MEDALLION FINANCIAL CORP (MFIN)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 net income of $10.1M ($0.43 diluted EPS) was the strongest quarter of 2024, up sequentially vs Q3 ($8.6M, $0.37), but down YoY due to much lower taxi medallion recoveries; NII grew 6% YoY to $52.0M while NIM (gross) compressed to 7.84% as funding costs rose and a nonaccrual interest reversal hit yield .
• Credit costs were elevated: provision of $20.6M (vs $10.8M YoY) with net charge-offs in Recreation at 4.35% of average loans and Home Improvement at 1.75%; management reiterated Q4 is the seasonal peak for delinquencies/charge-offs .
• Strategic partnership loan volume accelerated sharply ($124M in Q4 vs $40M in Q3), and the company signed an LOI to sell up to $121M of recreation loans at a premium, supporting capital efficiency; dividend raised 10% to $0.11/share .
• One-off items: $3.0M charge tied to SEC settlement-in-principle and a $5.5M insurance benefit on related legal costs; equity investment gains were $3.8M in Q4; these “noisy” items partially offset each other .
• Estimates context: S&P Global consensus (EPS/Revenue) unavailable at time of analysis; estimate comparisons could not be shown (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

• Net interest income grew YoY; Q4 NII was $52.0M (+6% YoY), with full-year NII at a record $202.5M; management highlighted record total interest income, NII, assets, strategic partnership volume, and total equity .
• Strategic partnership program scaled rapidly (Q3: $40M → Q4: $124M), adding fee/interest income with limited credit risk (short hold, partner takeout), and management expects continued partner additions .
• Capital allocation: dividend increased 10% to $0.11, ongoing buybacks ($4.6M in 2024), and LOI to sell up to $121M of rec loans at a premium to recycle capital; book value/share rose to $16.00 (vs $14.63 FY23) .

Quote: “We finished the year with record total interest income, net interest income, assets, strategic partnership loan volume, and total equity. We believe we are well-positioned for 2025” — Andrew Murstein .

What Went Wrong

• NIM compression persisted: Q4 gross-loan NIM was 7.84% (down 27 bps QoQ and 36 bps YoY), pressured by higher cost of funds and an interest reversal (~13 bps hit) from two commercial loans put on nonaccrual; management sees funding costs somewhat decoupled from Fed cuts near term .
• Higher credit costs: provision rose to $20.6M (vs $10.8M YoY); rec NCOs at 4.35% and home improvement at 1.75%; management reiterated Q4 is seasonally the worst for delinquencies/charge-offs .
• External overhang: SEC settlement-in-principle led to a $3.0M charge (offset by $5.5M insurance benefit); activist ZimCal criticized Bank NIM and credit trends and flagged governance/comp issues, creating headline risk into 2025 .

Financial Results

Notes:

• Q4 2023 figures from comparable columns in Q4 2024 release .
• Q2/Q3 2024 figures from respective releases; NIM metrics from mgmt commentary where necessary .

Segment KPIs and Loan Mix

Additional Q4 credit and margin details

• Rec NCOs: 4.35% of average portfolio; Home Improvement NCOs: 1.75% .
• Q4 cost of funds averaged 4.12% (up 60 bps YoY); two commercial nonaccruals reduced NIM by ~13 bps; Q4 origination rates were ~16.0% (Rec) and ~10.9% (HI), with January rates higher .

Balance Sheet and Capital (YE 2024)

• Total assets: $2.87B; Loans (gross): $2.36B; Deposits: $2.09B; Book value/share: $16.00; Shares outstanding: 23.14M .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and positioning: “We finished the year with record total interest income, net interest income, assets, strategic partnership loan volume, and total equity. We believe we are well-positioned for 2025 and the years ahead.” — Andrew Murstein .
• Margin dynamics: “Our net interest margin on gross loans was 7.84%… a 7 bps rise in cost of funds and two commercial loans on nonaccrual reduced NIM by ~13 bps… we originated recreation loans at ~16% and home improvement above 11% in January.” — Anthony Cutrone .
• Credit view: “Annually, Q4 is when we see delinquencies and charge-offs hit that seasonal high… we have been seeing better performance in our more recent vintages… after tightening in mid‑2023.” — Anthony Cutrone .
• 2025 growth and opex: “We probably see 2025 growing anywhere from mid‑ to high‑single digits… operating expenses probably closer to $21–$21.5M a quarter as we scale.” — Anthony Cutrone .
• Capital allocation: “Dividend increased 10% to $0.11… repurchased over 570,000 shares at $8.07 average; $15+M authorization remaining.” — Andrew Murstein .

Q&A Highlights

• Recreation loan sale: Selling up to $121M due to stronger-than-expected volume; provides funding flexibility; expect close in 30–60 days .
• Credit/delinquency seasonality: Q4 seasonal peak; recent vintages (post-tightening) performing better; macro uncertainty acknowledged .
• NIM outlook: Cost of CDs decoupled from Fed; not calling bottom, but origination rates above book yield should counteract funding costs; variability likely near term .
• Loan growth: Expect mid‑ to high‑single-digit portfolio growth in 2025 while maintaining tight credit standards .
• Operating expenses: Run-rate trending ~$21–$21.5M per quarter due to staffing and analytics/system investments supporting growth .

Estimates Context

• S&P Global consensus for Q4 2024 EPS and “revenue” (total interest income) was unavailable at the time of analysis due to data access limits; therefore, we cannot quantify beats/misses versus Street for this quarter (S&P Global data unavailable).

Where estimates may need to adjust:

• Provision/credit: Elevated Q4 loss content and management’s expectation for seasonal normalization plus tightened recent vintages suggest modestly improving credit trajectory in 2025; however, rec NCOs at 4.35% could keep provision elevated near term .
• Margin: Near-term NIM variability but positive inflection as cost of funds plateaus and higher-coupon originations season into the book; this supports upward bias to NII assumptions if funding costs ease .

Key Takeaways for Investors

• Core engine intact: Loan yields remain high (Rec ~16% new; HI >11% new), and Street should model NII growth resuming as funding costs plateau and higher-rate vintages season .
• Credit normalization: Expect seasonal improvement post-Q4 peak; recent tightening supports better vintage performance; nonetheless, rec NCOs at 4.35% warrant conservative provision assumptions near term .
• Capital efficiency lever: LOI to sell up to $121M rec loans at a premium plus growing strategic partnerships provide non-dilutive capital rotation and fee income diversification .
• Shareholder return supported by fundamentals: Dividend raised to $0.11 and buyback capacity ($15.4M remaining YE) reflect confidence and cushion valuation; book value/share at $16.00 provides tangible anchor .
• Watch the funding tape: CDs remain “4‑ish%,” somewhat decoupled from Fed moves; sustained easing/calm in CD markets is a key catalyst for NIM expansion .
• Headline risk: SEC settlement-in-principle recorded ($3.0M charge; $5.5M insurance benefit) and activist criticism create overhang; formal resolution could be a de‑risking catalyst .
• 2025 base case: Mid‑ to high‑single-digit loan growth, opex ~$21–$21.5M/quarter, and stable-to-improving margin trajectory argue for EPS growth off Q4’s run-rate, absent macro shocks .

Appendices

KPIs and Additional Operating Detail

Balance Sheet (Selected, Year-End)

Disclosures

• Financials are from company press releases/8‑K and the earnings call transcript as cited. Where comparisons versus Wall Street are needed, S&P Global consensus could not be retrieved at the time of analysis (S&P Global data unavailable).