that. However, we continue to believe that it is in the best long-term interest of our businesses and our shareholders. For the quarter, net income attributable to our shareholders was $12.2 million or $0.50 per diluted share, an increase of $2.1 million or $0.07 per share over the prior year quarter.

For the full year, net income attributable to shareholders was $43 million or $1.78 per share, an increase of $7.2 million or $0.26 per share from 2024. Our net book value per share as of December 31 was $17.53, up from $17.07 a quarter ago and $16 a share a year ago. Our adjusted tangible book value per share, which excludes the value of goodwill, intangible assets and the deferred tax liability associated with both was $12.12 at the end of the quarter, up from $11.64 a quarter ago and $10.50 a year ago.

That covers our fourth quarter and full year results. Andrew and I are now happy to take your questions.

[Operator Instructions] The first question comes from Mike Grondahl with Northland Securities.

First question, the provision expense, the $27 million or $27.7 million, how would you characterize that? It was up from the $18 million in 3Q. Is there a little catch-up there? And then what would you think is sort of a normalized provision quarterly in 2026?

Mike, yes, that's a good question because just looking at the numbers, it seems like a pretty sizable increase. But there's a couple of things going on there. One, in Q4, we took the remaining rec loans that we had as held for sale, and we moved them back into held for investment. So that was about a $2.2 million provision hit when we had to book the allowance.

If we go back a year when we moved these loans, it was actually about $100 million we moved out to held for sale when we were contemplating a sale and speaking with potential buyers. That was -- we had about a $4 million gain or benefit. So between the 2 of them, that swing, one is a provision in this year and the other is a benefit last year. That was a $6 million swing that's part of that $7 million.

In addition to that, on a $1.6 million book, our allowance coverage went from 5% last year to 5.32%. So I mean, there's a step-up in allowance that runs through the provision because of that. And then on top of that, we took commercial provisions of about $1.5 million, a little over $1.5 million in Q4, and it was just about $100,000 a year ago. That plus -- I can keep going.

That plus the taxi medallion benefits were kind of light that ran through provision this year. Last year -- this year was only about $200,000. Last year it was $1.7 million. There's a whole list of things that reconcile that difference. Going forward, we wouldn't expect it to be the $2.7 million. It should be something less than that. But when we think about growth, we're looking at mid-teens growth looking in 2026 across our loan book, there'll be a fair amount of put on costs with booking allowances as we grow.

Got it. That's helpful. And then there was a couple of gains, and I know you guys record these from time to time coming out of the commercial book or coming out of the taxicab business. Could you just maybe go over a couple of those, the nature of those, the $8.7 million, is that one portfolio company?

Was it a couple? And then there is -- I think in other, there was like $2.9 million. If you could just highlight a couple of those, the nature of those gains.

Yes. So in the equity gains, there was a little more than half a dozen changes and gains that we recognized throughout the quarter with our equity holdings. And again, that's the $80 million or so that's on our balance sheet. Just about $8.5 million of that is related to 3 specific exits. One was a gain on a warrant.

We -- although we typically don't get them, we did get a warrant about 1.5 years ago on a loan. That portfolio company sold, loan was repaid, and we recognized a gain on that. And the other 2 were actual equity gains. So the 3 of them totaled about that $8.5 million. And then the some small items that reconcile to the full amount that's net on the income statement.

And those other -- those equity gains, one of them, it was actually our oldest portfolio company. We originally made this loan just about 18 years ago. I had a lot more hair back then. And the other one was originated 4 or 5 years ago.

Got it. And that $2.9 million, and I think it was other income, what was that?

Yes. So that's -- there's a whole host of things there, but the biggest piece of that and the biggest component of that is we had -- and it's somewhat abnormal. We usually don't see it this large. We had income related to our CRA investments at Medallion Bank that was approximately $2.7 million.

That's in that number. We wouldn't expect to see numbers that large on a regular basis. And that's just part of the investing we do to get CRA credit. We've got a fair amount of investments in these funds that give us the credit. And over time, they do generate a nice return. That was just an added bonus in Q4.

Great. Great. And then, Andy, a question for you. When you were talking about 2026, you seem to emphasize home improvement a little bit more. That portfolio has sort of been $800 million, I think, the last 5 quarters, give or take a little bit. But you mentioned you had added some talent there.

Can you just talk about your growth outlook for home improvement? And did you add some salespeople? How many? That would be helpful.

Sure. There was a group that used to be at EnerBank, and they moved over when they were sold to Regions Bank. And I've been tracking how well they've been doing through the year. So we approached them and brought them in. I think the Medallion Bank put out a release on this in the last 30 days or so with the person's name.

