Medallion Financial (NASDAQ: MFIN) outlines 2025 loan mix, funding and risk profile
Rhea-AI Filing Summary
Medallion Financial Corp. is a Delaware-based specialty finance company focused on consumer and commercial lending, with total assets of $2.96 billion as of December 31, 2025. Lending is concentrated in recreation and home improvement loans, which together represent most loans receivable and interest income.
Recreation loans totaled $1.62 billion and home improvement loans $810.2 million, with a combined loans receivable balance of $2.57 billion including commercial and taxi medallion exposures. About 25% of consumer loans are non-prime, and management highlights sensitivity to economic downturns, inflation and higher rates, which can raise delinquencies and losses.
The company funds primarily through $2.09 billion of brokered certificates of deposit and other borrowings, plus privately placed notes, SBA debentures and trust preferred securities, for total debt of $2.40 billion. Medallion Bank must remain well-capitalized, comply with Basel III capital and CRA requirements, and navigate extensive consumer, privacy, AML and SBA regulations.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the Fiscal Year Ended
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicated by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the price at which the common stock was last sold on June 30, 2025, as reported on NASDAQ, was $
The number of outstanding shares of registrant’s common stock, par value $0.01, as of March 9, 2026 was
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement for its 2026 Annual Meeting of Shareholders, for which a Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year-end of December 31, 2025, are incorporated by reference into Part III of this Form 10-K.
MEDALLION FINANCIAL CORP.
2025 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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Page |
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PART I |
4 |
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ITEM 1. |
OUR BUSINESS |
4 |
ITEM 1A. |
RISK FACTORS |
18 |
ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
32 |
ITEM 1C. |
CYBERSECURITY |
32 |
ITEM 2. |
PROPERTIES |
32 |
ITEM 3. |
LEGAL PROCEEDINGS |
33 |
ITEM 4. |
MINE SAFETY DISCLOSURES |
33 |
PART II |
33 |
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ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
33 |
ITEM 6. |
[RESERVED] |
34 |
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
34 |
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
55 |
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
56 |
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
56 |
ITEM 9A. |
CONTROLS AND PROCEDURES |
56 |
ITEM 9B. |
OTHER INFORMATION |
59 |
ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
59 |
PART III |
59 |
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ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
59 |
ITEM 11. |
EXECUTIVE COMPENSATION |
59 |
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
59 |
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
59 |
ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
59 |
PART IV |
60 |
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ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
60 |
ITEM 16. |
FORM 10-K SUMMARY |
62 |
SIGNATURES |
63 |
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2
The following discussion should be read in conjunction with our financial statements and the notes to those statements and other financial information appearing elsewhere in this report.
This report contains forward-looking statements relating to future events and future performance applicable to us within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, including, without limitation, statements regarding our expectations, beliefs, intentions, or future strategies that are signified by the words expects, anticipates, intends, believes, or similar language. In connection with certain forward-looking statements contained in this Form 10-K and those that may be made in the future by or on behalf of the Company, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. The forward-looking statements contained in this Form 10-K were prepared by management and are qualified by, and subject to, significant business, economic, competitive, regulatory, and other uncertainties and contingencies, including those relating to the U.S. and global economies, including the current inflationary environment, the impact of tariffs and the risk of recession, all of which are difficult or impossible to predict, and many of which are beyond control of the Company.
All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statements. The statements have not been audited by, examined by, compiled by, or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Form 10-K should consider these facts in evaluating the information contained herein. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in the forward-looking statements contained in this Form 10-K. The inclusion of the forward-looking statements contained in this Form 10-K should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Form 10-K will be achieved.
In light of the foregoing, readers of this Form 10-K are cautioned not to place undue reliance on the forward-looking statements contained herein. You should consider these risks and those described under Risk Factors in this Form 10-K and others that are detailed in the other reports that the Company files from time to time with the SEC.
3
PART I
ITEM 1. OUR BUSINESS
We, Medallion Financial Corp., or the Company, are a specialty finance company organized as a Delaware corporation. Our strategic focus is operating and growing our consumer finance and commercial lending businesses. Our total assets were $2.96 billion as of December 31, 2025 and $2.87 billion as of December 31, 2024.
We conduct our business through various wholly-owned subsidiaries, including:
Our Market
We provide loans to individuals and small to mid-size businesses, through our subsidiaries, under four operating segments:
The following table presents our loans receivable as of December 31, 2025.
(Dollars in thousands) |
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Loans |
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Allowance for |
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Net Loans |
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Loans held for investment: |
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Recreation |
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$ |
1,617,221 |
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$ |
85,956 |
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$ |
1,531,265 |
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Home improvement |
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810,237 |
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19,563 |
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790,674 |
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Commercial |
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123,068 |
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9,052 |
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114,016 |
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Taxi medallion |
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1,179 |
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218 |
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961 |
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Total loans held for investment |
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2,551,705 |
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114,789 |
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2,436,916 |
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Loans held for sale, at lower of amortized cost or fair value: |
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Recreation |
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— |
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|
|
— |
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|
|
— |
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Strategic partnership |
|
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15,144 |
|
|
|
— |
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|
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15,144 |
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Total loans held for sale, at lower of amortized cost or fair value |
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15,144 |
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|
|
— |
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15,144 |
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Total loans |
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$ |
2,566,849 |
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$ |
114,789 |
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$ |
2,452,060 |
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4
Recreation Lending
Recreation lending is a return-oriented business focused on originating prime and non-prime recreation loans, comprising 63% of our loans receivable as of December 31, 2025. The segment is a significant source of income, accounting for 66% of our interest income for the year ended December 31, 2025. All of our recreation loans are serviced by a third-party loan servicer that we have used since the business’s inception.
We maintain relationships with approximately 3,400 dealers and financial service providers, or FSPs, not all of which are active at any one time. FSPs are entities that provide finance and insurance, or F&I, services to small dealers that do not have the desire or ability to provide F&I services themselves. The ability of FSPs to aggregate the financing and relationship management for many small dealers makes them valuable to us. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten relationships were responsible for 39% of recreation lending’s new loan originations for the year ended December 31, 2025 consistent with the year ended December 31, 2024. The percentage of new loan originations by the top ten dealers and/or FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.
The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $22,000 as of December 31, 2025, with an average loan size at origination during 2025 of approximately $29,000. The loans are fixed rate with an average term at origination of approximately 15 years. The weighted average maturity of our loans outstanding is 11 years. The size, geographic dispersion, source and collateral variety of the loans reduces our risk. The loans are secured primarily by RVs, or recreational vehicles, boats, collector cars, and other consumer recreational equipment, of which RVs make up 54% of the portfolio, boat loans making up 21%, and collector cars making up 13% of the portfolio as of December 31, 2025. Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, at 17% and 10% of loans outstanding as of December 31, 2025 with no other states at or above 10%. As of December 31, 2025, 2024, and 2023, the weighted average FICO scores, measured at origination, of our recreation loans outstanding, inclusive of loans held for sale, were 686, 685 (683 exclusive of loans held for sale), and 683. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, and 2023 were 688, 685 (686 exclusive of loans held for sale), and 686.
Home Improvement Lending
Working directly with contractors and FSPs, we offer flexible customer financing for window, siding, and roof replacement, swimming pool installations, and other home improvement projects. Our core product is a standard installment loan, which features affordable monthly payments and competitive interest rates for prime credit customers. We also offer a variety of promotional loan options to help contractors close a challenging sale. Promotional loan options include same-as-cash, no interest, and deferred payment features, which allow borrowers to reduce the total cost of financing or start repayments when it is most convenient. Home improvement loans comprised 32% of our loans receivable as of December 31, 2025.
Home improvement lending operates in a manner similar to recreation lending, with a few key differences. We currently maintain a smaller number of relationships, with approximately 700 contractors and FSPs. Management monitors the number of contractors and FSPs and their relative contributions as a means of assessing market share and segment growth. Most of our home improvement-financed sales take place in the borrower’s home instead of a store, with the contractor presenting the borrower with a bid that includes a financing option.
A large proportion of our home improvement-financed sales are facilitated by contractor salespeople with limited financing backgrounds rather than by contractor employees who provide F&I services. The result is contractor demand for financing services that facilitate an in-home transaction (e.g., digital tools, including mobile applications for phone or tablet, support for E-SIGN compliant electronic signatures, and extended operating hours), and additional resources for the salesperson throughout the financing process. Our top ten contractors and/or FSP relationships were responsible for 61% of home improvement lending’s new loan originations for the year ended December 31, 2025. The percentage of new loan originations by the top ten contractors and/or FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.
We offer home improvement loans with only fixed rates, with an average term at origination of approximately 15 years. The weighted average maturity of our loans outstanding was 13 years as of December 31, 2025. The home improvement loan portfolio had an average loan size of approximately $22,000 at December 31, 2025 and an average loan size at origination during 2025 of approximately $31,000. The geographic dispersion of the home improvement loan portfolio supplements credit quality in reducing our risk. As of December 31, 2025, home improvement loans were concentrated in swimming pools, roofs, and windows at 32%, 28%, and 11%. Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Florida and Texas at 14% and 12% of loans outstanding as of December 31, 2025, and with no other states at or above 10%. As of December 31, 2025, 2024, and 2023, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 767, 767, and 764. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, and 2023 were 779, 781, and 771.
5
Commercial Lending
We originate subordinated loans to U.S. lower middle market businesses to support acquisitions, recapitalizations, ownership transitions, and growth initiatives. Commercial loans of $123.1 million comprised 5% of our loans receivable as of December 31, 2025.
We focus our marketing efforts primarily on domestic manufacturing and business services, with California, Wisconsin, and New York having 20%, 12%, and 11% of the segment portfolio, and no other states having a concentration at or above 10%. These commercial loans are primarily secured by a second position on all assets of the businesses and generally range in amount from $2.5 million to $6.0 million at origination. As a component of most of the transactions, a portion of the investment is an equity or partnership stake, and occasionally, we also receive warrants to purchase an equity interest in the borrowers or some other form of success fee or profit participation. We seek to expand our commercial loan activities by developing a more diverse borrower base with a wider geographic area of coverage, and by expanding the targeted industries.
Commercial loans are secured by a lien on substantially all business assets, and have interest rates averaging 747 basis points over the prevailing prime rate at the end of 2025, compared to 547 basis points over the prime rate at the end of 2024.
Strategic Partnerships
In 2019, the Bank launched a strategic partnership program to provide lending and other services to financial technology, or fintech, companies. The associated activities are currently limited to originating loans or other receivables facilitated by our strategic partners and selling those loans or receivables to our strategic partners or other third parties without recourse within a specified time after origination, such as three business days. Revenues are currently derived primarily from contracted program fees paid to us by our strategic partners and interest income earned while the loans or receivables remain on our books, offset by any transaction fees paid by us to our strategic partners for their role in processing loan applications. We originated $771.6 million and $203.6 million of strategic partnership loans for the years ended December 31, 2025 and 2024. We held $15.1 million and $7.4 million of strategic partnership loans as of December 31, 2025 and 2024.
Taxi Medallion Lending
Taxi medallion loans and assets of $4.3 million comprised less than 0.2% of our assets as of December 31, 2025. All taxi medallion loans and assets were located in the New York City metropolitan area. A New York City taxi medallion is the only permitted license to operate a taxi and accept street hails in New York City. As reported by the New York City Taxi and Limousine Commission, taxi medallions sold for a variety of prices during 2025 supporting our estimated value of $79,500, net of liquidation costs, as of December 31, 2025.
Our taxi medallion loans are secured by the taxi medallion and enhanced with personal guarantees of the owners, shareholders or equity members. When a borrower defaults on a loan, we have the ability to restructure the underlying loan or repossess the taxi medallion collateralizing that loan and sell it in the market or through a foreclosure auction and pursue the personal guarantees, all of which we have done. We have recorded an allowance for credit losses against the loans to mitigate potential future losses, and since 2020, the entire portfolio has remained on nonaccrual. Consistent with our established policy, once loans become 120 days past due, they are charged off down to collateral value and transferred to loan collateral in process of foreclosure.
Our Strategy
Our core philosophy has been to identify markets that are profitable and where we can obtain defensible market positions. The key elements of our strategy to grow our consumer lending (recreation and home improvement) and commercial lending businesses and increase their profitability include:
Capitalize on our relationships with dealers, contractors, and FSPs. We are committed to establishing, building, and maintaining relationships with our dealers, contractors, and FSPs. Our marketing efforts are focused on building relationships in consumer markets as we work directly with dealers, contractors, and FSPs to offer quality financing for their customers, including those with past credit challenges. We believe that relationships with dealers and brokers provide us with, in addition to loan origination opportunities, significant benefits, including an additional layer of due diligence on borrowers and additional monitoring capabilities. We have assembled a management team that has developed an extensive network of dealers, contractors, and/or FSP relationships in our target markets. We believe that our management team’s relationships with these dealers, contractors, and FSPs have provided and will continue to provide us with loan origination opportunities. In 2025, all of our consumer loans retained in the portfolio were generated by dealers, contractors, and FSPs.
6
Focus on niche industries and our expertise in these niche fields. We specialize in providing consumer loans through dealers and FSPs for the purchase of recreation products such as RVs, boats, and collector cars, and through contractors and FSPs for the purchase of home improvements, such as replacement windows and roofs, along with offering loan origination services to fintech partners. We believe our focus on these niche areas provides us with an opportunity to realize favorable returns.
Employ disciplined underwriting policies and maintain rigorous portfolio monitoring. We have an extensive loan underwriting and monitoring process. We conduct a thorough analysis of each potential loan and its prospects, competitive position, financial performance, and industry dynamics. We stress the importance of credit and risk analysis in our underwriting process, and have imposed more restrictive underwriting standards as part of our continued efforts to mitigate concentration risks. We believe that our continued adherence to this disciplined process will permit us to continue to generate a stable, diversified and increasing revenue stream of current income from our earning assets.
Leverage the skills of our experienced management team. The members of our management team have broad investment and lending backgrounds, with prior experience in banking and non-bank consumer and commercial lending, at specialty finance companies, middle market commercial banks, and other financial services companies. We believe that the experience and contacts of our management team will continue to allow us to effectively implement the key aspects of our business strategy.
Expand our strategic partnership program. We launched an initial fintech partnership during 2020. Our partners are non-banks offering loans and other financial services to their customers. We continue to evaluate possibilities for additional partnerships.
