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MF

MEDALLION FINANCIAL CORP (MFIN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clear beat: diluted EPS of $0.50 versus Wall Street consensus of $0.365*, and revenue of $87.0M versus $51.7M consensus*, underpinned by $9.43M equity gains and a stronger non-interest income mix . The board raised the quarterly dividend to $0.12 per share, signaling confidence in cash generation .
  • Net interest margin on gross loans ticked up sequentially to 7.94% (from 7.84% in Q4), despite elevated funding costs; provision for credit losses increased to $22.0M given seasonality and macro caution .
  • Strategic partnership originations accelerated to $136.2M, with management indicating durability of $100M+ per quarter and fees of 15–65 bps; a $53M loan sale closed at a 5% premium in early May, supporting near-term noninterest gains .
  • Key near-term stock catalysts: ongoing equity monetizations at Medallion Capital, incremental loan sales at premiums, and sustained strategic partnership flow, offset by higher provisioning and funding costs commentary .

What Went Well and What Went Wrong

What Went Well

  • EPS beat and revenue outperformance: $0.50 diluted EPS and $87.0M revenue (interest + other), both above consensus; management highlighted strong origination and equity gains (“We originated more than $280 million of loans…generated strong equity gains”) .
  • Sequential margin improvement and credit trends: gross NIM rose to 7.94%; consumer loans 90+ DPD improved to $8.7M (0.37%) from year-end; management noted improved delinquencies and healthier borrower profiles (FICO 685 rec, 781 home improvement) .
  • Capital actions and strategic momentum: dividend increased to $0.12 and buybacks of ~60k shares; strategic partnership volume $136.2M with management expecting “$100M+ per quarter” durability .

What Went Wrong

  • Higher provisioning and operating costs: provision rose to $22.0M, including a $3.1M commercial allowance (tariffs and macro) and $1.4M consumer qualitative add; OpEx increased on technology investments and proxy/legal costs .
  • Recreation net charge-offs elevated: $16.4M (4.67% of average portfolio), reflecting seasonal pressures; home improvement charge-offs at $3.1M (1.55%) .
  • Funding costs still a headwind: average deposit rate at 3.75% and cost of funds at 4.16% YoY higher; management expects margins to “stick around here” absent rate declines .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$76.996 (Interest $76.409 + Other $0.587) $80.761 (Interest $76.519 + Other $4.242) $87.024 (Interest $75.425 + Other $11.599)
Diluted EPS ($)$0.37 $0.43 $0.50
Net Interest Margin on Gross Loans (%)8.11% 7.84% 7.94%
Net Interest Income ($USD Millions)$52.737 $52.012 $51.412
Provision for Credit Losses ($USD Millions)$20.151 $20.572 $22.014
Net Income ($USD Millions)$8.611 $10.142 $12.014

Note: Revenue defined as total interest income + total other income.

YoY and Estimate Comparison (Q1 focus)

MetricQ1 2024Q1 2025 ActualQ1 2025 Consensus
Revenue ($USD Millions)$72.473 (Interest $67.070 + Other $5.403) $87.024 $51.733*
Diluted EPS ($)$0.42 $0.50 $0.365*
Net Interest Margin on Gross Loans (%)8.10% 7.94% N/A

Values retrieved from S&P Global.*

Segment Breakdown (Q1 2025)

MetricRecreationHome ImprovementCommercial
Originations ($USD Millions)$86.8 $48.8 New + follow-on $9.7 (call detail)
Loans Outstanding ($USD Millions)$1,500 (62% of total loans) $812.4 (33% of total loans) $116.1
Interest Income ($USD Millions)$50.5 $19.8 N/A
Avg Interest Rate (%)15.01% (15.10% ex-HFS) 9.83% 13.14%
90+ DPD ($, %)$7.1 (0.48%) $1.5 (0.19%) N/A
Allowance for Credit Loss (%)5.00% (HFI) 2.49% Commercial allowance increase $3.1M (Q1)

KPIs (Q1 2025 unless noted)