And we're excited about the growth opportunities there. We think we're going to grow mid-teens, which is substantially above where we've been, as you pointed out, for the last year or 2. This portfolio is tremendous credit. It's 780 or so FICO scores, which is AA+ quality. So it's nice to continue to strengthen our portfolio. That's one of the reasons why we have an investment-grade rating on it. This portfolio continues to perform extremely well, great margins, and I'm happy it's going to be a big part of our growth this year.

Yes. And the thing that I'd add also, Mike, is that unlike rec where we've got a lot more ability to ramp up originations or slow them down because we're dealing with smaller borrowers, the relationships we have with these home improvement contractors and dealers and brokers, it's a little bit different. So there's a lot of lead time involved in preparing for the origination volume that's to come down the line.

So if we go back a year ago, we had to temper expectations with our third parties on what we would be able to do throughout the year just given where capital stood. We've gotten past that hurdle. We were able to raise additional capital at Medallion Bank throughout the year. So now in addition to what Andy said, bringing in this talent, we're able to go back to these partners and say, okay, yes, for 2026, we're committed and we could fund certain levels.

The last thing we wanted to do last year was say, yes, we could originate at a certain level and not be able to do it because of capital constraints. So it was a conscious decision to keep that book somewhat flat throughout the year.

The next question is from Christopher Nolan with Ladenburg Thalmann.

Andrew, congratulations on the step-up. And Anthony, I can't believe that you've had more hair in the past. Anyhow, was the reserve increase driven by CECL? Or did you guys have some discretion on that?

Yes, it's CECL, right? So there's economic factors that go into it as well as our historical charge-off experience. So charge-offs -- Q4 charge-offs are always higher than most other quarters. So that has an impact on it.

And it's a different product. We've seen the loss experience start to come down on the home improvement, and we're happy with that. It's still elevated in rec. So it's just -- I think over time, we'll start to see that settle. But right now, we're not seeing that turn the way we have in home improvement.

Great. And should we -- a follow-up on the previous line of questions. Should we be seeing a growth in the reserve ratio in 2026, percentage of loans?

I wouldn't expect anything significant, although obviously, the allowance is going to grow as we grow the book. The overall economy and how we continue to see these borrowers perform going into -- through Q1 and into Q2, that will drive how we think about that allowance coverage ratio.

Got you. And for the fourth quarter, what were the charge-offs -- net charge-offs? I didn't see the quarterly investor presentation, maybe I missed it.

Sure. So on the home improvement, I think we spoke about this just a few minutes ago. But on home improvement, net charge-offs for Q4 was 107%. On the rec portfolio, if we just base it upon loans held for investment, it was 453. If you look at the total portfolio, those that are held for sale and those held for investment, it was 441.

Great. And given the increase in 90 days past due for rec, should we be seeing a slowdown in the rec originations? And what's causing the erosion of asset quality in the rec portfolio?

Yes. Look, we're compensated for the risk, and we understand that, and we've been doing this type of lending for a long time. So I don't think we're that concerned. But I think what we're seeing -- and as I said, we've committed a whole lot of resources in terms of manpower, technology and capital to building out our systems over the past several years.

We're going to continue to do that. One of those investments is on a data analytics team that looks at the performance of our portfolio, current, past and what we expect it to be going forward. And one of the things that we're trying to do, and we see that in where we're originating in January is maybe we're outside of the market in terms of rate, a little too high.

So by bringing that down, January, we originated at 14.5%, maybe by bringing that down, we think that, that's going to generate better credit performance. We're still getting -- on paper, we're still getting the same borrower, but we think that they're actually going to perform better based upon all the data that we have.

So we should see net interest margin coming a little bit, right?

Yes, it will have an impact on net interest margin, right? So we'll see that maybe it will probably drop below the 8%. But when you look at the credit adjusted yield, we think that, that long term is going to be better than what we're seeing now.

Great. Final question for Andrew. Thank you for all the strategic commentary that you made. Does this put on the table potential for acquisitions and/or a sale of the company? And have you gotten any signals from regulators indicating that they'd be receptive to that?

Nothing is top of mind. The nice thing is that the ILC charters seem to be more acceptable now from the government agencies. Several of them have been approved for the first time in many years. So the potential for a change of control, I'd say, exists today. I don't see us really buying any businesses in the near term.

I think there's just so much growth potential in the ones that we have. In terms of a sale, again, nothing come to mind, but I mentioned EnerBank before. and EnerBank is a bank that's sold for roughly 2 to 3x book value and 20 to 25x earnings. So if we ever got that price, I think we pulled the trigger, which is a significant premium. But I don't see us really doing anything now. I want to continue to do -- I mean in the last 5 years, we've made more than we have in the first 85 combined.

So things are flowing really well for us today. Dividends have been going up. Buybacks should continue to go up. Earnings have been going up. So I think we're on a great course right now.