Seek strategic acquisitions. In addition to increasing market share in existing lending markets and identifying new niches, we seek to acquire other financing businesses and related portfolios, and specialty finance companies that make secured loans to small businesses and consumers which have mitigated credit risk similar to our own. Since our initial public offering in May 1996, we have acquired eight specialty finance companies, five loan portfolios, and three taxi rooftop advertising companies.
Loan Characteristics
Consumer Loans. Consumer loans generally require equal monthly payments covering accrued interest and amortization of principal over a negotiated term, generally around eleven to fourteen years. Interest rates offered are fixed. Borrowers may prepay consumer loans without any prepayment penalty. In general, the Bank has established relationships with dealers, contractors, and FSPs, which are the sources for consumer loan volumes. The loans are made up of recreation loans and home improvement loans which were 67% and 33% of total consumer loans at December 31, 2025.
Our recreation loans are secured primarily by RVs, boats, collector cars, and other consumer recreational equipment with a small proportion of loans secured by other collateral such as motorcycles and boat motors. These loans, which together make up our largest and most profitable loan portfolio, have a weighted average yield of 13.37% at December 31, 2025. Our home improvement loans are secured by the personal property installed on real property, and the security interest for some of these loans is perfected with a UCC fixture filing. As of December 31, 2025, these loans had a weighted average yield of 9.95%.
Commercial Loans. We have typically originated commercial loans in principal amounts ranging from $2.5 million to $6.0 million, and occasionally have originated loans under or in excess of those amounts. These loans are generally retained, typically have terms of five to six years, are non-amortizing with principal due at maturity, and include cash interest payments with the ability to incorporate payment-in-kind interest when appropriate. All loans may be prepaid, and in the first five years, a prepayment fee may be owed to us. The term of, and interest rate charged on, certain of our outstanding loans are subject to the regulations of the Small Business Administration, or the SBA. Under SBA regulations, the maximum rate of interest permitted on loans originated by us is 19%; however, terms and interest rates are subject to market competition for all loans.
Marketing, Origination, and Loan Approval Process
Each loan application is individually reviewed through analysis of several factors, including loan-to-value ratios, the borrower’s credit history, public records, personal interviews, trade references, personal inspection of the premises, and approval from the SBA, or other regulatory body, if applicable. Each commercial and taxi medallion loan applicant is required to provide personal or corporate tax returns, premises leases, and/or property deeds.
Our senior management establishes loan origination criteria for commercial loans. Loans that conform to such criteria may be processed by a loan officer with the proper credit authority, and non-conforming loans (other than those by the Bank) must be approved by our Executive Chairman, Chief Executive Officer, and/or the Chief Credit Officer and the Investment Oversight Committee of our board of directors. Loan criteria for loans originated with the Bank is established by the Bank’s board of directors and senior management. The Bank’s policies identify specific approval authorities for its recreation, home improvement and strategic partnership loans. Policy exceptions are reported to the Bank’s board of directors. Consumer loans are primarily sourced through relationships with RV and boat dealers, home improvement contractors and strategic partners throughout our market area. Commercial loans are generally sourced through a network of private equity sponsors who we have long-standing relationships with and are also referred by contacts with banks.
7
Sources of Funds
Management determines our funding sources, based upon an analysis of the respective financial and other costs and burdens associated with funding sources. We also fund our lending operations through debt offerings and private placements, fixed-rate, senior secured notes, long-term subordinated debentures issued to the SBA, as well as preferred equity securities at our subsidiaries. In the past, we have utilized credit facilities with banks, as well as equity and debt offerings, to fund our lending operations. Our funding strategy and interest rate risk management strategy is to have the proper structuring of debt to minimize both rate and maturity risk, while maximizing returns with the lowest cost of funding over an intermediate period of time. Since the inception of the Bank, substantially all of the Bank’s borrowings have been provided by FDIC insured brokered certificates of deposit.
The table below presents our sources of available funds and amounts outstanding under credit facilities, exclusive of deferred financing costs of $8.4 million, and their weighted average interest rates at December 31, 2025. See Note 5 to the consolidated financial statements for additional information.
(Dollars in thousands) |
|
Total |
|
|
Cash, cash equivalents, and federal funds sold |
|
$ |
201,564 |
|
Brokered certificates of deposit & other funds borrowed |
|
|
2,089,416 |
|
Average interest rate |
|
|
3.87 |
% |
Privately placed notes |
|
|
146,500 |
|
Average interest rate |
|
|
8.12 |
% |
Maturity |
|
2/26 - 8/39 |
|
|
SBA debentures and borrowings |
|
|
|
|
Amounts outstanding |
|
|
85,000 |
|
Average interest rate |
|
|
3.98 |
% |
Maturity |
|
3/25- 3/34 |
|
|
Trust preferred securities |
|
|
33,000 |
|
Average interest rate |
|
|
6.12 |
% |
Maturity |
|
9/37 |
|
|
Federal reserve and other borrowings |
|
|
50,000 |
|
Average interest rate |
|
|
3.75 |
% |
Total cash (1) |
|
$ |
201,564 |
|
Total debt outstanding |
|
$ |
2,403,916 |
|
We fund our fixed-rate loans with fixed rate brokered or listing service certificates of deposit, fixed rate private notes, fixed-rate SBA debentures and borrowings, and to a lesser extent variable rate borrowings. The mismatch between maturities and interest-rate sensitivities of these balance sheet items results in interest rate risk. We seek to manage our exposure to increases in market rates of interest to an acceptable level by incurring fixed-rate debt.
Nevertheless, we accept varying degrees of interest rate risk depending on market conditions. For additional discussion of our funding sources and asset liability management strategy, see Asset/Liability Management on page 50.
Competition
Banks, credit unions, and finance companies, some of which are SBICs, compete with us in originating consumer and commercial loans. Many of these competitors have greater resources than we have, and certain competitors are subject to less restrictive regulations than we are. As a result, we cannot assure you that we will be able to identify and complete the financing transactions that will permit us to compete successfully.
Human Capital Resources
As of December 31, 2025, we employed 179 persons: 141 at Medallion Bank, 29 at our parent company, and 9 at Medallion Capital. This compares to 174 persons at the end of 2024: 135 at Medallion Bank, 29 at our parent company, and 10 at Medallion Capital.
Equal employment opportunity is a fundamental principle of ours, where employment is based upon personal capabilities and qualifications. We prohibit and do not tolerate any discrimination against employees, applicants, interns or any other covered persons, and we ensure equal employment opportunity without discrimination on the basis of race, color, creed, religion, national origin, ancestry, ethnicity, citizenship status, physical or mental disability, age, sex (including pregnancy), gender, gender identity or gender expression, marital status, familial status, veteran status, genetic information or any other protected characteristic as established by applicable federal, state or local law.
We incentivize our employees through a combination of competitive salary, equity compensation and other benefits. We provide most employees with incentive compensation in the form of cash and equity. Employee equity ownership helps us attract, retain, motivate and reward employees, while aligning employee compensation with our stockholders’ interests by linking realizable pay with stock performance.
8
Our Compensation Committee reviews management’s recommendations and advises management and the Board of Directors on broad compensation policies such as salary ranges, annual incentive bonuses, long-term incentive plans, including equity-based compensation programs, and other benefit and perquisite programs.
We have a 401(k) Investment Plan and other generally available benefit programs like health insurance, paid and unpaid leaves, life insurance, disability coverage, accident insurance and critical illness insurance; we believe that the availability of these benefit programs generally enhance employee productivity and loyalty. We believe it is important for our employees at the Bank to provide service to the communities in which they live and encourage them to take time, including prearranged work time, to participate in activities of local civic organizations, charitable or nonprofit organizations or educational institutions. We value employee development and training and are committed to identifying and developing the talents of our next-generation leaders. Our employee benefits also help protect the health, well-being and financial security of our employees.
SUPERVISION AND REGULATION
Exemption from the 1940 Act
In order to maintain our status as a non-investment company, we operate so as to fall outside the definition of an “investment company” or within an applicable exception. We expect to continue to fall within the exception from the definition of an “investment company” provided under Section 3(c)(6) of the 1940 Act as a company primarily engaged, directly or through majority-owned subsidiaries, in the business of, among other things, (i) banking, (ii) purchasing and otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance and services, and (iii) making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services. We monitor our continued compliance with this exception and were compliant as of December 31, 2025.
Regulation of Medallion Bank as an Industrial Bank
In May 2002, we formed the Bank, which received approval from the FDIC for federal deposit insurance in October 2003. The Bank is subject to extensive federal and state banking laws, regulations, and policies that are intended primarily for the protection of depositors, the Deposit Insurance Fund, customers, and the banking system as a whole, and not for the protection of our other creditors and stockholders.
Under the banking charter, the Bank is authorized to make consumer and commercial loans, and may accept all FDIC-insured deposits other than demand deposits (e.g. checking accounts). As a state-chartered, Federal Reserve non-member bank with FDIC-insured deposits, the Bank is examined, supervised and regulated by the FDIC and the Utah Department of Financial Institutions, or the Utah DFI. The statutes enforced by, and regulations and policies of, these agencies affect almost all aspects of its business, including by prescribing permissible types of loans and investments, the amount of required capital, the permissible scope of its activities and various other requirements. If the Bank’s regulators were to determine that we have violated banking laws and regulations, including by engaging in unsafe and unsound practices, the Bank could be subject to enforcement and other regulatory actions, which could have an adverse effect on its business, results of operations and financial condition.
Capital Standards
The Bank is subject to risk-based and leverage-based capital ratio requirements under the U.S. Basel III capital rules adopted by the federal banking regulators.
Under the risk-based capital standards, the Bank’s assets, exposures and certain off-balance sheet items are assigned to broad risk categories, each with designated weights, and the resulting capital ratios represent capital as a percentage of total risk-weighted assets. The minimum capital ratios applicable to us are as follows:
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The prompt corrective action framework, which generally applies to FDIC-insured depository institutions, including the Bank, also includes capital requirements the Bank must satisfy to, among other things, be able to accept brokered deposits without limitations. See “Prompt Corrective Action” and “Brokered Deposits” below.
In addition to meeting the minimum capital requirements, under the U.S. Basel III capital rules, the Bank must also maintain the required capital conservation buffer of 2.5% to avoid becoming subject to restrictions on capital distributions (including dividends on the Bank’s preferred stock) and certain discretionary bonus payments to management. The capital conservation buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it effectively increases the required minimum risk-based capital ratios.
The table below presents the capital requirements the Bank is required to maintain:
|
|
Minimum U.S. Basel III Regulatory Capital |
CET1 risk-based capital ratio |
|
7.0% |
Tier 1 risk-based capital ratio |
|
8.5% |
Total risk-based capital ratio |
|
10.5% |
For purposes of calculating the denominator of the three risk-based capital ratios, the assets of covered banking organizations are given risk weights that, under the U.S. Basel III capital rules, range from 0% to 1,250%, depending on the nature of the asset. Most of the Bank’s loans are assigned a 100% risk weight, with loans that are 90 days or more past due or on nonaccrual assigned a 150% risk weight. In addition, direct obligations of the U.S. Department of the Treasury, or U.S. Treasury, or obligations unconditionally guaranteed by the U.S. government have a 0% risk weight, while general obligation claims on states or other political subdivisions of the United States are assigned a 20% risk weight, except for municipal or state revenue bonds, which have a 50% risk weight.
The U.S. Basel III capital rules provide for limited recognition in CET1 capital, and deduction from CET1 capital above certain thresholds, of three categories of assets: (i) deferred tax assets arising from temporary differences that cannot be realized through net operating loss carrybacks (net of related valuation allowances and of deferred tax liabilities), (ii) mortgage servicing assets (net of associated deferred tax liabilities) and (iii) investments in more than 10% of the issued and outstanding common stock of unconsolidated financial institutions (net of associated deferred tax liabilities). The federal banking regulators have adopted a rule that is designed to simplify the capital treatment of those categories of assets for banking organizations, such as the Bank, which are not subject to the advanced approaches in the U.S. Basel III capital rules.
The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, or EGRRCPA, required the federal banking regulators to adopt regulations to implement an exemption from the U.S. Basel III capital rules for smaller banking organizations, including the Bank, which maintain a “Community Bank Leverage Ratio” of at least 8% to 10%. Specifically, the EGRRCPA provides that if any depository institution or depository institution holding company with less than $10 billion in total consolidated assets maintains tangible equity in excess of this leverage ratio, as implemented by the federal banking regulators, it would be deemed to be in compliance with (i) the leverage and risk-based capital requirements promulgated by the federal banking agencies; (ii) in the case of a depository institution, the capital ratio requirements to be considered “well-capitalized” under the federal banking agencies’ “prompt corrective action” regime; and (iii) “any other capital or leverage requirements” to which the depository institution or holding company is subject, unless the appropriate federal banking agency determines otherwise based on the particular institution’s risk profile.
The FDIC has adopted a rule, implementing the Community Bank Leverage Ratio. Under the rule, the Community Bank Leverage Ratio is the same as the Tier 1 Leverage Ratio under the Basel III capital rules and a qualifying small banking organization, such as the Bank, that has less than $10 billion in total consolidated assets and meets certain risk-based criteria can choose to apply the Community Bank Leverage Ratio framework if its Community Bank Leverage Ratio is greater than 9%. In November 2025, federal banking regulators proposed reducing the Community Bank Leverage Ratio from 9% to 8%. The Bank has not elected and currently does not expect to elect to apply the Community Bank Leverage Ratio framework but will continue to assess the framework and may choose to apply it in the future.
As a condition to receipt of FDIC insurance, the Bank entered into a capital maintenance agreement with the FDIC, or the 2003 Capital Maintenance Agreement, requiring it to maintain a 15% leverage ratio (Tier 1 capital to average assets) and an adequate allowance for credit losses.
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Prompt Corrective Action
The Bank is subject to FDIC regulations which apply to every FDIC-insured depository institution, setting out a system of mandatory and discretionary supervisory actions that generally become more severe as the capital levels of an individual institution decline. Pursuant to provisions of the Federal Deposit Insurance Act, or FDIA, and related regulations with respect to prompt corrective action, the federal banking regulators must take “prompt corrective action” with respect to FDIC-insured depository institutions that do not meet minimum capital requirements. The FDIA sets forth the following five capital categories: “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” An insured depository institution’s capital category depends upon how its capital levels compare with various relevant capital measures and certain other factors that are established by regulation.
|
|
“Well-capitalized” |
|
“Adequately capitalized” |
CET1 risk-based capital ratio |
|
6.5% |
|
4.5% |
Tier 1 risk-based capital ratio |
|
8.0% |
|
6.0% |
Total risk-based capital ratio |
|
10.0% |
|
8.0% |
Tier 1 leverage ratio |
|
5.0% |
|
4.0% |
If a bank meets the quantitative thresholds for well-capitalized status provided above and is not subject to any written agreement, order or directive from the appropriate regulatory agency to meet and maintain a specific capital level, it will qualify as well-capitalized. Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on the Bank’s operations or financial condition. See “Brokered Deposits” below for additional information. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications. Pursuant to the 2003 Capital Maintenance Agreement, the Bank has agreed that the Bank’s capital levels will at all times meet or exceed the levels required for the Bank to be considered well-capitalized under FDIC rules.