KPIValue
Total Loan Originations ($USD Millions)$281.6
Strategic Partnership Originations ($USD Millions)$136.2
Total Loans ($USD Billions)$2.5
Interest Yield (%)11.65%
Average Loan Portfolio Yield (%)12.04%
Average Deposit Rate (%)3.75%
Cost of Funds (%)4.16% (YoY +49 bps)
Net Charge-offs – Recreation$16.4M; 4.67% of average portfolio
Net Charge-offs – Home Improvement$3.1M; 1.55% of average portfolio
Provision for Credit Losses ($USD Millions)$22.014
Taxi Medallion Cash Collections ($USD Millions)$2.6
Book Value per Share ($)$16.36 (Mar 31)
Adjusted Book Value per Share ($)$10.90 (non-GAAP)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ2 2025 onward$0.11 (Q4 board action) $0.12 declared for May 30, 2025 Raised
Loan sale program2025LOI to sell up to $121M at premium (Dec 2024) Closed $53M sale at ~105 price; gain ~2–2.5% expected; additional sale targeted Q3/Q4 Executed; continued
Net interest margin outlookFY 2025Not previously providedMargin to “stick around here”; limited expansion until rates decline Maintained
Total loan growthFY 2025Not previously providedExpect ~5–7% growth; will not chase growth New
Strategic partnership volumeFY 2025Highest volume in Q3 2024 at $40M Durable $100M+ per quarter; fees 15–65 bps Raised outlook
Operating expensesFY 2025N/ATech-servicing platform costs to remain elevated; proxy/legal up YoY Maintained elevated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Net interest margin and funding costsGross NIM 8.11%; offset rising borrowings Gross NIM 7.94%; deposit rate 3.75%; margin to “stick around” Stable to slight improvement QoQ; constrained by rates
Strategic partnership programQ3: $40M; building pipeline $136.2M originations; durable $100M+ per quarter; 15–65 bps fees Accelerating and more durable
Equity gains (Medallion Capital)Q4: $3.8M quarterly; $6.9M FY gains $9.43M gains; 1–2 more exits possible in 2025 (timing uncertain) Positive, opportunistic
Taxi medallion recoveriesQ3: cash collections $4.1M $2.6M cash collections; total net assets $6.8M Lower than Q3; still contributing cash
Credit provisioningQ3/Q4 provisions $20.2M–$20.6M $22.0M; added $3.1M commercial (tariffs/macro) + $1.4M consumer qualitative Higher caution
SEC matterQ4: recorded $3.0M penalty and $5.5M insurance benefit Management believes resolved pending approvals; costs “essentially zero” in Q1 De-risking

Management Commentary

  • “We originated more than $280 million of loans during the quarter, with strategic partnership loans accounting for nearly half… We saw delinquencies in both of our consumer loan portfolios improve from a quarter ago.” — Andrew Murstein
  • “Our net interest margin on gross loans was 7.94%… with the decrease YoY overwhelmingly attributable to our cost of funds increasing 49 basis points to 4.16%.” — Anthony Cutrone
  • “These [tech servicing] initiatives will allow… self-service tools… improved customer experience and greater efficiency long term… costs are expected to remain elevated.” — Anthony Cutrone
  • “We would expect to see maybe 1 or 2 more [equity] gains this year… timing is hard to predict.” — Andrew Murstein
  • “We do have flexibility to use judgment [CECL]; we did that… $1.4M consumer provisions qualitative.” — Andrew Murstein

Q&A Highlights

  • Normalized earnings: Adjusting for $9.4M equity gains, $1.7M taxi medallion benefits, and nonrecurring items, EPS of $0.50 would be “somewhere around $0.35,” with a $3.1M commercial allowance likely non-recurring .
  • Reserve methodology: Management applied qualitative overlays under CECL to consumer portfolios ($1.4M), indicating proactive risk management discretion .
  • Loan sales and gains: Q2 sale closed at ~$105 price ($53M), implying ~2–2.5% gain after costs; additional sale targeted Q3/Q4 .
  • Strategic partnerships: 4–5 partners; fees 15–65 bps; management expects “$100M+ per quarter” volume and noted competitor disruptions sending business their way .
  • Margin and growth outlook: Margins to hold near current levels; guided loan growth ~5–7% with discipline amid macro uncertainty .

Estimates Context

  • Q1 2025 beat: EPS $0.50 vs $0.365 consensus*; revenue $87.024M vs $51.733M consensus*, both with two estimates in coverage* .
  • Implications: Consensus likely to revise up near-term given higher noninterest income (equity gains, strategic partnership fees) and confirmed loan sale gains; caution persists around provisioning and funding costs .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Strong beat with diversified drivers (equity gains, partnership fees) and a sequential NIM uptick; dividend lifted to $0.12 reinforces capital return narrative .
  • Expect continued noninterest catalysts: further equity monetizations (1–2 possible in 2025) and incremental loan sales at premiums, supporting earnings variability on the upside .
  • Provisioning likely elevated near term (seasonality/macro/tariffs); monitor recreation charge-off trajectory and consumer qualitative overlays for credit normalization signals .
  • Strategic partnership flow appears durable at $100M+ per quarter; fee-based revenue (15–65 bps) and quick-turn interest add resilience while diversifying beyond core consumer segments .
  • Margin expansion constrained by rate backdrop (deposit 3.75%; cost of funds 4.16%); upside to margins requires broader rate declines or improved funding mix .
  • Full-year loan growth guided to ~5–7%; management prioritizes credit quality over volume—constructive for franchise value in uncertain macro .
  • Near-term trading setup: positive momentum from dividend raise and executed loan sale; watch for additional equity exits and Q2/Q3 loan sale progress as catalysts versus potential pullbacks on provisioning headlines .