This concludes the question-and-answer session. I would like to turn the conference back over to Andrew Murstein for closing remarks.

Thank you. And before closing the call, I'd just like to reaffirm my strong commitment to Medallion in my expanded role as CEO. As I mentioned earlier, my priority is to build upon the strong foundation we've established while thoughtfully expanding our capabilities and market presence in a disciplined manner.

Having served as President for many years, I've been deeply involved in shaping our direction over the past few decades, and this transition represents a continuation of the leadership principles, a long-term approach that have guided us successfully over the years. We'll remain focused on disciplined growth, operational excellence across our business lines and prudent capital allocation.

I'm very proud of what our team has accomplished and even more confident in what we can achieve together going forward. Our commitment to our shareholders remains strong, evidenced by our consistent earnings, our strategic buybacks and our dividend. I just want to thank our employees, partners and shareholders for your continued trust and support.

We look forward to updating you on our progress next quarter, and I hope you all have a great rest of your day. Thank you again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to Medallion Financial Corp. Third Quarter of 2025 Earnings Call. [Operator Instructions] Also, please be aware that today's call is being recorded.

I would now like to turn the call over to Val Ferraro, Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Medallion Financial Corp.'s Third Quarter Earnings Call. Joining me today are Andrew Murstein, President and Chief Operating Officer; and Anthony Cutrone, Executive Vice President and Chief Financial Officer.

Certain statements made during the call today constitute forward-looking statements. 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.

Thank you, and good morning, everyone. We are pleased with the strong performance we delivered in the third quarter of 2025. As compared to the third quarter of last year, our net income was $7.8 million, $11.3 million when excluding a nonrecurring $3.5 million charge related to the redemption of preferred stock at Medallion Bank, supported by a 6% increase in net interest income to $55.7 million and continued momentum across our core lending verticals.

We also saw a further improvement in net interest margin on both gross and net loans, which is reflected in our earnings. During the quarter, we redeemed the Series F preferred stock at Medallion Bank. While that resulted in a onetime $3.5 million charge to earnings, it lowers our ongoing cost of capital at the bank and positions us well going forward.

Across the portfolio, we continue to execute effectively with meaningful contributions from our recreation, home improvement and commercial lending lines. Total loans reached $2.559 billion and loan originations came in at $427 million for the period, an increase from both the previous quarter and year-over-year. This improved performance reflects the continued strength across our lending segments, driven by disciplined execution and strategic positioning, which I will now walk through in further detail.

I'll start with consumer lending, our largest and most profitable business line, which continues to anchor our performance with interest income of $74.1 million for the quarter, growing 5% as compared to the same period of last year despite consumer lending originations being $201.4 million as compared to $235.6 million a year ago. Within the consumer lending segment, the recreational loan book grew 3% to $1.603 billion at September 30, 2025, representing 63% of our total loans. Originations also grew slightly to $141.7 million compared to $139.1 million a year ago, and interest income rose 4% to $53.6 million. Delinquencies of 90-plus days were just 0.57% of gross recreational loans and the allowance for credit losses was 5.1% to reflect expected seasonal and economic dynamics as compared to 4.53% a year ago.

The home improvement loan book decreased modestly to $804 million at September 30, 2025, representing 31% of our total loans. Originations were $59.7 million versus $96.5 million last year. Delinquencies of 90-plus days were just 0.16% of gross home improvement loans and the allowance for credit losses was 2.55% compared to 2.42% a year ago. Importantly, we are originating loans to individuals in these niches that have strong credit quality with average FICOs on new originations now 688 for rec and 779 for home improvement. The vast majority of our book falls within super prime to near prime, which has moved up over the years.

Moving on to our commercial segment, which continues to deliver meaningful equity gains. We had new originations of $17.5 million during the quarter, and the portfolio grew to $135.1 million with an average interest rate of 13.71%. Additionally, as of September 30, we had nearly 3 dozen equity investments with a book value of just $9.3 million on our balance sheet. These equity components are a result of our long-term strategic investments. And while the timing of exits is inherently unpredictable, we remain confident in our pipeline.

During the quarter, gains from equity investments were modest, generating $300,000 of income, but have generated $15.8 million year-to-date, and we do expect more realizations in the coming quarters. Our strategic partnership program, whereby we earn an origination fee and about 3 to 5 days of interest on holding loans before selling them back to the partner had its fourth straight quarter of over $120 million of originations, reaching a record level of $208.4 million this quarter. Total loans held as of quarter end under the strategic partnership program were $15.3 million. Most of these loans are outside of rec and home improvement and are mostly offered as employee benefits by large employers and loans for unplanned or elective medical procedures.