Brokered Deposits
The Bank uses “brokered deposits” to fund a substantial portion of the Bank’s activities. Under the FDIA and related regulations, FDIC-insured institutions such as the Bank may only accept brokered deposits without FDIC permission if they meet specified capital standards and are not subject to any written agreement, order or directive to meet and maintain a specific capital level, and are subject to restrictions with respect to the interest they may pay on deposits unless they are well-capitalized. In particular, the FDIA and the FDIC’s regulations prohibit an insured depository institution from accepting brokered deposits unless it is well-capitalized or is adequately capitalized and receives a waiver from the FDIC.
Under FDIC regulations governing brokered deposits and interest rate restrictions, a bank that is “adequately capitalized” and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate, at the time any such deposit is accepted, in excess of (i) 75 basis points over certain national rates described in the FDIC’s regulations or (ii) 90% of the highest interest rate paid on a particular deposit product in the bank’s local market area, if the bank provides notice to the FDIC and evidence of such local rate. There are no such restrictions under the FDIA on a bank that is well-capitalized.
Pursuant to the 2003 Capital Maintenance Agreement, the Bank has agreed that our capital levels will at all times meet or exceed the level required for the Bank to be considered well-capitalized under FDIC rules. If the Bank was no longer able to accept or renew brokered deposits as a result of failing to meet the requisite capital standards or as a result of being subject to a written agreement, order or directive to meet and maintain a specific capital level, there would be a material adverse effect on the Bank’s business, financial condition, liquidity and results of operations. See “Risk Factors — Medallion Bank’s use of brokered deposits for its deposit-gathering activities may not be available when needed. The inability to accept and renew brokered deposits would have a material adverse effect on our business, financial condition, liquidity, and results of operations.”
Deposit Insurance
The Bank’s deposits have the benefit of FDIC insurance up to the applicable limits. The FDIC’s Deposit Insurance Fund, or DIF, is funded by assessments on insured depository institutions, such as us. The Bank’s assessment (subject to adjustment by the FDIC) is currently based on the Bank’s average total consolidated assets less the Bank’s average tangible equity during the assessment period, the Bank’s supervisory ratings, and specified forward-looking financial measures used to calculate the assessment rate.
From time to time, the FDIC increases base deposit insurance assessment rates. In addition, the FDIC must recover, by special assessment, losses to the FDIC deposit insurance fund as a result of the FDIC’s use of the systemic risk exception to the least cost resolution test under the FDIA.
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Payment of Dividends
The power of the board of directors of an insured depository institution to declare a cash dividend or other distribution with respect to capital is subject to statutory and regulatory restrictions that limit the amount available for such distribution, depending upon earnings, financial condition and cash needs of the institution, as well as general business conditions. Insured depository institutions are also prohibited from paying management fees to any controlling persons or, with certain limited exceptions, making capital distributions, including dividends, if after such transaction the institution would be less than adequately capitalized.
Under Utah law, the Bank may only declare dividends to the Bank’s shareholders out of the Bank’s net profits, after providing for all expenses, losses, interest and taxes accrued or due. Further, the Bank is required to transfer, to a surplus fund, at least 10% of the Bank’s net profits before dividends for the period covered by the dividend until the surplus fund reaches 100% of the Bank’s capital stock. As of December 31, 2025, our risk-based capital ratios were above the regulatory minimums that incorporated the 2.5% capital conservation buffer and satisfies the aforementioned Utah law. Any amount paid from the Bank’s net earnings into a fund for the retirement of outstanding debt capital instruments or preferred stock for the period covered by the dividend will be considered an addition to the Bank’s surplus fund if, upon the retirement of such instruments, the amount paid into the retirement fund for the period may be properly carried to the Bank’s surplus fund.
The federal banking agencies also have authority to prohibit depository institutions from engaging in business practices that are considered unsafe or unsound, possibly including payment of dividends or other payments under certain circumstances even if such payments are not expressly prohibited by statute.
In addition, as discussed under “Capital Standards,” if the Bank’s risk-based capital ratios do not satisfy the minimum risk-based requirements plus the capital conservation buffer, the Bank will face graduated constraints on, among other things, capital distributions (including dividends on the Bank’s preferred stock) based on the amount of the shortfall and the amount of the Bank’s eligible retained income. For these purposes, eligible retained income is defined as the greater of (i) net income for the four preceding quarters, net of distributions and associated tax effects not reflected in net income; and (ii) the average net income over the preceding four quarters.
Safety and Soundness
The FDIA also implemented certain specific restrictions on transactions and required federal banking regulators to adopt overall safety and soundness standards for depository institutions related to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation and compensation, fees and benefits, and such other operational and managerial standards as the agencies deem appropriate. Guidelines adopted by the federal banking regulators establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, these guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines. These guidelines also prohibit excessive compensation as an unsafe and unsound practice, and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder. The federal banking agencies may require an institution to submit to an acceptable compliance plan, as well as have the flexibility to pursue other more appropriate or effective courses of action given the specific circumstances and severity of an institution’s noncompliance with one or more standards. The FDIC may also terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
In October 2025, the FDIC and the Office of the Comptroller of the Currency, or OCC, issued a proposed rule that would define the term “unsafe or unsound practice” for purposes of their enforcement powers under the FDIA. The proposed definition would focus on whether the practice is likely to materially harm, or already has materially harmed, the financial condition of an institution.
Among other things, in addition to the restrictions on brokered deposits discussed above, the FDIA limits the interest rates paid on deposits by undercapitalized institutions and limits the aggregate extensions of credit by a depository institution to an executive officer, director, principal shareholder or related interest.
Consumer Financial Protection
The Bank is subject to a number of federal and state consumer protection laws that extensively govern the Bank’s consumer lending businesses. These laws include, but are not limited to, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Electronic Fund Transfer Act and these laws’ respective state-law counterparts, as well as laws regarding unfair and deceptive acts and practices. These federal and state laws, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair and deceptive practices and subject the Bank to substantial regulatory oversight. Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees. Federal banking regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies,
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including regulatory sanctions, customer rescission rights, and civil money penalties. Failure to comply with consumer protection requirements may also result in substantial reputational harm that could adversely affect our business.
Community Reinvestment Act of 1977
The Bank is subject to certain requirements and reporting obligations under the Community Reinvestment Act, or CRA. Under the CRA, the Bank has an obligation, consistent with safe and sound operations, to help meet the credit needs of the Bank's entire assessment area, including low- and moderate-income individuals and communities in that assessment area. Currently, the Bank's assessment area is Salt Lake County, Utah. In connection with its examination of the Bank, the FDIC is required to assess the Bank's CRA performance in the areas of lending, investments and services. The FDIC may take compliance with the CRA into account when regulating and supervising the Bank's other activities. The CRA also requires the agencies to take into account banks’ records of meeting community credit needs when evaluating applications for, among other things, new branches or mergers. We have elected to be evaluated for the Bank's compliance with CRA requirements based on a strategic plan we adopted with public involvement and regulatory approval. That strategic plan includes measurable goals for helping to meet the credit needs of the Bank's assessment area and is available on the Bank's website. The CRA provides that CRA examination ratings be made public. The Bank received a rating of “Outstanding” in its most recently completed CRA examination.
In October 2023, the Federal Reserve, the FDIC and the OCC jointly issued a final rule that significantly amended the agencies’ regulatory framework implementing the CRA. Thereafter, a federal court issued a preliminary injunction enjoining the U.S. federal bank regulatory agencies from enforcing the revised regulations while litigation challenging those regulations remains pending. In July 2025, the federal bank regulatory agencies issued a proposal to rescind the CRA final rule issued in 2023 and to reinstate the CRA framework that was in effect prior to the 2023 final rule.
Transactions with Affiliates and Insiders
The Bank is subject to certain federal laws that restrict and control our ability to extend credit and provide to or receive services from its affiliates under Sections 23A and 23B of the Federal Reserve Act and Regulation W promulgated thereunder. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank. These restrictions include quantitative and qualitative limits on the amounts and types of transactions that may take place, including the transfer of funds by the Bank to certain of its affiliates in the form of loans, extensions of credit, investments, or purchases of assets. These restrictions also require that credit transactions with affiliates be collateralized and that its transactions with affiliates be on terms no less favorable to the Bank than comparable transactions with unrelated third parties. Generally, the Bank’s covered transactions with any affiliate are limited to 10% of our capital stock and surplus, and covered transactions with all affiliates are limited to 20% of our capital stock and surplus.
The Bank is also subject to limits under federal law on its ability to extend credit to its directors, executive officers and principal shareholders (persons that beneficially own or control more than 10% of any class of our voting stock), as well as to entities owned or controlled by such persons. Among other things, extensions of credit to such insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than those prevailing for comparable transactions with non-insiders. Also, the terms of such extensions of credit may not involve more than the normal risk of non-repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons individually and in the aggregate. Certain extensions of credit also require the approval of the Bank’s board of directors.
Financial Privacy and Cybersecurity
Federal and state laws contain extensive consumer privacy protection provisions. The Gramm-Leach-Bliley Act requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables retail customers to opt out of institutions' ability to share information with unaffiliated third parties under certain circumstances. Other federal and state laws and regulations impact our ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The Gramm-Leach-Bliley Act also requires financial institutions to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information. Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.
State regulators have been increasingly active in implementing privacy and cybersecurity standards and regulations. In recent years, several states adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also implemented or modified their data breach notification and data privacy requirements.
In addition, pursuant to requirements applicable to FDIC-supervised banking organizations, such as us, we are required to notify the FDIC within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or pose a threat to the financial stability of the United States.
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Anti-Money Laundering and the USA PATRIOT Act
The Bank is subject to the anti-money laundering, or AML, provisions of the Bank Secrecy Act, or the BSA, as amended by the USA PATRIOT Act, or the PATRIOT Act, and implementing regulations issued by the FDIC and the U.S. Treasury. The PATRIOT Act, which includes the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, is intended to facilitate the detection and prosecution of terrorism and international money laundering. The PATRIOT Act establishes standards for verifying customer identification incidental to the opening of new accounts. Other provisions of the PATRIOT Act provide for special information sharing procedures governing communications with the government and other financial institutions with respect to suspected terrorists and money laundering activity, and enhancements to suspicious activity reporting, including electronic filing of suspicious activity reports over a secure filing network. The BSA requires all financial institutions, including banks, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA includes a variety of record-keeping and reporting requirements (such as cash and suspicious activity reporting), as well as due diligence/know-your-customer documentation requirements. The U.S. Treasury’s Office of Financial Crimes Enforcement Network, or FinCEN, issued a final rule, applicable as of May 2018, to clarify and enhance customer due diligence requirements for financial institutions. The rule (among other things) imposed certain obligations on covered financial institutions with respect to their “legal entity customers,” including corporations, limited liability companies and other similar entities. For each such customer that opens an account (including an existing customer opening a new account), the covered financial institution must identify and verify the customer’s “beneficial owners,” who are specifically defined in the rule. Bank regulators routinely examine institutions for compliance with customer due diligence obligations.
The Anti-Money Laundering Act of 2020, or AMLA, which amends the BSA, is intended to comprehensively reform and modernize U.S. anti-money laundering laws. Among other things, the AMLA codifies a risk-based approach to AML compliance for financial institutions; requires the U.S. Department of the Treasury to periodically promulgate priorities for anti-money laundering and countering the financing of terrorism; requires the development of standards by the Treasury Department for testing technology and internal processes for BSA compliance; expands enforcement- and investigations-related authority, including a significant expansion in the available sanctions for certain BSA violations, and expands BSA whistleblower incentives and protections. Certain of the statutory provisions in the AMLA require rulemakings beyond those that have already been finalized, reports and other measures. The impact of the AMLA, including on our compliance costs and compliance risk relating to the BSA, will depend on, among other things, these additional rulemakings and implementation guidance.
In June 2024, FinCEN proposed to amend the anti-money laundering/countering the financing of terrorism, or AML/CFT, cybercrime program requirements for all financial institutions subject to the BSA that have AML/CFT program obligations, including us. The proposal would, among other things, require a financial institution’s risk assessment process to identify, evaluate and document the financial institution’s money laundering, terrorist financing and other illicit activity risks, and update such risk assessments on a periodic basis. In July 2024, the U.S. federal bank regulatory agencies proposed amendments to their respective BSA program rules to align those rules with the June 2024 FinCEN proposal. FinCEN has not yet issued a final rule.
Regulation by the SBA
Medallion Funding and Medallion Capital are each licensed by the SBA to operate as SBICs, under the Small Business Investment Act of 1958, as amended, or the SBIA. The SBIA authorizes the licensing of privately held investment vehicles as SBICs in order to provide long term financing to small business concerns. Under the SBIA and the regulations promulgated by the SBA thereunder, a “small business concern” is a business that is independently owned and operated, which is not dominant in its field of operation, and which (i) has a tangible net worth, together with any affiliates, of $24.0 million or less and average annual net income after U.S. federal income taxes for the preceding two fiscal years of $8.0 million or less (average annual net income is computed without the benefit of any carryover loss), or (ii) satisfies alternative criteria under the Federal government’s North American Industry Classification System, or the NAICS, that assigns codes to the industry in which a small business is engaged and provides a small business size standard based either on the number of persons employed by the business or its gross revenues. In addition, at the end of each fiscal year, at least 25% of the total amount of investments must be made in “smaller enterprises” that have a net worth of $6.0 million or less, and average net income after federal income taxes for the preceding two years of $2.0 million or less. A business that meets the NAICS size standards also qualifies as a “smaller enterprise” for purposes of meeting SBA’s size standard regulations.