Although this program represents a small part of fees and interest generated from Medallion Financial, approximately $1.5 million in total this quarter, it has nearly tripled from a year ago and continues to expand each quarter and represents further diversification of our income sources. 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.

Turning to our taxi medallion assets. We collected $6.1 million of cash during the quarter, which resulted in net recoveries and gains of $3.4 million. Net taxi medallion assets declined to just $5.1 million and now represents less than 0.2% of our total assets. Despite the small size, these assets continue to generate cash. And with more than $150 million of charge-off medallion loans, a majority in New York City, we believe there continues to be recovery opportunities.

From a capital allocation perspective, we remain committed to returning capital to shareholders. During the quarter, we paid a quarterly dividend of $0.12 per share. And although we did not repurchase any shares this quarter with $14.4 million remaining under our $40 million repurchase program, we would expect to see additional purchases in the quarters to come, enhancing the return we provide to shareholders.

From a credit perspective, we continue to benefit from a diversified portfolio, prudent underwriting standards and attractive returns on our lending activities. Our approach is highly analytical and data-driven, supported by advanced digital tools that help optimize underwriting, origination, servicing and overall portfolio visibility. These capabilities allow us to assess risk with precision and maintain consistently strong performance across operating environments.

With solid execution across our businesses, a disciplined approach to credit and strong demand for our loan products, we believe we are well positioned to deliver sustainable growth and attractive shareholder returns over the long term.

With that, I'll now turn it over to Anthony, who will provide some additional insights into our quarter.

Thank you, Andrew. Good morning, everyone. For the third quarter, net interest income grew 6% to $55.7 million from the same quarter a year ago. Our net interest margin was 8.21%, up 10 basis points from a year ago. Our total interest yield increased 17 basis points from a year ago to 11.92%, and the average interest rate on our deposits was 3.82% at the end of September, up just 1 basis point from the prior quarter.

During the third quarter, we originated $141.7 million of recreation loans at an average rate of 15.77% and $59.7 million of home improvement loans at an average rate of 10.9%. We continue to originate both recreation and home improvement loans at rates above our current weighted average coupon in these portfolios with new originations in October at rate averaging around 15.5% for rec loans and averaging around 10.5% for home improvement loans.

Our loan portfolio reached a value of $2.559 billion at September 30, up 3% from a year ago and included both loans held for investment and those loans held for sale. Total loans included $1.6 billion of recreation loans, $804 million of home improvement loans, $135 million of commercial loans and $15.3 million of strategic partnership loans. For the quarter, the average yield on our total loan portfolio increased 27 basis points from a year ago to 12.39%. Consumer loans more than 90 days past due were $10.2 million or 0.43% of total consumer loans as compared to $9 million or 0.39% a year ago.

Our provision for credit loss was $18.6 million for the quarter, a decrease from $21.6 million in the second quarter and a decrease from $20.2 million in the prior year quarter. During the quarter, we increased the allowance for credit loss in the commercial loan portfolio by $300,000 as well as increasing the allowance for credit loss on our consumer loans given both seasonality and economic uncertainties, which resulted in additional provision of $3.9 million, $3.8 million of which was related to recreation loans with the remainder tied to home improvement loans. Additionally, the current quarter provision included $1.7 million of benefits related to taxi medallion loans. Total net benefits related to taxi medallion during the quarter were $3.4 million. Net charge-offs in the recreation portfolio during the quarter were $12.9 million or 3.36% of the average portfolio and were $2.1 million or 1.03% of the average home improvement portfolio.

Turning to expenses. Operating costs totaled $20.7 million during the quarter, up from $19 million in the prior year quarter. The $1.7 million increase over the prior year included costs associated with technological initiatives surrounding our servicing platform and capabilities, resulting in higher third-party professional services and higher depreciation expense. As we've said in the past, the upgraded platform allows for greater flexibility in the servicing of our consumer loans with a fair amount of self-service tools, which we believe will add to an improved customer experience and greater efficiencies long term. Again, as previously disclosed, these costs are expected to remain elevated in comparison to prior years as we continue to expand our capabilities and incur the cost of the customized platform. Employee costs increased roughly $700,000 from a year ago, both as a function of retaining talent as well as enhancing our talent pool.

For the quarter, net income attributable to shareholders was $7.8 million or $0.32 per diluted share. Net income to shareholders included a nonrecurring charge of $3.5 million, an impact of $0.14 related to the redemption of Medallion Bank Series F preferred stock. Excluding this nonrecurring charge, earnings would have been $11.3 million compared to $8.6 million or $0.37 per share earned in the prior year quarter.