Investments by SBICs must generally be in active, domestic businesses. SBIC regulations preclude investment in the following types of businesses: (1) business whose primary business activity is as a relender or reinvestor (that is, directly or indirectly, providing funds to others, purchasing debt obligations, factoring, or long term leasing of equipment with no provision for maintenance or repair); (2) many kinds of real estate projects; (3) single purpose projects that are not continuing businesses; (4) companies located outside the U.S. intending to use the proceeds of the investment outside of the U.S. or companies that are located in the U.S. that have more than 49% of their employees or tangible assets located outside of the US; (5) businesses that are passive and do not carry on an active trade or business; (6) businesses that use 50% or more of the funds to buy goods or services from an associated supplier; and (7) certain “sin businesses” such as gambling and the like.
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Under current SBA regulations, the maximum rate of interest that Medallion Funding and Medallion Capital may charge may not exceed the higher of (i) 19% or (ii) the sum of (a) the higher of (i) that company’s weighted average cost of qualified borrowings, as determined under SBA regulations, or (ii) the current SBA debenture rate, plus (b) 11%, rounded to the next lower eighth of one percent. As of December 31, 2025, the maximum rate of interest permitted on loans originated by our SBICs was 19%. As of December 31, 2025, our outstanding commercial loans had a weighted average rate of interest of 14.22%. Current SBA regulations also require that each loan originated by an SBIC has a term between one and 20 years.
In addition, SBICs are subject to periodic examination by the SBA, for which the SBA charges examination fees. SBICs must maintain certain records and make them available for SBA examination. SBICs also are required to prepare valuations of their portfolio investments in accordance with prescribed valuation guidelines, maintain certain minimum levels of capital, file annual reports containing financial, management and other information and file notices of certain material changes in their ownership and operations. We are typically examined by the SBA for compliance with applicable SBA regulations.
SBICs are precluded from making investments in a small business if it would give rise to certain conflicts of interest. Generally, a conflict of interest may arise if an associate of the SBIC has or makes an investment in the small business that the SBIC is financing or serves as one of its officers or would otherwise benefit from the financing. A conflict of interest would also occur if an SBIC were to lend money to any of its officers, directors, and employees, or invest in any affiliates thereof. Joint investing with an associate (such as another fund controlled by affiliates of the general partner of the fund) may be made on identical terms or on terms that are fair to the SBIC. The SBA also prohibits, without prior SBA approval, a “change of control” or transfers which would result in any person (or group of persons acting in concert) owning 10% or more of any class of capital stock of an SBIC. A “change of control” is any event which would result in the transfer of the power, direct or indirect, to direct the management and policies of an SBIC, whether through ownership, contractual arrangements, or otherwise.
Under SBA regulations, without prior SBA approval, loans and other investments by licensees with outstanding SBA leverage to any single small business concern may not exceed 10% of the sum of an SBIC’s “private capital” and its total approved SBA leverage.
SBICs may invest idle funds that are not being used to make loans or other long-term investments in certain short-term investments permitted under SBA regulations. These permitted investments include direct obligations of, or obligations guaranteed as to principal and interest by, the government of the U.S. with a term of 15 months or less and deposits maturing in one year or less issued by an institution insured by the FDIC. These permitted investments must be maintained in (i) direct obligations of, or obligations guaranteed as to principal and interest by, the US, which mature within 15 months from the date of the investment; (ii) repurchase agreements with federally insured institutions with a maturity of seven days or less if the securities underlying the repurchase agreements are direct obligations of, or obligations guaranteed as to principal and interest by the US, and such securities must be maintained in a custodial account in a federally insured institution; (iii) mutual funds, securities, or other instruments that exclusively consist of, or represent pooled assets of, investments described in (i) or (ii) above; (iv) certificates of deposit with a maturity of one year or less, issued by a federally insured institution; (v) a deposit account in a federally insured institution, subject to withdrawal restriction of one year or less; (vi) a checking account in a federally insured institution; or (vii) a reasonable petty cash fund.
SBICs may purchase voting securities of small business concerns in accordance with SBA regulations. Although prior regulations prohibited an SBIC from controlling a small business concern except in limited circumstances, SBA regulations allow an SBIC to exercise control over a small business for a period of seven years from the date on which the SBIC initially acquires its control position. This control period may be extended for an additional period of time with the SBA’s prior written approval.
If an SBIC defaults in its payment obligations to SBA under its outstanding debentures, fails to comply with any terms of its securities, or violates any law or certain regulations applicable to it, the SBA has the right to accelerate the maturity of all amounts due under its debentures. Additionally, the SBA may appoint a receiver for the SBIC and for its liquidation in the event of a default on payment of a SBIC’s debentures or for serious regulatory violations.
As further described under Item 1A. Risk Factors of this Annual Report on Form 10-K, a portion of our borrowings (approximately 4% as of December 31, 2025) are through SBA’s debentures, which provide us access to long-term borrowings (typically 10 years) at fixed rates with coupons typically less than other sources of capital available to us. We currently do not have any approved SBA commitments available. The SBA has informed us that we need to have Medallion Capital’s management team reviewed through the SBA’s licensing division; until successful completion of that review, Medallion Capital is not deemed by the SBA to have a qualified management team. We cannot assure you that such SBA review will find that the management team is qualified and accordingly may not be able to obtain commitments to access additional SBA debentures or refinance existing SBA debentures. If such approval is not received, Medallion Capital will no longer be able to finance investments to portfolio companies using the SBIC license. In addition, the timing of SBA’s approval, if received, is uncertain.
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Other
Change in Control
Because the Bank is an “insured depository institution” within the meaning of the FDIA and the Change in Bank Control Act as well as Medallion Financial Corp. being a “financial institution holding company” within the meaning of the Utah Financial Institutions Act, federal and Utah law and regulations prohibit any person or company from acquiring control of the Bank or Medallion Financial Corp., without, in most cases, prior written approval of the FDIC or the Commissioner of the Utah DFI, as applicable. Under the Change in Bank Control Act, control is conclusively presumed if, among other things, a person or company acquires 25% or more of any class of the Bank’s voting stock. A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to a number of specified “control factors” as set forth in the applicable regulations. Although the Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act, your investment in the Company is not insured or guaranteed by the FDIC, or any other agency, and is subject to loss.
Under the Utah Financial Institutions Act, control is defined as the power, directly or indirectly, or through or in concert with one or more persons to: (a) direct or exercise a controlling influence over (i) the management or policies of a financial institution or (ii) the election of a majority of the directors or trustees of an institution; or (b) to vote 25% or more of any class of voting securities of a financial institution. In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through or in concert with one or more persons, to vote more than 10% but less than 25% of any class of voting securities of a financial institution. If any holder of any series of the Bank’s preferred stock is or becomes entitled to vote for the election of the Bank’s directors, such series will be deemed a class of voting stock, and any other person will be required to obtain the non-objection of the FDIC under the Change in Bank Control Act to acquire or maintain 10% or more of that series. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our common stock in excess of the amount which can be acquired without regulatory approval.
Examination and Supervision
Federal and state banking agencies require the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures. We must undergo regular on-site examinations by the FDIC and the Utah DFI, which examine the Bank for adherence to a range of legal and regulatory compliance responsibilities. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential, with the exception of the CRA examination discussed above. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.
Incentive Compensation
The FDIC has issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that appropriately balance risk and financial results in a manner that does not encourage employees to expose their organizations to imprudent risk, (ii) be compatible with effective internal controls and risk management and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
The Dodd-Frank Act requires the federal banking regulators and the Securities and Exchange Commission, or the SEC, to establish joint regulations or guidelines at specified regulated entities having at least $1 billion in total assets, such as us, prohibiting incentive-based payment arrangements that encourage inappropriate risk-taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity. The federal banking regulators and the SEC proposed revised rules in 2016, some of which re-proposed revised rules in 2024, none of which have been finalized.
Valid When Made and True Lender
The FDIC has adopted a rule clarifying that a loan made by a state-chartered bank is considered “valid when made” pursuant to the preemptive authority in Section 27 of the FDIA, and therefore the loan’s original terms, including, among others, its interest rate, are valid and enforceable by any subsequent assignee, transferee, or buyer, regardless of the usury laws of other states, or the Valid-When-Made Rule. Under the Valid-When-Made Rule, the interest rate on a bank-made loan remains valid and enforceable even after the bank sells or transfers it to a party that could not have originated the loan on the same terms as the bank. Under the Valid-When-Made Rule, the interest rate on a bank-made loan remains valid and enforceable even after the bank sells or transfers it to a party that could not have originated the loan on the same terms as the bank. In adopting the Valid-When-Made Rule, the FDIC noted that the rule is not intended to address the “true lender” of a loan.
Future Legislation
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Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and modify our business strategy, and limit our ability to pursue business opportunities in an efficient manner.
AVAILABLE INFORMATION
Our corporate website is located at www.medallion.com. We make copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act available on or through our website free of charge as soon as reasonably practicable after we electronically file them with or furnish them to the SEC. Our SEC filings can be found in the Investors Relations section of our website, the address of which is www.medallion.com/investors.html, or on the SEC website at www.sec.gov. Our Code of Ethical Conduct and Insider Trading Policy can be located in the Corporate Governance section of our website at www.medallion.com/investors_corporate_governance.html. These documents, as well as our SEC filings, are available in print free of charge to any stockholder who requests a copy from our Secretary.
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ITEM 1A. RISK FACTORS
Risks Related to Our Loan Portfolios and Business
Our business is heavily concentrated in consumer lending, which carries a risk of loss that is different from and typically higher than the risk of loss associated with commercial lending and which could be adversely affected by an economic downturn.
Our business is heavily concentrated in consumer lending. As a result, we are more susceptible to fluctuations and risks particular to consumer credit than a more diversified company would be. Our business is particularly sensitive to macroeconomic conditions that affect the U.S. economy, consumer spending and consumer credit. This includes, for example, the risk of recession, the impacts of inflation, which has in recent years and could continue to have an adverse effect on consumer spending, a rising interest rate environment, the impact of tariffs, as well as the impact that geopolitical responses to international and regional wars have had on gasoline prices and the economic environment generally in the United States. We are also more susceptible to the risks of increased regulations and legal and other regulatory actions that are targeted at consumer credit or the specific consumer credit products that we offer (including promotional financing). Our business concentration could have a material adverse effect on our results of operations.
By its nature, lending to consumers carries with it different risks and typically a higher risk of consistent loss than commercial lending. Although the net interest margins are intended to be higher to compensate us for this increased risk, an economic downturn could result in higher loss rates and lower returns than expected and could affect the profitability of our consumer loan portfolios. During periods of economic slowdown, delinquencies, defaults, repossessions, and losses generally increase, and consumers may reduce their discretionary spending in areas such as recreation and home improvement, which constitute the significant majority of our business. These periods have been, and may continue to be, accompanied by increasing unemployment rates and declining values of consumer products securing outstanding accounts, which weaken collateral coverage and increase the amount of a loss in the event of default.
Additionally, the risk of recession, higher gasoline prices, volatile real estate values and market conditions, resets of adjustable rate mortgages to higher interest rates, increases in inflation, tariffs on products or component parts of the collateral we finance, general availability of consumer credit, or other factors that impact consumer confidence or disposable income, could increase loss frequency and decrease consumer demand for RVs, boats, trailers, and other consumer products (including in connection with home improvement projects), as well as weaken collateral values on certain types of consumer products. Any decrease in consumer demand for those products could have a material adverse effect on our ability to originate new loans and, accordingly, on our business, financial condition, and results of operations.
Although declines in commodity prices, and more particularly gasoline prices, generally are financially beneficial to the individual consumer, these declines may also have a negative impact on unemployment rates in geographic areas that are highly dependent upon the oil and natural gas industry, which could adversely affect the credit quality of consumers in those areas.
Our balance sheet consists of a significant percentage of non-prime consumer loans, which are associated with higher-than-average delinquency rates and losses. The actual rates of delinquencies, defaults, repossessions, and losses on these loans could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our net interest income.
Furthermore, our business is significantly affected by monetary and regulatory policies of the U.S. Federal Government and its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control and could have a material adverse effect on us, through interest rate changes, costs of compliance with increased regulation, and other factors. For example, the Federal Reserve raised the Federal Funds Rate several times in 2022 and 2023. If inflationary pressures return, our interest expense could increase faster than our interest income, reducing our net interest income and net interest margin, and continuing adverse impacts on consumer spending could reduce demand for our consumer loan products. These developments, along with United States government credit, debt ceiling and deficit concerns, global economic uncertainties and market volatility, have caused and could continue to cause interest rates to be volatile.
The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how those economic conditions might impair the ability of our borrowers to repay their loans. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets.
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Our financial condition, liquidity and results of operations depend on the credit performance of our loans.
During the year ended December 31, 2025, 36% of our recreation loans originated were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit histories. As of December 31, 2025, 25% of our entire consumer loan portfolio consisted of non-prime receivables. While our underwriting guidelines are designed to confirm that, notwithstanding such factors, the obligor would be a reasonable credit risk, the receivables nonetheless are expected to experience higher default rates than a portfolio of obligations of prime obligors. The weakening of our underwriting guidelines for any reason, such as in response to the competitive environment, in an effort to originate higher yielding loans, a lack of discipline or diligence by our employees in underwriting and monitoring loans or our inability to adequately adapt policies and procedures to changes in economic or other conditions, may result in loan defaults and charge-offs that may necessitate increases to our allowance for credit losses, each of which could adversely affect our net income and financial condition. In the event of a default on a recreation loan, generally the most practical recovery method is repossession of the financed vehicle, although the collateral value of the vehicle usually does not fully cover the outstanding account balance and costs of recovery. Repossession sales that do not yield sufficient proceeds to repay the receivables in full typically result in losses on those receivables.
In addition, our prime portfolio has grown in proportion to our overall portfolio over the past several years. While prime portfolios typically have lower default rates than non-prime portfolios, we have less ability to make risk adjustments to the pricing of prime loans compared to non-prime loans. As a result, to the extent our prime portfolio continues to grow, a larger proportion of our business will consist of loans with respect to which we will have less flexibility to adjust pricing to absorb losses. As a result of these factors, we may sustain higher losses than anticipated in our prime portfolio. Additionally, if our prime credit losses are higher than expected then we may also be at risk with regard to our forecasted losses, which could impact our loss reserves and results of operations.
Our allowance for credit losses may prove to be insufficient to cover losses on our loans.
We maintain an allowance for credit losses (a reserve established through a provision for losses that decreases our earnings and that, accordingly, affects our financial condition) that we believe is appropriate to provide for current expected losses in our loan portfolio.
The process for establishing an allowance for credit losses is critical to our results of operations and financial condition, and requires complex models and judgments, including forecasts of economic conditions and other assumptions. Changes in economic conditions affecting borrowers, growth in our loan portfolio, changes in the credit characteristics of our loan portfolio, new information regarding our loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. In cases where we modify loans, if the modified loans do not perform as anticipated, we may be required to establish additional allowances on these loans.
We periodically review and update our methodology, models and the underlying assumptions, estimates and assessments we use to establish our allowance for credit losses to reflect our view of current conditions. Moreover, our regulators, as part of their supervisory function, periodically review the methodology, models and the underlying assumptions, estimates and assessments we use for calculating, and the adequacy of, our allowance for credit losses. Our regulators, based on their judgment, may conclude that we should modify our methodology, models or the underlying assumptions, estimates and assessments, increase our allowance for credit losses, and/or recognize further losses. We continue to review and evaluate our methodology, models and the underlying assumptions, estimates and assessments we use and we will implement further enhancements or changes to them, as needed. We cannot provide assurance that our credit loss reserves will be sufficient to cover actual losses. Future increases in the allowance for credit losses or recognized losses (as a result of any review, update, regulatory guidance, changes in accounting standards or otherwise) will result in a decrease in net earnings and capital and could have a material adverse effect on our business, results of operations, and financial condition.
Our business, financial condition and results of operations could be negatively impacted if we are unsuccessful in developing and maintaining relationships with dealers, contractors, and FSPs.
We originate loans for retention in our loan portfolios by working with third-party sellers of consumer products and not by working directly with consumers. As a result, our ability to originate consumer loans for our portfolio depends on our relationships with a limited number of dealers, contractors and FSPs. Although we have relationships with various dealers, contractors and FSPs, none of our relationships are exclusive and each may be terminated at any time. In addition, a large proportion of our new loan originations is concentrated in our top ten relationships, and the loss of a significant relationship could have a negative effect on demand for our products and our new loan originations. There is also significant competition for the contractor and FSP relationships we depend on in connection with our home improvement lending segment. The loss of any of these relationships, our failure to develop additional relationships, and circumstances in which our existing dealer, contractor, and FSP relationships generate decreased sales and loan volume all may have a material adverse effect on a substantial part of our business, financial condition and results of operations.
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A reduction in demand for our products and failure by us to adapt to such reduction could adversely affect our business, financial condition and results of operations.
The demand for the products we offer may be reduced due to a variety of factors, such as the risk of recession and other economic conditions, demographic patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products or the availability of competing products. If we fail to adapt to significant changes in our customers’ demand for, or access to, our products, our revenues could decrease, and our operations could be adversely affected. Even if we do make changes to our product offerings to fulfill customer demand, customers may resist such changes or may reject such products. Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and, by that time, it may be too late to make further modifications to such product without causing further adverse effects to our business, results of operations, and financial condition.
Decreases or increases in prevailing interest rates could adversely affect our business, our cost of capital and our net interest income.
Our profitability may be directly affected by interest rate levels and fluctuations in interest rates. As interest rates change, our gross interest rate spread on originations either increases or decreases because the rates charged on the loans originated are limited by market and competitive conditions, sometimes restricting our ability to pass on increased interest costs to the consumer. Additionally, although a significant percentage of our borrowers are non-prime and are not highly sensitive to interest rate movement, increases in interest rates may reduce the volume of loans we originate. While we monitor the interest rate environment and seek to mitigate the impact of increased interest rates, we cannot provide assurance that the impact of changes in interest rates can be successfully mitigated.
In addition, the majority of our loan portfolio consists of fixed-rate loans. To the extent our funding costs increase in response to an increase in market rates of interest, an abrupt increase in market rates of interest may have an adverse impact on our results of operations until we are able to originate new consumer loans at higher prevailing interest rates. As noted above, the Federal Reserve has raised certain benchmark interest rates in the recent past in an effort to combat inflation.
Additionally, we borrow to fund our loans and investments, a portion of our income is dependent upon the difference between the interest rate at which we borrow funds and the interest rate at which we invest these funds. Essentially all of our loans have fixed interest rates, while a portion of our borrowings may reprice at current higher rates. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds could increase, which would reduce our net investment income. We may hedge against interest rate fluctuations by using standard hedging instruments, subject to applicable legal requirements. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition, and results of operations. Also, we will have to rely on our counterparties to perform their obligations under such hedges.
Our commercial borrowers have the right to prepay their loans in full or in part at any time. Commercial borrowers are subject to a prepayment penalty of up to 5% during the first year, declining by one percentage point through the fifth year. A borrower is likely to exercise prepayment rights at a time when the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. In a lower interest rate environment, we will have difficulty re-lending prepaid funds at comparable rates, which may reduce the net interest income that we receive. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid, and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if a substantial number of our portfolio companies elect to prepay amounts owed to us and we are not able to reinvest the proceeds for comparable yields in a timely fashion.
Financing and Related Risks
Failure to raise additional capital could have a material adverse effect on our results of operations and financial position and impact our growth strategy.
We seek to raise additional capital to have sufficient capital resources and liquidity to meet our commitments, including the terms of the 2003 Capital Maintenance Agreement, and fund our business needs and future growth. With the recent repayment at maturity of $31.25 million aggregate principal amount of our privately placed notes in February 2026, we have been seeking, and continue to actively seek, additional debt financing. We cannot assure you that we will be successful in obtaining such additional financing on acceptable terms, if it all.
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Similarly, our ability to obtain additional sources of funds including through credit facilities or other alternative sources of financing may be difficult, and we cannot guarantee that we will be able to do so on terms favorable to us or at all. The availability of credit facilities depends, in part, on factors outside of our control, including regulatory capital treatment for unfunded bank lines of credit, the financial strength and strategic objectives of the banks that participate in credit facilities and the availability of bank liquidity in general. In addition, as further described below, we currently cannot raise funds through SBA debentures and our ability to do so in the future is subject to uncertainty.
Our ability to raise additional capital will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition. We may not be able to obtain capital on acceptable terms or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of capital markets investors or other disruptions in capital markets, may adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. Further, we may have to when many other financial institutions are seeking to raise capital and would then have to compete with those institutions for investors.
An inability to raise additional capital on acceptable terms could have a material adverse effect on our business, financial condition, or results of operations, and adversely impact our growth strategy.
Our subsidiary Medallion Capital’s management team is currently under review by the SBA; until successful completion of the review, which, including the timing thereof, remains uncertain, we cannot obtain financing through the SBA.
A portion of our borrowings (approximately 4% as of December 31, 2025) are through SBA’s debentures, which provide us access to long-term borrowings (typically 10 years) at fixed rates with coupons typically less than other sources of capital available to us. We currently do not have any approved SBA commitments available. The SBA has informed us that we need to have Medallion Capital’s management team reviewed through the SBA’s licensing division; until successful completion of that review, Medallion Capital is not deemed by the SBA to have a qualified management team. We cannot assure you that such SBA review will find that the management team is qualified and accordingly may not be able to obtain commitments to access additional SBA debentures or refinance existing SBA debentures. If such approval is not received, Medallion Capital will no longer be able to finance investments to portfolio companies using the SBIC license. In addition, the timing of SBA’s approval, if received, is uncertain.
We are subject to certain financial covenants and other restrictions under debt arrangements, which could affect our ability to finance future operations or capital needs or to engage in other business activities.
Certain privately placed notes contain financial covenants and other restrictions relating to financial ratios and minimum tangible net worth. Our ability to meet these financial covenants and restrictions could be affected by events beyond our control. A breach of these covenants could result in an event of default under the applicable debt instrument. Such a default, if not cured or waived, may allow the holders to accelerate the related debt and may result in the acceleration of any other debt that is subject to an applicable cross-acceleration or cross-default provision. Our privately placed debt is subject to cross default provisions. Certain other events can constitute an event of default. In the event our holders of the related notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Based on the foregoing factors, the operating and financial restrictions and covenants in our current debt agreements and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage in other business activities.
Medallion Bank’s use of brokered deposits for its deposit-gathering activities may not be available when needed. The inability to accept and renew brokered deposits would have a material adverse effect on our business, financial condition, liquidity, and results of operations.
Medallion Bank relies on the established brokered deposit market to originate deposits to fund its operations. Additionally, Medallion Bank’s business, strategy and prospects are dependent on its ability to accept and renew brokered deposits without limitation and, therefore, dependent on its ability to be “well-capitalized” under the FDIC’s regulatory framework.
Medallion Bank’s brokered deposits consist of deposits raised through the brokered deposit market rather than through retail branches. Although Medallion Bank has developed contractual relationships with a diversified group of investment brokers, and the brokered deposit market is well developed and utilized by many banking institutions, conditions could arise that might affect the availability of brokered deposits. Although the Medallion Bank primarily funds its business using FDIC-insured deposits that generally cannot be withdrawn prior to maturity, there can be no assurance that this funding source will continue to be available on the same terms, or at all. In addition, Medallion Bank’s ability to rely on brokered deposits as a source of funding is subject to capitalization requirements set forth in the FDIC’s prompt corrective action framework. Medallion Bank may not accept or renew brokered deposits unless it is “well-capitalized”, or it is “adequately capitalized” and it receives a waiver from the FDIC. A bank that is “adequately capitalized” and that accepts or renews brokered deposits under a waiver from the FDIC is subject to additional restrictions on the interest rates it may offer. See "Our Business - Supervision and Regulation" for additional information.
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If the capital levels at Medallion Bank fall below the “well-capitalized” level as defined by the FDIC, or if it otherwise fails to maintain “well capitalized” status, Medallion Bank’s ability to raise brokered deposits would be materially impaired. If Medallion Bank’s capital levels fall below the “adequately-capitalized” level as defined by the FDIC, it would be unable to raise brokered deposits. Any impairment or inability to raise brokered deposits would have a material adverse effect on our business, financial condition, liquidity and results of operations. Brokered deposits may also not be as stable as other types of deposits, and if Medallion Bank experiences a period of sustained operating losses, the cost of attracting deposits from the brokered deposit market could increase significantly. Medallion Bank’s ability to manage its growth to stay within the “well-capitalized” level is critical to our ability to retain open access to this funding source.
Investors in our securities, may be adversely affected and may face significant losses (including the possibility of losing their entire investment) if Medallion Bank is unable to accept or renew brokered deposits or if its access to the brokered deposit market were impaired.
We depend on cash flow from our subsidiaries to make payments on our indebtedness and fund operations.
We are primarily a holding company, and we derive most of our operating income and cash flow from our subsidiaries. As a result, we rely heavily upon distributions from our subsidiaries to generate the funds necessary to make payments on our indebtedness and fund operations. Funds are provided to us by our subsidiaries through dividends and payments on intercompany indebtedness, but we cannot assure you that our subsidiaries will be in a position to continue to make these dividend or debt payments. The Utah Department of Financial Institutions and FDIC have the authority to prohibit or to limit the payment of dividends by Medallion Bank. In addition, as a condition to receipt of FDIC insurance, Medallion Bank entered into a capital maintenance agreement with the FDIC requiring it to maintain a 15% Tier 1 leverage ratio (Tier 1 capital to average assets). As of December 31, 2025, Medallion Bank’s Tier 1 leverage ratio was 17.8%. We received dividends from Medallion Bank of $24.0 million in each of the years ended December 31, 2025 and 2024 and received dividends from Medallion Capital of $5.6 million and $1.6 million for the years ended December 31, 2025 and 2024.
Legal and Regulatory Risks
We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act significantly changed federal financial services regulation and affects, among other things, the lending, deposit, investment, trading, and operating activities of financial institutions and their holding companies. In addition to the statutory requirements under the Dodd-Frank Act, the legislation also delegated authority to U.S. banking, securities, and derivatives regulators to impose additional restrictions through required rulemaking. The Dodd-Frank Act requires a company that owns an industrial bank to serve as a “source of strength” to the institution and is also subject to the “Volcker Rule.” Although these requirements have not materially impacted us, we cannot assure you that they will not in the future.
Other changes in the laws or regulations applicable to us more generally, may negatively impact the profitability of our business activities, require us to change certain of our business practices, materially affect our business model, limit the activities in which we may engage, affect retention of key personnel, require us to raise additional regulatory capital, increase the amount of liquid assets that we hold, or otherwise affect our funding profile or expose us to additional costs (including increased compliance costs). Any such changes may also require us to invest significant management attention and resources to make any necessary changes and may adversely affect our ability to conduct our business as previously conducted or our results of operations or financial condition.
We are also subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements, and retail financing, debt collection, consumer protection, environmental, health and safety, creditor, wage-hour, anti-discrimination, whistleblower and other employment practices laws and regulations and we expect these costs to increase going forward. The violation of these or future requirements or laws and regulations could result in administrative, civil, or criminal sanctions against us, which may include fines, a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business. As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations.
The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.
The banking industry is extensively regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, federal deposit insurance funds, and the banking system as a whole, and not for the protection of security holders. We are subject to regulation and supervision by the FDIC and the Utah DFI. The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept, maintenance of adequate capital and liquidity, changes in the control of Medallion Bank and us, restrictions on dividends, and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities or acquisitions, and
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there is the risk that such approvals may not be obtained, either in a timely manner or at all. Our regulators also have the ability to compel us to take, or restrict us from taking, certain actions entirely, such as actions that our regulators deem to constitute an unsafe or unsound banking practice. Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, could result in sanctions by regulatory agencies, civil money penalties, or damage to our reputation, all of which could have a material adverse effect on our business, financial condition or results of operations.
Federal and state banking laws and regulations, as well as interpretations and implementations of these laws and regulations, are continually undergoing substantial review and change. Financial institutions generally have also been subjected to increased scrutiny from regulatory authorities. Election outcomes may also drive shifts in governmental policy that could adversely affect us or, more broadly, the business environment in which we operate. These changes and increased scrutiny have resulted and may continue to result in increased costs of doing business and may in the future result in decreased revenues and net income, reduce our ability to effectively compete to attract and retain customers, or make it less attractive for us to continue providing certain products and services. Any future changes in federal and state law and regulations, as well as the interpretations and implementations, or modifications or repeals, of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition or results of operations.
Our inability to remain in compliance with regulatory requirements could have a material adverse effect on our operations in a given market and on our reputation generally. No assurance can be given that applicable laws or regulations will not be amended or construed differently or that new laws and regulations will not be adopted, either of which could materially adversely affect our business, financial condition, or results of operations.
The USA Patriot Act of 2001 and the BSA require financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with FinCEN. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers and beneficial owners of certain legal entity customers seeking to open new financial accounts. Federal and state bank regulators also have focused on compliance with BSA and anti-money laundering regulations. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or expanding activities. Although we have policies and procedures designed to assist in compliance with the BSA and other anti-money laundering laws and regulations, there can be no assurance that such policies or procedures will work effectively all of the time or protect us against liability for actions taken by our employees, agents, and intermediaries with respect to our business or any businesses that we may acquire. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations.