Our net book value per share as of September 30 was $17.07, up from $16.77 a quarter ago and $15.70 a year ago. Our adjusted tangible book value, which excludes the value of goodwill, intangible assets and the correlated deferred tax liability associated with both was $11.64 at the end of the quarter, up from $11.32 a quarter ago and $10.17 a year ago.

That covers our third quarter results. Andrew and I are now happy to take your questions.

[Operator Instructions] And our first question here will come from Christopher Nolan with Ladenburg Thalmann.

Anthony, was the operating EPS $0.46 a share?

Yes. So $0.32 and $0.14 on that $3.5 million charge on the redemption of the bank's Series F, that would get you to $0.46.

And then were there any loans sold in the quarter?

No. No, we still have -- other than within the strategic partnership program, we still have a fair amount of recreation loans that we do anticipate selling. I don't know if it will happen in Q4, but we are targeting sometime in the next couple of quarters. What we're seeing is with the capital levels we have at the bank, that might not be necessary. So we'll -- as something comes together, we'll determine whether or not we want to bring those back and hold them or if we want to continue to sell them.

Okay. And then I noticed that on the income statement, noncontrolling income increased quarter-over-quarter. And on the balance sheet, noncontrolling interest decreased. Does that relate to the Series F redemption?

Yes. So the decrease in the -- on the balance sheet is the redemption of the Series F, that's correct. And on the income statement, we broke it out. So you've got the $3.5 million on the redemption of the Series F and also the interest -- the dividend -- the preferred dividend on those on the SBLF and the Series G, that's going to be recurring. That's 9% of that noncontrolling interest. That's what we would expect to see going forward.

So we should see -- what should be the noncontrolling income quarterly going forward on a run rate?

It's the $2.33 million.

Versus $1.5 million, which was roughly the run rate earlier, correct?

Right, right. So in our noncontrolling interest, the preferred stock of the bank has increased over the last year, so it's gone up. And the Series F a year ago had an 8% coupon. The Series G has a 9%, which is higher than last year, but lower than what the Series F stepped up to in Q2.

Got it. Final question, and I guess for Andrew. Given the government shutdown, do you guys have exposure to government employees?

No.

Yes, nothing that would affect us at all.

And our next question will come from Mike Grondahl with Northland Securities.

This is Logan on for Mike. First, congrats on the continued growth of the strategic partnership loans. Could you give us some color on how you guys are viewing strategic originations and fees in 2026?

That's been growing for quite some time now. We're pleased with the way it's been performing the last several quarters. We're going to try to bring on 1 or 2 new partners in the next 1 to 2 quarters. And therefore, I think, you're going to see a continued increase in performance there. The volume should go up significantly probably if we're able to contract with those firms. And even if we don't, I think, the volume is just ramping up nicely on its own.

Great. Then can you provide some color on why recreation originations were flat year-over-year and what your outlook is for that segment?

Part of it is just the capital. We were -- we raised our credit standards in the last several quarters. We didn't complete our offering. I think it was May or so. So we were just cautious. We didn't know if we were going to be able to successfully close the transaction. We thought we would. But until it's in your -- money is in the bank, so to speak, you never know for sure. But now that we're able to use that money and leverage it up with low-cost deposits, I think, you're going to see accelerated growth in the next several quarters.

Got it. And then with the Fed cutting rates yesterday for the second time, how should we be thinking about margins going forward?

Yes. I think the trend we saw in Q3 with margin expansion is something we would think continues. We're currently writing loans at rates above where our WACC sits. So we would expect our yield to continue. We should start to see some drop in cost of funds over the next couple of quarters, but it might take another quarter or 2. So I wouldn't expect any additional compression, but we should start to see some expansion -- further expansion in the coming quarters.

Got it. And then one last one from us. How do you feel about overall loan growth going forward?

I think we all feel pretty positive about it. It should grow closer to what it was several years ago when we had the excess capital. And again, we have it now. We also brought in a significant group that was doing home improvement lending. And they just started with us a couple of weeks ago. And I'm hearing great things about their names and reputations, and we may put out a release about it in the next few weeks, but that should really be a supercharge for us. I think if they can perform like we believe they can, I think that's going to really accelerate the home improvement lending.

And with that, we will conclude our question-and-answer session. I'd like to turn the conference back over to Andrew for any closing remarks.

Thank you. Before closing the call, as many of you know, the Board of Directors appointed me into an expanded role as CEO starting January 31, 2026, and I'm truly excited about this opportunity to build on our momentum and continue driving the company forward. I'm going to continue to work closely with our leadership team to assess performance across all of our business lines, identify new opportunities and ensure we remain agile in a rapidly evolving market environment.

Over the past quarters, our focus has been on executing our strategic priorities, strengthening our operational foundation and positioning the company for sustainable long-term growth. As we approach the end of the year, we're proud of the strong performance we've achieved so far in 2025 and remain confident that we will continue to deliver solid results in the final quarter of this year.