Increases in FDIC insurance premiums may adversely affect our earnings.
Our deposits are insured by the FDIC up to legal limits and, accordingly, we are subject to FDIC deposit insurance assessments. We have, in the past, and may in the future be required to pay higher FDIC premiums, and the FDIC has imposed, and could impose in the future, special assessments. See “Supervision and Regulation—Deposit Insurance.” Future increases of FDIC insurance premiums or special assessments could have a material adverse effect on our business, financial condition or results of operations.
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
We are subject to various privacy, information security, and data protection laws, including requirements concerning data security breach notification, and we could be negatively affected by these laws. For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of nonpublic personal information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing safeguards considered appropriate based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification requirements in certain circumstances in the event of a data security breach. Moreover, legislators and regulators are increasingly adopting or revising, privacy, information security, and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection, and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal Trade Commission, as well as at the state level.
Compliance with current or future privacy, data protection, and information security laws (including those regarding data security breach notification) could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial condition or results of operations. Our failure to comply
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with privacy, data protection, and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions, and damage to our reputation, which could have a material adverse effect on our business, financial condition, or results of operations.
Our use of third-party vendors and our other ongoing third-party business relationships are subject to regulatory requirements and scrutiny.
We regularly use third-party vendors as part of our business. We also have substantial ongoing business relationships with other third parties. These types of third-party relationships are subject to demanding regulatory requirements and attention by our federal and state bank regulators. Regulation requires us to adopt enhanced due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships. In certain cases, we may in the future be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs and potentially limit our competitiveness. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third-party relationships and in the performance of the parties with which we have these relationships. As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third-party vendors or other ongoing third-party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect our business, financial condition or results of operations.
If any of the various dealers, contractors, FSPs or Strategic Partners through which we originate loans fails to fulfill their obligations to consumers or comply with applicable law, we may incur remediation costs. Although the dealers, contractors, FSPs and Strategic Partners that we contract with are required to fulfill their contractual commitments to consumers and to comply with applicable law, from time to time they might not, or a borrower might allege that they did not. This, in turn, can result in claims against us or in loans being uncollectible. In those cases, we may decide that it is beneficial to remediate the situation, either by assisting the borrowers to get a refund, working with the dealers, contractors, FSPs or Strategic Partners to modify the terms of the loans or reducing the amount due by making a concession to the consumer or otherwise. Historically, the cost of remediation has not been material to our business, but it could be in the future.
Our SBIC subsidiaries are licensed by the SBA and are therefore subject to SBA regulations.
Our SBIC subsidiaries are licensed to operate as SBICs and are regulated by the SBA. The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the SBIC subsidiaries to forego attractive investment opportunities that are not permitted under SBA regulations.
Further, SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10% or more of a class of capital stock of an SBIC. If the SBIC subsidiaries fail to comply with applicable SBIC regulations, the SBA could, depending on the severity of the violation, limit or prohibit their use of debentures, declare outstanding debentures immediately due and payable, and/or limit them from making new investments. In addition, the SBA could revoke or suspend an SBIC license or may appoint a receiver for the SBIC and for its liquidation for willful or repeated violation of, or willful or repeated failure to observe, any provision of the SBIA or any rule or regulation promulgated thereunder. Such actions by the SBA would, in turn, negatively affect us.
Our subsidiary Medallion Capital’s management team is currently under review by the SBA; until successful completion of the review, which, including the timing thereof, remains uncertain, we cannot obtain financing through the SBA.
A portion of our borrowings (approximately 4% as of December 31, 2025) are through SBA’s debentures, which provide us access to long-term borrowings (typically 10 years) at fixed rates with coupons typically less than other sources of capital available to us. We currently do not have any approved SBA commitments available. The SBA has informed us that we need to have Medallion Capital’s management team reviewed through the SBA’s licensing division; until successful completion of that review, Medallion Capital is not deemed by the SBA to have a qualified management team. We cannot assure you that such SBA review will find that the management team is qualified and accordingly may not be able to obtain commitments to access additional SBA debentures or refinance existing SBA debentures. If such approval is not received, Medallion Capital will no longer be able to finance investments to portfolio companies using the SBIC license. In addition, the timing of SBA’s approval, if received, is uncertain.
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Our ability to enter into transactions with our affiliates is restricted.
The SBA restricts the ability of SBICs to lend money to any of their officers, directors, and employees, or invest in any affiliates thereof.
Medallion Bank is subject to certain federal laws that restrict and control its ability to engage in transactions with its affiliates. Sections 23A and 23B of the Federal Reserve Act and applicable regulations restrict the transfer of funds by Medallion Bank to certain of its affiliates, including us, in the form of loans, extensions of credit, investments, or purchases of assets and restrict its ability to provide services to, or receive services from, its affiliates. Sections 23A and 23B also require generally that Medallion Bank’s transactions with its affiliates be on terms no less favorable to Medallion Bank than comparable transactions with unrelated third parties.
Federal and state law may discourage certain acquisitions of our common stock which could have a material adverse effect on our stockholders.
Because Medallion Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act and Medallion Financial Corp. is a “financial institution holding company” within the meaning of the Utah Financial Institutions Act, federal and Utah law and regulations prohibit any person or company from acquiring control Medallion Bank or Medallion Financial Corp., without, in most cases, prior written approval of the FDIC or the Commissioner of the Utah Department of Financial Institutions, as applicable. Under the Change in Bank Control Act, control is conclusively presumed if, among other things, a person or company acquires 25% or more of any class of the Bank’s voting stock. A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to a number of specified “control factors” as set forth in the applicable regulations. Although Medallion Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act, your investment in the Company is not insured or guaranteed by the FDIC, or any other agency, and is subject to loss. Under the Utah Financial Institutions Act, control is defined as the power, directly or indirectly, or through or in concert with one or more persons to: (a) direct or exercise a controlling influence over (i) management or policies of a financial institution or (ii) the election of a majority of the directors or trustees of an institution or (b) vote 25% or more of any class of voting securities of a financial institution. In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through concern with one or more persons, to vote more than 10% but less than 25% of any class of voting securities of a financial institution. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our common stock in excess of the amount which can be acquired without regulatory approval. These provisions could delay or prevent a third party from acquiring us, despite the possible benefit to our stockholders, or otherwise adversely affect the market price of our common stock.
Risk Relating to Our Growth and Operations
Competition with other lenders could adversely affect us.
The consumer lending market is very competitive and is served by a variety of entities, including banks, savings and loan associations, credit unions, independent finance companies, and financial technology companies. The recreation lending and home improvement lending markets are also highly fragmented, with a small number of lenders capturing large shares of each market and many smaller lenders competing for the remaining market share. Our competitors often seek to provide financing on terms more favorable to consumers or dealers, contractors and FSPs than we offer. Many of these competitors also have long-standing relationships with dealers, contractors and FSPs and may offer other forms of financing that we do not offer, e.g., credit card lending. We anticipate that we will encounter greater competition as we expand our operations, and competition may also increase in more stable or favorable economic conditions. In addition, certain of our competitors are not subject to the same regulatory requirements that we are and, as a result, these competitors may have advantages in conducting certain business and providing certain services and may be more aggressive in their loan origination activities. Increasing competition could also require us to lower the rates we charge on loans in order to maintain our desired loan origination volume, which could also have a material adverse effect on our business, financial condition and results of operations.
We have in the past and may in the future pursue new strategies and lines of business, and we may face enhanced risks as a result of these changes in strategy, including from transacting with a broader array of customers and exposure to new assets, activities markets, and regulatory requirements.
Since the formation of the Bank in 2002, we have expanded and changed our strategy and pursued new business lines on more than one occasion, including expanding into our recreation lending, home improvement lending and strategic partnership program businesses and our transition away from taxi medallion loan business.
We may continue to change our strategy and enter new lines of business, including through the acquisition of another company, acquisitions of new types of loan portfolios or other asset classes, expansion of our deposit-taking activities, or otherwise, in the future. Any new business initiatives have in the past and may in the future expose us to new and enhanced risks, including new credit-related, compliance, fraud, market and operational risks, increased compliance and operating costs, different and potentially greater regulatory scrutiny of such new activities and assets, and may expose us to new types of customers as well as asset classes, activities and markets.
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Any new business initiatives and strategies we may pursue in the future may be less successful than anticipated and may not advance our intended business strategy. We may not realize a satisfactory return on investments or acquisitions, we may experience difficulty in managing new portfolios or integrating operations, and management’s attention from our other businesses could be diverted. Any of these results could ultimately have an adverse effect on our business, financial condition or results of operations.
Our financial condition and results of operations will depend on our ability to manage growth effectively.
Our ability to achieve our loan and investment objective will depend on our ability to grow, which will depend, in turn, on our management team’s ability to identify, evaluate, and monitor, and our ability to finance and invest in, companies that meet our investment criteria.
Accomplishing this result on a cost-effective basis will be largely a function of our management team’s handling of the investment process, its ability to provide competent, attentive, and efficient services, and our access to financing on acceptable terms. In addition to monitoring the performance of our existing investments, members of our management team and our investment professionals may also be called upon to provide managerial assistance to our portfolio companies. These demands on their time may distract them or slow the rate of investment. In order to grow, we will need to hire, train, supervise, and manage new employees. However, we cannot assure you that any such employees will contribute to the success of our business. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and results of operations.
Our business depends on our ability to adapt to rapid technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services, including with the proliferation and increasing use of artificial intelligence, or AI. The effective use of technology increases efficiency and enables financial institutions to serve customers better. Our future success depends, in part, upon our ability to address the needs of customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements than we do. We may not be able to implement new, technology-driven products and services effectively or be successful in marketing these products and services to our customers. In addition, the implementation of technological changes and upgrades to maintain current systems and integrate new ones may also cause service interruptions, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws. Failure to successfully keep pace with technological change affecting the financial services industry and failure to avoid interruptions, errors and delays could have a material adverse effect on our business, financial condition or results of operations.
We expect that new technologies and business processes applicable to the banking industry will continue to emerge, whether AI-related or otherwise, and these new technologies and business processes may be better than those we currently use. Because the pace of technological change is high and our industry is intensely competitive, we may not be able to sustain our investment in new technology as critical systems and applications become obsolete or as better ones become available. A failure to maintain current technology and business processes could cause disruptions in our operations or cause our products and services to be less competitive, all of which could have a material adverse effect on our business, financial condition or results of operations.
Security breaches and other disruptions could compromise our information and expose us to liability, which may negatively impact our business and reputation.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customers, and personally identifiable information of our customers and employees, in third-party data centers (including in the cloud or services), and on our networks. The secure processing, maintenance, and transmission of this information is critical to our operations. Despite our security and business continuity measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions, or vulnerable to other disruptions as a result of systems failures, operational events, employee error or incidents affecting our third-party and cloud service providers (or providers to those third-party service providers). Any such breach or disruption could compromise our networks, and the information stored there could be accessed, publicly disclosed, destroyed, lost or stolen. Any such access, disclosure, destruction or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and regulatory penalties, disrupt our operations and damage our reputation, which could adversely affect our business. In addition, we may also be required to incur significant costs in connection with any regulatory investigation or civil litigation resulting from a security breach or other information technology disruption that affects us. We and our service providers have implemented work-from-home arrangements, which has increased the risk of security breaches and other disruptions.
We have been, and likely will continue to be, the target of attempted cyber-attacks, computer viruses, malicious code, phishing attacks, denial of service attacks and other information security threats. To date, cyber-attacks have not had a material impact on our financial condition, results or business. However, we could suffer material financial or other losses in the future and we are not able to predict the severity of these attacks. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the current global economic and political environment, our work-from-home arrangements, our use of cloud service providers, the outsourcing of some of our business operations, and the interconnectivity and interdependence of third
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parties to our systems. In addition, our increasing interconnectivity with service providers, dealers, contractors, Strategic Partners and FSPs, including through APIs, increases the risk that a security breach or other disruption affecting a third party materially affects our ability to conduct business. Regulatory agencies have also become increasingly focused on cybersecurity incidents, and we may incur additional expenses in order to comply with new obligations.
We are dependent upon our senior management team for our future success.
We depend on the diligence, skill, and network of business contacts of the investment professionals we employ for sourcing, evaluating, negotiating, structuring, and monitoring our investments. Our future success also depends on our senior management team and its coordination with the senior management team at Medallion Bank. These members of senior management include Alvin Murstein, our Executive Chairman of the Board of Directors, Andrew M. Murstein, our President, Chief Executive Officer and Chief Operating Officer, Anthony N. Cutrone, our Executive Vice President and Chief Financial Officer, Donald S. Poulton, Chief Executive Officer, Medallion Bank, D. Justin Haley, President Medallion Bank, and Steven M. Hannay, Executive Vice President and Chief Lending Officer, Medallion Bank. The departure of any member of our senior management or the senior management team at Medallion Bank could have a material adverse effect on our ability to manage or grow our business and effectively mitigate risk.
The development and rapidly expanding use of AI present risks and challenges that may adversely impact our business.
We or our third-party vendors, service providers, Strategic Partners, dealers, contractors or FSPs with which we have relationships have in the past developed and incorporated, and may in the future develop or incorporate AI technology in certain business processes, services or products. Although we currently do not use any AI tools or models in critical areas of our business, and are not aware of any third-parties that use AI tools or models in a manner that would materially affect our business, the rapidly expanding development and use of AI present a number of risks and challenges to our business.
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI, as well as provisions regarding intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI. These evolving laws and regulations could increase our compliance costs and the risk of non-compliance. AI models, notably generative and agentic AI models, may produce output or take action that is incorrect, result in the release of private, confidential or proprietary information, reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it challenging to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made.
Further, we may increase our use of AI tools or models in the future, and in doing so, we may rely on AI models developed by third parties. Such reliance would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models, and on the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility. Additionally, we are exposed to risks related to the use of AI technologies by third-party vendors, clients, counterparties, clearinghouses and other financial intermediaries. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation, public perception of our business, or the effectiveness of our security measures.
In addition to our use of AI technologies, we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks. Generative or agentic AI, if used to perpetrate fraud or launch cyberattacks, could cause a significant disruption at a particular financial institution or exchange, which could pose a threat to financial stability.
Our strategic investments may not produce anticipated returns.
Our strategic investments may not generate the anticipated financial or operational benefits, which could adversely affect our business, financial condition, and results of operations. We allocate capital to initiatives such as acquiring interest‑earning assets, expanding personnel, and enhancing technology and advertising, with the expectation that these investments will support long‑term growth. Investments in portfolio expansion may require higher than expected provision for credit losses if performance weakens or market conditions deteriorate. Investments in personnel may increase salary and benefits expense without producing corresponding revenue if productivity or business development efforts fall short. Similarly, expenditures on technology and advertising may not yield the expected increases in customer engagement or loan originations, limiting our ability to achieve projected returns. If these investments do not perform as expected, our profitability and competitive position could be materially and adversely affected.
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Acts of violence or war, natural disasters, and terrorist attacks may affect any market for our securities, impact the businesses in which we invest, and harm our operations and profitability.
Acts of violence or war, natural disasters, and terrorist attacks may harm our results of operations and your investment. We cannot assure you that there will not be further acts of violence or war globally or domestically, major natural disasters hitting the United States or terrorist attacks against the U.S. or U.S. businesses. Such events in the U.S. or elsewhere may impact the businesses in which we directly or indirectly invest by undermining economic conditions in the United States. In addition, a portion of our business is focused on the New York City metropolitan area, which suffered a terrorist attack in 2001 and has faced continued threats. Another terrorist attack in New York City or elsewhere could severely impact our results of operations. Losses resulting from terrorist attacks are generally uninsurable.
Our operations could be interrupted if certain external vendors on which we rely experience difficulty, terminate their services or fail to comply with banking laws and regulations.
We depend, to a significant extent, on relationships with third parties that provide services, primarily information technology services critical to our operations. Currently, we obtain services from third parties that include information technology infrastructure and support, plus loan origination, loan servicing, and accounting systems and support. If any of our third-party service providers experience difficulties or terminate their services and we are unable to replace our service providers with other service providers, our operations could be interrupted. It may be difficult for us to replace some of our third-party vendors, particularly vendors providing our loan origination, loan servicing and accounting services, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason. If an interruption were to continue for a significant period of time, it could have a material adverse effect on our business, financial condition or results of operations. Even if we are able to replace these third parties, it may be at higher cost to us, which could have a material adverse effect on our business, financial condition or results of operations. In addition, if a third-party provider fails to provide the services we require, fails to meet contractual requirements, such as compliance with applicable laws and regulations, or suffers a cyberattack or other security breach, our business could suffer economic and reputational harm that could have a material adverse effect on our business, financial condition or results of operations.
Misconduct by current or former employees could expose us to significant legal liability and reputational harm.
We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of the dealers, contractors, FSPs, and Strategic Partners that sell our loan products are of critical importance. Our current and former directors, and employees could engage or could have engaged in misconduct that adversely affects our business. For example, if such a person were to engage, or previously engaged, in fraudulent, illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation (as a consequence of the negative perception resulting from such activities), financial position, third-party relationships and ability to forge new relationships with third-party dealers, contractors, FSPs or Strategic Partners. Our business often requires that we deal with confidential information. If our current and former directors, and employees were to improperly use or disclose this information or previously improperly used or disclosed this information, even if inadvertently, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by our current and former employees or directors, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our business, financial condition or results of operations.
We borrow money, which magnifies the potential for gain or loss on amounts invested, and increases the risk of investing in us.
Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested, and therefore increase the risk associated with investing in us. We historically have borrowed from the brokered CD market, private and public note placements, issuance of senior debt securities to banks and other lenders, and through long-term subordinated SBA debentures. These creditors have fixed dollar claims on our assets that are superior to the claims of our stockholders. If the value of our assets increases, then leveraging would cause stockholders’ equity to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause stockholders’ equity to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could reduce the amount available for distribution payments.
As of December 31, 2025, we had $2.4 billion of outstanding indebtedness with a weighted average borrowing cost of 4.16%.
Approximately $777.4 million of our borrowing relationships have maturity dates during 2026, a vast majority of which are brokered certificates of deposit. We currently have $33.0 million of indebtedness of which the interest rate is SOFR-based. See Note 5 of our consolidated financial statements for a discussion of the current and new lending arrangements to date.
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Additional Risks Relating to Our Loan Portfolios and Investments
Lending to small businesses involves a high degree of risk and is highly speculative.
Lending to small businesses involves a high degree of business and financial risk, which can result in substantial losses and should be considered speculative. Historically, our borrower base consists primarily of small business owners that may have limited resources and that are generally unable to obtain financing from traditional sources. There is generally no publicly available information about these small business owners, and we must rely on the diligence of our employees and agents to obtain information in connection with our credit decisions. In addition, these small businesses often do not have audited financial statements. Some smaller businesses have narrower product lines and market shares than their competition. Therefore, they may be more vulnerable to customer preferences, market conditions, or economic downturns, which may adversely affect the return on, or the recovery of, our investment in these businesses.
Our portfolio is and may continue to be concentrated in a limited number of portfolio companies, industries and sectors, which will subject us to a risk of significant loss if any of these companies default on its obligations to us or by a downturn in the particular industry or sector.
Our portfolio is and may continue to be concentrated in a limited number of portfolio companies, industries and sectors. We do not have fixed guidelines for diversification, and while we are not targeting any specific industries, our investments are, and could continue to be, concentrated in relatively few industries. As a result, the aggregate returns we realize may be adversely affected if a small number of loans perform poorly or if we need to write down the value of any one loan. If our larger borrowers were to significantly reduce their relationships with us and seek financing elsewhere, the size of our loan portfolio and operating results could decrease. In addition, larger business relationships may also impede our ability to immediately foreclose on a particular defaulted portfolio company as we may not want to impair an overall business relationship with either the portfolio company management or any related funding source. Additionally, a downturn in any particular industry or sector in which we are invested could also negatively impact the aggregate returns we realize.
The lack of liquidity in our investments may adversely affect our business.
We generally make investments in private companies. Substantially all of these securities are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded our investments. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.
In addition, the illiquidity of our loan portfolio and investments may adversely affect our ability to dispose of loans at times when it may be advantageous for us to liquidate such portfolio or investments. In addition, if we were required to liquidate some or all of the investments in the portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of rising interest rates, our cost of funds would increase, which would reduce our net operating income before net realized and unrealized gains. We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with short-term floating-rate debt, and to a lesser extent by term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities.
We have analyzed the potential impact of changes in interest rates on net interest income. Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2025 by $1.3 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $5.4 million at December 31, 2025. Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size, and composition of the assets on the balance sheet, and other business developments that could affect net increase in net assets resulting from operations in a particular quarter or for the year taken as a whole. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.
We depend on the accuracy and completeness of information about customers.
In deciding whether to extend credit or enter into other transactions, and in evaluating and monitoring our loan portfolio on an ongoing basis, we may rely on information furnished by or on behalf of customers, including financial statements, credit reports and other financial information. We may also rely on representations of those customers or of other third parties, such as independent auditors, as to the accuracy and completeness of that information. The failure to receive financial statements, credit reports or other financial or business information related to our customers on a timely basis, or the inadvertent reliance by us on inaccurate, incomplete,
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fraudulent or misleading forms of any of the foregoing information, could result in credit losses, reputational damage or other effects that could have a material adverse effect on our business, financial condition or results of operations.
Climate-related physical risk could disrupt our business and the risk of divergent climate-related requirements and stakeholder expectations could increase compliance costs and uncertainty.
Extreme weather events and shifts in climate may disrupt our operations, the operations of the FSPs, dealers or contractors with which we have relationships, or the businesses and employers of our borrowers. Any such disruptions could adversely affect our business, results of operations and ability to originate new loans. We are exposed to risks arising from evolving public policy and regulatory frameworks and from shifts in market behavior and public sentiment regarding efforts to reduce reliance on carbon-intensive activities, which could adversely affect our business, and results of operations. The transition to a less carbon-dependent economy could also have a negative impact on origination volumes in our recreation lending segment if demand for recreational vehicles decreases due to climate-related concerns. In addition, our credit risks could increase and demand for our products could decrease if and to the extent our borrowers work in industries that are negatively affected by climate change.
Further, differences among jurisdictions and stakeholders in their respective approaches to climate change could increase the likelihood that we are subject to potentially competing legal and regulatory requirements and stakeholder expectations relating to climate-related matters. The risk associated with, and the perspective of regulators, employees and other stakeholders regarding, climate change is evolving rapidly, which makes it difficult to assess the ultimate impact on us of climate change-related risks and uncertainties. Moreover, in light of differing stakeholder perspectives regarding climate change, actions we take, or are perceived not to take, concerning climate-related matters may be criticized by some stakeholders, which could adversely affect our business, market position, and efforts to recruit and retain employees.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
We invest in our portfolio companies primarily through senior secured loans, junior secured loans, and subordinated debt issued by small-to mid-sized companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of the relevant portfolio company.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Even though we may have structured most of our investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance.
If our underwriting processes do not adequately assess risk, contain errors or are otherwise ineffective, whether due to automation, inaccurate or incomplete customer information, or otherwise, our reputation and relationships with dealers, contractors and FSPs could be harmed, our market share could decline and our financial condition, liquidity and result of operations could be adversely affected.
Our ability to maintain relationships with dealers, contractors and FSPs is significantly dependent on our ability to effectively evaluate a borrower's credit profile and likelihood of default in a timely fashion. To conduct this evaluation, we utilize credit, pricing, loss forecasting and scoring models that allow us to automate elements of our underwriting processes. Our models are based on algorithms that evaluate several factors, including behavioral data, transactional data, bank data and employment information, which may not effectively predict future credit loss. We have also been increasing the role of technology and automation in our credit underwriting processes. If we are unable to effectively segment borrowers into relative risk profiles, we may be unable to offer attractive interest rates. Additionally, if these models fail to adequately assess the creditworthiness of our borrowers, whether due to flaws in model design, inaccurate or insufficient data (whether acquired by us or provided by our dealers, contractors and FSPs), or otherwise, we may experience higher than forecasted losses and our financial condition, liquidity and results of operations could be adversely affected.
30
We regularly refine these algorithms based on new data and changing macro-economic conditions. However, the models that we use may not accurately assess the creditworthiness of our borrowers and may not be effective in assessing creditworthiness in the future. In addition, allegations, whether or not accurate, that underwriting decisions do not treat borrowers fairly, or comply with applicable laws or regulations, can result in negative publicity, reputational harm and regulatory scrutiny.
We are subject to a variety of risks in connection with any sales of loans we may conduct.
From time to time, we have sold portfolios of our consumer loans to manage our capital levels and facilitate future originations to meet customer demand. We completed a sale of a portfolio of our recreation loans in April 2025, and we may conduct additional sales of portions of our consumer loan portfolios in the future. These loan sales subject us to a variety of risks, which we discuss further below.
When we sell consumer loans, we are required to make customary representations and warranties to the purchaser about the loans and the manner in which they were originated and serviced. If any of these representations and warranties are incorrect, we may be required to indemnify the purchaser for any related losses, or we may be required to repurchase or provide substitute loans for part or all of the affected loans. We may also be required to repurchase loans as a result of borrower fraud on a loan we have sold. In the past we have had to, and may in the future have to, indemnify purchasers for losses or repurchase loans in connection with alleged breaches of representations and warranties. Such indemnifications and repurchases could have a material adverse effect on our liquidity, business, financial condition or results of operations.
In addition, we must report as held for sale any loans which we have undertaken to sell, whether or not a purchase agreement for the loans has been executed. We must exercise our judgment in determining when loans must be reclassified from held for investment status to held for sale status under applicable accounting guidelines, and loans that have been reclassified to held for sale may ultimately not be sold in a timely manner, or at all. Any failure to accurately report loans as held for sale could result in regulatory investigations and monetary penalties, which could have a material adverse effect on our business, financial condition or results of operations. In addition, our policy is to carry loans held for sale at the lower of cost or fair value. Prior to being sold, any loans classified as held for sale may be adversely affected by market conditions, including changes in interest rates, and by changes in the borrower’s creditworthiness, and the fair value associated with these loans, including any loans originated for sale to the secondary market, may decline prior to being sold. We may be required to reduce the value of any loans we mark held for sale as a result, which could have a material adverse effect on our business, financial condition or results of operations.
Loan portfolio sales we have conducted have generally included loans with stronger credit characteristics than the overall composition of our loan portfolio. Accordingly, following those transactions, the overall credit characteristics of our loan portfolio declined due to the transfer of the loans with stronger credit characteristics. Because the loans subject to the forgoing loan sale are seasoned and have lower interest rates and higher average FICO scores than the overall recreation loan portfolio, the credit and other characteristics of our assets could change following a sale. For example, long-term credit performance would likely worsen with the lower average FICO scores in the loan portfolio.
Although we have engaged in sales of loan portfolios in the past and believe it is likely we will sell loans in the future, there can be no assurance that we will continue to sell loans. When we have engaged in loan sales in the past, our non-interest income for the period in which the sale occurred has increased relative to periods in which we did not conduct loan sales. Accordingly, if attractive sale opportunities were not available, or we were to decide not to pursue sales of loan portfolios in order to support our growth objectives, we may not sell any loans, which, in turn, could have a material adverse effect on our non-interest income.
We may not control many of Medallion Capital’s portfolio companies.
We do not control Medallion Capital’s portfolio companies, even though we may have board representation or board observation rights. As a result, we are subject to the risk that a Medallion Capital portfolio company in which we invest may make business decisions with which we disagree, and the management of such company may take risks or otherwise act in ways that do not serve our interests as debt investors.
We may not realize gains from our equity investments.
Certain investments that we have made in the past and may make in the future include warrants or other equity securities. In addition, we may from time to time make non-control, equity co-investments in companies in conjunction with private equity sponsors. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization, or public offering, which would allow us to sell the underlying equity interests.