Moving forward, we plan to maintain the growth strategy that has guided our lending business successfully over the past several years. Our commitment to our shareholders remains strong, evidenced by our consistent earnings, our strategic buyback and our dividend.

Thank you again for your investment and interest in Medallion, and have a great rest of your day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Good day, and welcome to the Medallion Financial Corp. second quarter earnings conference call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Val Ferraro. Please go ahead.

Thank you, and good morning. Welcome to Medallion Financial Corp.'s second quarter earnings call. Joining me today are Andrew Murstein, President and Chief Operating Officer; and Anthony Cutrone, Executive Vice President and Chief Financial Officer.

Certain statements made during the call today constitute forward-looking statements. 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.

Thank you, and good morning, everyone. Before discussing our second quarter performance for all of you new to our story, I would like to start by providing an overview of Medallion Financial. Medallion Financial is a specialty finance company primarily operating via 2 subsidiaries: Medallion Bank and Medallion Capital.

Medallion Bank is an industrial bank, a special and unique banking charter. These charters are highly sought-after, and there are only about 15 of them in the U.S. We are not a bank holding company and not regulated by the Fed, but through Medallion Bank are able to take in FDIC-insured deposits, thus giving us a low-cost dependable funding source for our lending business.

We originate and service a growing portfolio of consumer loans, working with more than 4,000 dealers, contractors and financial service providers to finance RVs, boats, collector cars, other consumer recreational equipment and home improvements. We also offer loan origination services via our fintech strategic partners. Medallion Bank recently raised over $75 million through a public offering of noncumulative perpetual preferred stock that trades under the symbol MBNKO on the NASDAQ.

Medallion Capital is a small business investment company, or SBIC, with its founding dating back to the 1980s. As an SBIC, Medallion Capital is able to access 10-year debentures from the Small Business Administration. These debentures, along with capital, are what fund our growing commercial loan portfolio. While most SBICs have a finite life, Medallion Capital has a permanent capital base, which has allowed it to operate and grow for nearly 4 decades. This unique structure is advantageous and allows us to invest over a longer time horizon than many of our competitors. Medallion Capital originates and services mezzanine loans in various commercial industries and has an equity investment in many of the portfolio companies it finances.

Now moving on to our quarterly results. We are very pleased with our second quarter performance. As compared to the second quarter of last year, our net income increased 56% to $11.1 million, and our earnings increased to $0.46 per share. Net interest income also increased 7% to $53.4 million, and our net interest margin remained steady at 8.09%. This improved performance reflects the continued strength across our lending segments, driven by disciplined execution and strategic positioning, which I will now walk through in further detail.

I'll start with consumer lending, our largest and most profitable business line, which continues to anchor our performance. While total originations for both recreational and home improvement segments were lower at $197 million compared to $277.6 million a year ago, interest income rose 9% to $71.2 million. The recreation loan book grew modestly to $1.55 billion, representing 62% of our total loans. While originations were lower at $142.8 million compared to $209.6 million a year ago, interest income rose 8% to $51.1 million. Delinquencies of 90-plus days were just 0.49% of gross recreational loans and the allowance for credit losses was 5.05% to reflect expected seasonal and economic dynamics as compared to 4.35% a year ago.

The home improvement loan book also grew modestly to $803.5 million as of June 30, 2025, representing 32% of our total loans. Originations were $54.3 million versus $68 million last year. Delinquencies of 90-plus days were just 0.16% of gross home improvement loans, and the allowance for credit losses was 2.54% compared to 2.38% a year ago. Importantly, we are originating loans to individuals in these niches that have strong credit quality with average FICOs and new originations now 687 for recreational 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.

Our commercial segment continues to deliver meaningful equity gains. It generated $3.3 million of income this quarter, and equity gains have now generated a total of $27.6 million of income over the past 8 quarters. The portfolio grew to $121.4 million with an average interest rate of 13.43%. Additionally, as of June 30, we had more than 30 equity investments with a book value of just $8.1 million on our balance sheet. These equity components are a result of our long-term strategic investments. And while the timing of exits is inherently unpredictable, we remain confident in our pipeline.

Our strategic partnership program, whereby we earn an origination fee and about 3 to 5 days of interest on holding loans before selling them back to the partner, had its third straight quarter of over $120 million of originations, reaching a record level of $168.6 million this quarter. Most of these loans are outside of rec and home improvement and are mostly offered as employee benefits by large employers and loans for unplanned or elective medical procedures. Although this program represents a small part of fees and interest generated from Medallion Financial, approximately $1.2 million this quarter, this business continues to expand each quarter and represents a further diversification of our income sources. 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.

Turning to our taxi medallion assets. We collected $2.3 million of cash during the quarter. Net taxi medallion assets declined to just $5.9 million and now represent less than 0.3% of our total assets. Despite the small size, these assets continue to generate cash and with more than $150 million of charge-off medallion loans, a majority in New York City, we believe there continues to be recovery opportunities.

From a capital allocation perspective, we remain committed to returning capital to shareholders. During the quarter, we repurchased more than 48,000 shares of our stock and have approximately $14.4 million remaining under our $40 million repurchase program. Additionally, we paid a quarterly dividend of $0.12 per share, representing a 20% increase year-over-year and marked the third increase to our dividend since we reinstated it 3 years ago. Overall, we remain encouraged by the momentum across our business lines and believe we are well positioned for continued success.

With that, I'll now turn it over to Anthony, who will provide some additional insight into our quarter.

Thank you, Andrew. Good morning, everyone. For the second quarter, net interest income grew 7% to $53.4 million from the same quarter a year ago. Our net interest margin on gross loans was 8.09%, down 3 basis points from a year ago. Our total interest yield increased 23 basis points from a year ago to 11.75%, and the average interest rate on our deposits was 3.81% at the end of June.

During the second quarter, we originated $142.8 million of recreation loans at an average rate of 15.96% and $54.3 million of home improvement loans at an average rate of 11.57%. We continue to originate both recreation and home improvement loans at rates above our current weighted average coupon in these portfolios, with new originations in July at rates averaging around 16% for recreation loans and averaging around 11% for home improvement loans.

Our loan portfolio was $2.49 billion at the end of June, up 4% from a year ago and included both loans held for investment and loans held for sale. Total loans included $1.5 billion of recreation loans, $803.5 million of home improvement loans and $121.4 million of commercial loans. For the quarter, the average yield on our loan portfolio increased 29 basis points from a year ago to 12.27%. Consumer loans more than 90 days past due were $8.6 million or 0.37% of total consumer loans as compared to $11.4 million or 0.49% at the end of 2024 and $7.2 million or 0.33% a year ago.

Our provision for credit loss was $21.6 million for the quarter, a decrease from $22 million in the first quarter and an increase from $18.6 million in the prior year quarter. During the quarter, we increased the allowance for credit loss in the commercial loan portfolio by $2.9 million as well as increasing the allowance for credit loss on our consumer loans, which resulted in an additional provision of $3.7 million, $3.5 million of which was related to recreation loans and $200,000 tied to home improvement loans.

In addition, the current quarter provision included $600,000 of benefits related to taxi medallions. The total net benefits related to taxi medallions during the quarter were $1.4 million. Net charge-offs in the recreation portfolio during the quarter were $11.9 million or 3.25% of the average portfolio and were $3.8 million or 1.87% of the average home improvement portfolio.

Turning to expenses. Operating costs totaled $21.5 million during the quarter, up from $20 million in the prior year quarter. The increase over the prior year included costs associated with technological initiatives surrounding our servicing platform and capabilities. These initiatives will allow for greater flexibility in the servicing of our consumer loans with a fair amount of self-service tools, which we believe will add to an improved customer experience and greater efficiency long term. These costs are expected to remain elevated in comparison to prior years as we continue to expand our capabilities and incur the costs of the customized platform.

Employee costs increased roughly $700,000, both as a function of retaining talent as well as enhancing our talent pool. For the quarter, net income attributable to our shareholders was $11.1 million or $0.46 per diluted share. Our net book value per share as of June 30 was $16.77, up from $16.36 a quarter ago and $15.25 a year ago. Our adjusted tangible book value per share, which excludes the value of goodwill, intangible assets and the correlated deferred tax liability associated with both was $11.32 at the end of the quarter, up from $10.90 a quarter ago and $9.74 a year ago.

That covers our second quarter results. Andrew and I are now happy to take your questions.

[Operator Instructions] Our first question comes from Christopher Nolan with Ladenburg Thalmann.

Congratulations on the quarter. What were the strategic partners that you sold the loans to identified? I didn't see it.

No. Are you referring to the loan sale that generated the $1.3 million?

Correct.

Yes. So those weren't the strategic partnership loans. Those were actual rec loans. We had started talking with a couple of different potential buyers 6 or 7 months ago, and we closed a sale of about $53 million in April. So those were our typical rec loans that we usually hold on the balance sheet.

Okay. And is that going to be an ongoing thing?

Yes, I wouldn't expect to see it on a quarterly basis every quarter, but we do think it's a good way for us to keep the engine going with our origination platforms. There's clearly an appetite for this type of loan product, so we do expect to do more of these in the future.

And the strategic loan, those remain on the balance sheet, if I understand it correctly. Is that right?

They remain on the balance sheet only for 5 days, I think, on average is the hold period. So we'll fund these loans. We do our diligence. We fund these loans. And then 5 days later, the partner or a related entity of the partner would buy these loans back from us.

Got you. Were there any nonrecurring items in the quarter aside from the gains?

Other than the $1.3 million gain on the loan sale, which we'll probably see more of those as we get through the upcoming quarters, I don't think there's anything that I would call out as nonrecurring. Everything that's going on right now is core to our business.

Got you. And then I guess, with the fair value loans, should we start seeing more regular gains and losses on the income statement as the values of those fluctuate?

So we -- so the -- I think the fair value portfolio of these loans sits right around $60 million right now. So we hold them at the lower of amortized cost or fair value. So currently, fair value is higher, which is why we were able to book a gain. So we don't intend on marking those loans up until there's actually an exit. If something were to happen in the market and we couldn't sell these loans, that portfolio, obviously, we would have to take a charge and mark those down. But we would only expect to see gains going forward upon the exit.

Okay. Final question, and I apologize for the string of questions, but this is an important one.

Yes, no problem. That's why we're here.

Your reserve ratio is going up. Your capital ratios are going up, which are all good things, and it gives you some flexibility. What's the thinking in terms of managing both the reserves and the capital levels going forward?

Yes. So the capital, particularly at the bank, our capital went up significantly during the quarter, and that's driven by the offering we did in May, raising $77.5 million of perpetual preferred stock. We think we've got ample capital to continue growth now. We should expect growth higher than what we've seen in the past 2 quarters. And we still target, on average, that high single digits growth rate long term. In terms of allowance, I think that's more of a function of us managing our growth and really ties to the economics of the overall economy as well as the performance of the portfolio.

Our next question comes from Mike Grondahl with Northland Securities.

This is Logan on for Mike. It appears like rec loan delinquency seems to be trending up year-over-year. Is there anything to call out on that?

No, nothing to call out. We've spoken about it in the past. Probably halfway through 2023, we took a big step-up in the credit and the type of loans that we wanted to write while maintaining the yield that we get on these loans. I think what we're seeing in terms of delinquency is that those older vintages pre that big step-up in credit where the charge-offs remain slightly elevated and the performance isn't as good. We're definitely seeing improved performance in our newer vintages, and that's the type of loans that we're writing currently. So we would expect that to improve as the quarters and years go by.

Great. That's good to hear. And then when excluding strategic partnership loans, originations were down about $78 million year-over-year. Is this just due to a tightening of underwriting? Any color there would be great.

Yes. I think it's our underwriting standards. It's managing capital. One of the things that we've got to do is make sure that we've got enough capital, not just for today, but based upon our projections. I think with this additional capital that we've raised, we'll be able to grow and put more originations and more loans on the book. I wouldn't expect it to all happen in Q3. It's a slow process, but we do think that with this capital, we could see that origination number go up.

Yes, that makes sense. And then for clarification purposes, can you walk us through the unit economics of these strategic partnership loans and how they compare to consumer loans?

Sure. So the way that works is we have about 5 fintech partners. We hope to sign another large one in the next 90 days or so. But the ones that we have, they'll send us their loans. We'll fund them. We'll charge a fee, it ranges from 20 basis points to 50 basis points. And then we'll get the float for a couple of days, as Anthony mentioned, about 5 days or so. So the float adds nicely to our numbers because these yields are about 20% interest rates. They're a lot higher than our typical consumer loans.

And one last one from us. Anything else to call out in terms of outlook for loan growth, margin and credit quality going forward?

Yes. No, I don't think there's anything to call out. As I think we just spoke about, we would expect to maintain our current credit standards. We're not looking to reduce rates, although we do want to -- we are mindful of competition, and we don't want to price ourselves out of the market. In terms of margin, we're hovering around that 8-ish where we've been for a number of quarters now. We would expect it to remain in that realm over the next few quarters with some expansion coming when we start to see interest rates eventually fall.

And 8-ish, as you know, is a big number. It's 800 basis points or so, which is a pretty high standard compared to where other banks are getting their net interest margins these days.

Great. Congrats on the quarter.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Murstein for any closing remarks.

Thank you. As mentioned, we're pleased with our performance through the first half of the year. As we move into the second half of the year and beyond, we will remain focused on delivering value to our shareholders through the execution of our prudent growth strategy. Our commitment to our shareholders remains strong, evidenced by our ongoing delivery of earnings, our opportunistic buybacks and our recently increased dividend.

As always, if you have any questions, please feel free to contact our Investor Relations team. The contact info is on the last page of our earnings supplement as well as the IR section of our website. Thank you again for your time and interest in Medallion. Have a great rest of your day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.