31
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Identifying, assessing, and managing material cybersecurity risks is an important function of our enterprise risk management program. Material cybersecurity risks from cybersecurity threats are managed across Medallion Financial Corp., the Bank, Medallion Capital, and third-party vendors, and monitoring such risks and threats involves coordination between us as the parent company and our two main operating subsidiaries. We continue to
Medallion Financial Corp., the Bank and Medallion Capital are each responsible for developing cybersecurity programs appropriate for their respective entities, including as may be required by applicable law or regulation. These programs have been guided by the National Institute of Standards and Technology Cybersecurity Framework, other industry-recognized standards, and contractual requirements, as applicable, and seek to protect each entity against cybersecurity risks and provide a foundation to respond promptly to cybersecurity events. Each entity maintains technical and organizational safeguards, including, among other things, employee testing and training, incident response programs and tabletop exercises,
Governance
Information regarding cybersecurity risks may be elevated from information security leadership through a variety of different channels, including discussions between or among subsidiary and parent company management, reports to subsidiary and parent company risk committees and reports to subsidiary and parent company boards and board committees. As noted above,
ITEM 2. PROPERTIES
We lease office space in New York City for our corporate headquarters under a lease expiring in April 2027. Our New York City office space also handles loan origination and subsidiary operations and our taxi medallion lending segment. Medallion Bank leases office space in Salt Lake City, Utah under a lease expiring in November 2033, which handles the recreation and home improvement lending segments. We also lease office space in Excelsior, Minnesota under a lease expiring February 2031, which handles our commercial lending segment. We do not own any real property, other than foreclosed properties obtained as a result of lending relationships. We believe that our leased properties, taken as a whole, are in good operating condition and are suitable for our current business operations.
32
ITEM 3. LEGAL PROCEEDINGS
See Note 10 “Commitments and Contingencies” subsections (c) and (d) to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for details of the Company’s legal proceedings, including the pending SEC litigation.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
STOCK PERFORMANCE GRAPH
The following graph commences as of December 31, 2020 and compares the Company’s common stock with the cumulative total return for the NASDAQ Composite Index and the Russell 2000 Index. Furthermore, the following graph assumes the investment of $100 on December 31, 2020 in each of the Company’s common stock, the stocks comprising the NASDAQ Composite Index and the Russell 2000 Index and assumes dividends are reinvested.
Cumulative Total Return
Based on Initial Investment of $100 on December 31, 2020, with dividends reinvested
Our common stock is quoted on NASDAQ under the symbol “MFIN.” Our common stock commenced trading on May 23, 1996. As of March 9, 2026, there were approximately 154 holders of record of our common stock. On March 9, 2026, the last reported sale price of our common stock was $9.49 per share.
We are subject to federal and applicable state corporate income taxes on our taxable ordinary income and capital gains. Beginning in March 2022, the Company's board of directors reinstated our quarterly dividend at $0.08 per share. The Company’s board of directors authorized and increased the quarterly dividend to $0.10 per share on October 24, 2023, to $0.11 per share on October 25, 2024, and to $0.12 per share on April 25, 2025, beginning with the dividend paid on May 30, 2025 to holders of record as of May 15, 2025. The Company currently expects to continue to pay quarterly dividends at the current rate for the foreseeable future. We may, however, re-evaluate the dividend policy in the future depending on market conditions. There can be no assurance that we will continue to pay any cash distributions, as we may retain our earnings to facilitate the growth of our business, to finance our investments, to provide liquidity, or for other corporate purposes.
33
We have adopted a dividend reinvestment plan pursuant to which stockholders may elect to have distributions reinvested in additional shares of common stock. When we declare a distribution, all participants will have credited to their plan accounts the number of full and fractional shares (computed to three decimal places) that could be obtained with the cash, net of any applicable withholding taxes that would have been paid to them if they were not participants. The number of full and fractional shares is computed at the weighted average price of all shares of common stock purchased for plan participants within the 30 days after the distribution is declared plus brokerage commissions. The automatic reinvestment of distributions will not release plan participants of any income tax that may be payable on the distribution. Stockholders may terminate their participation in the dividend reinvestment plan by providing written notice to the Plan Agent at least 10 days before any given distribution payment date. Upon termination, we will issue to a stockholder both a certificate for the number of full shares of common stock owned and a check for any fractional shares, valued at the then current market price, less any applicable brokerage commissions and any other costs of sale. There are no additional fees or expenses for participation in the dividend reinvestment plan. Stockholders may obtain additional information about the dividend reinvestment plan by contacting Equiniti Trust Company, LLC at PO Box 10027, Newark, NJ, 07101.
Securities Authorized for Issuance Under Equity Compensation Plans
Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2026 for our 2026 Annual Meeting of Shareholders under the caption “Equity Compensation Plan Information.”
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
On April 29, 2022, our board of directors authorized a new stock repurchase program with no expiration date, pursuant to which we were authorized to repurchase up to $35 million of our shares, which was increased to $40 million on August 10, 2022, also with no expiration date. Such new repurchase program replaced the previous one, which was terminated. During the year ended December 31, 2025, we repurchased 108,351 shares of our common stock at an aggregate cost of $1.0 million. Accordingly, as of December 31, 2025, up to $14,406,534 of shares remain authorized for repurchase under our stock repurchase program.
The following table presents our purchases for the year ended December 31, 2025.
|
|
Total Numbers of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
|
Total |
|
|
Maximum Approximate Dollar Value of Shares that May Yet to Be Purchased under the Plans or Programs |
|
|||||
January 1 - January 31 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
15,392,299 |
|
February 1 - February 28 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,392,299 |
|
March 1 - March 31 |
|
|
60,185 |
|
|
|
8.83 |
|
|
|
60,185 |
|
|
|
531,230 |
|
|
|
14,861,069 |
|
April 1 - April 30 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,861,069 |
|
May 1 - May 31 |
|
|
400 |
|
|
|
9.04 |
|
|
|
400 |
|
|
|
3,614 |
|
|
|
14,857,455 |
|
June 1 - June 30 |
|
|
47,766 |
|
|
|
9.44 |
|
|
|
47,766 |
|
|
|
450,920 |
|
|
|
14,406,534 |
|
July 1 - July 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,406,534 |
|
August 1 - August 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,406,534 |
|
September 1 - September 30 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,406,534 |
|
October 1 - October 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,406,534 |
|
November 1 - November 30 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,406,534 |
|
December 1 - December 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,406,534 |
|
Total |
|
|
108,351 |
|
|
$ |
9.10 |
|
|
|
108,351 |
|
|
$ |
985,764 |
|
|
$ |
14,406,534 |
|
ITEM 6. [Reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OBJECTIVE
The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the years ended December 31, 2025, 2024, and 2023. This section is intended to provide management's perspective of our financial condition and results of operations. In addition, this section contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results and conditions to differ materially from those projected in these forward-looking statements are described in the Risk Factors section on page 18. Additionally, more information about our business activities can be found in “Business.”
34
COMPANY BACKGROUND
We are a specialty finance company whose focus and growth has been our consumer finance and commercial lending businesses operated by Medallion Bank, or the Bank, and Medallion Capital, Inc., or Medallion Capital. The Bank is a wholly-owned subsidiary that originates consumer loans for the purchase of recreational vehicles, boats, collector cars, and home improvements, and provides loan origination and other services to fintech partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business. As of December 31, 2025, our consumer loans represented 95% of our gross loan portfolio, inclusive of loans held for sale, and commercial loans represented 5%. Total assets were $2.96 billion as of December 31, 2025 and $2.87 billion as of December 31, 2024.
Our loan-related earnings depend primarily on our level of net interest income. Net interest income is the difference between the total yield on our loan portfolio and the average cost of borrowed funds. We fund our operations through a wide variety of interest-bearing sources, including bank certificates of deposit issued to consumers, debentures issued to and guaranteed by the SBA, privately placed notes, trust preferred securities, and preferred stock of the Bank. Net interest income fluctuates with changes in the yield on our loan portfolios and changes in the cost of borrowed funds, as well as changes in the amount of interest-earning assets and interest-bearing liabilities held by us.
Net interest income is also affected by economic, regulatory, and competitive factors that influence interest rates, loan demand, and the availability of funding to finance our lending activities. We, like other financial institutions, are subject to interest rate risk to the degree that our interest-earning assets reprice, either due to inflation or other factors, on a different basis than our interest-bearing liabilities. We continue to monitor global supply chain disruptions, the impact of tariffs, gas prices, labor shortages, unemployment, and other factors contributing to U.S. inflation, the risk of recession and economic health, as well as other factors which contribute to competition and changes in the demand for our loan products. We have been, and continue to, seek borrowers with strong credit ratings and moderate the pace of our recent growth in the event of a potential economic downturn and in light of the current uncertainties and inflationary environment.
We also provide debt, mezzanine, and equity investment capital to companies in a variety of commercial industries. These investments may be venture capital style investments which may not be fully collateralized. Our investments are typically in the form of secured debt instruments with fixed interest rates accompanied by an equity stake or warrants to purchase an equity interest for a nominal exercise price (such warrants are included in equity investments on the consolidated balance sheets). Interest income is earned on the debt instruments.
The Bank is an industrial bank regulated by the FDIC and the Utah Department of Financial Institutions that originates consumer loans, raises deposits, and conducts other banking activities. The Bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit. To take advantage of this low cost of funds, historically we referred a portion of our taxi medallion and commercial loans to the Bank, which originated these loans, and have since been serviced by Medallion Servicing Corp., or MSC. However, other than in connection with dispositions of existing taxi medallion assets, the Bank has not originated any new taxi medallion loans since 2014 (and Medallion Financial Corp. has not originated any new taxi medallion loans since 2015) and is working with MSC to service its remaining portfolio, as it winds down. MSC earns referral and servicing fees for these activities.
In 2019, the Bank launched a strategic partnership program to provide lending and other services to fintech companies. The Bank entered into an initial partnership in 2020 and began issuing its first loans. The Bank continues to evaluate and launch additional partnership programs with fintech companies.
We continue to consider various alternatives for the Bank, which may include an initial public offering of its common stock, the sale of all or part of the Bank, a spin-off or other potential transaction. We do not have a deadline for its consideration of these alternatives, and there can be no assurance that this process will result in any transaction being announced or consummated.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We follow financial accounting and reporting policies that are in accordance with Generally Accepted Accounting Principles, or GAAP. Some of these significant accounting policies require management to make difficult, subjective or complex judgments. The policies noted below, however, are deemed to be our “critical accounting policies” under the definition given to this term by the SEC. According to the SEC, “critical accounting policies” mean those policies that are most important to the presentation of a company’s financial condition and results of operations, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
The judgments used by management in applying the critical accounting policies may be affected by deterioration in the economic environment, which may result in changes to future financial results. Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes to the allowance for credit losses in future periods, and the inability to collect on outstanding loans could result in increased credit losses.
35
Provision and Allowance for Credit Losses
The consumer loan allowance for credit losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. In analyzing the adequacy of the allowance for credit losses for recreation and home improvement loans, we segment our consumer loan portfolio by risk pool to reach what we believe to be an appropriate level of homogeneity and use a probability of default, or PD/loss given default, or LGD, model to calculate the allowance. For each loan, PD and LGD values are assigned based on the risk pool and delinquency status of the loan. Those values are determined by historical delinquent loan performance for the respective loan pool and actual loss rates within that pool, including the history of recoveries. The PD value time series for each loan is then modified using a model that incorporates statistically significant macroeconomic factors, such as unemployment rate and consumer spending, to predict increases or decreases in expected default rates. Those modifications are applied over a twelve-month reasonable and supportable forecast period followed by a six-month reversion period. As a final step, qualitative factors may be added to each loan pool based on management judgment, increasing or decreasing the size of the allowance for a particular loan pool. Performing loans are recorded at book value and the general reserve maintained to absorb expected losses is consistent with GAAP.
Management is primarily responsible for the overall adequacy of the allowance. The allowance is evaluated on a regular basis, at least quarterly, by management and is based upon management’s periodic review of the factors noted above. In addition, allowance adequacy is subject to independent credit reviews and a review of the allowance model. Regulators, as an integral part of their supervisory functions, periodically review our consumer loan portfolio and related allowance for credit losses. These regulatory agencies may require us to increase our allowance for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. An increase in the allowance for credit losses required by these regulatory agencies could materially adversely affect our financial condition and results of operations.
Under the CECL lifetime loss standard in effect since January 1, 2023, we calculate the allowance for credit losses using both quantitative and qualitative factors. The quantitative loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in credit characteristics of our loans, loan prepayment and other cash flow-related behaviors, and macroeconomic factors. Periodically, we update our allowance model assumptions based on prior experience. In the fourth quarter of 2025, we updated our prepayment speed assumptions and calculation method, transitioning from a pooled analysis to a loan-level approach, which increased modeled prepayment speeds and had the effect of decreasing the allowance for credit losses for both recreation and home improvement loans. Earlier in 2025, we revised our assumptions to include a redevelopment of our macroeconomic factor model, which increased the allowance's sensitivity to unemployment, the consumer price index, and labor force participation. We also further segmented the recreation loan portfolio by credit risk and further segmented the home improvement portfolio by product type. These adjustments had the effect of increasing the allowance for credit losses for both recreation and home improvement loans.
All taxi medallion loans are deemed impaired and have a specific allowance for each loan, such that the underlying net loan has a value no greater than collateral value. The determination of taxi medallion collateral fair value is derived quarterly for each jurisdiction. For taxi medallion loans, delinquent nonperforming loans are valued at collateral value for the most recent quarter. Collateral value for the taxi medallion loans is generally determined utilizing factors deemed relevant under the circumstances of the market including but not limited to: actual transfers, pending transfers, median and average sales prices, discounted cash flows, market direction and sentiment, and general economic trends for the industry and economy. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. We deem a loan impaired when, based on current information and events, it is probable that we will be unable to collect the amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. We charge-off loans in the period that such loans are deemed uncollectible or when they reach 120 days delinquent regardless of whether the loan is a recreation, home improvement, or taxi medallion loan.
Goodwill and Intangible Assets
Goodwill assets arose as a result of the excess of fair value over book value for several of our previously unconsolidated portfolio investment companies as of April 2, 2018. This fair value was brought forward under our new reporting and was subject to a purchase price accounting allocation process conducted by an independent third-party expert to arrive at the current categories and amounts. Goodwill is not amortized, but is subject to quarterly review by management to determine whether additional impairment testing is needed, and such testing is performed at least on an annual basis.
Through December 31, 2024, we evaluated goodwill for impairment on an annual basis at December 31 of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. On October 1, 2025, we changed the annual goodwill impairment testing date from December 31 to October 1 to better align with the timing of our annual long-term planning process. This change was not material to the consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge.
36
Other intangible assets with finite useful lives are amortized either on an accelerated or straight-line basis over their estimated useful lives. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
As of December 31, 2025 and 2024, we had goodwill of $150.8 million, all of which related to the recreation and home improvement lending segments. As of December 31, 2025 and 2024, we had intangible assets of $17.7 million and $19.1 million. We recognized $1.4 million of amortization expense on the intangible assets for each of the years ended December 31, 2025, 2024 and 2023.
Management engaged an independent third-party expert to perform a quantitative assessment of goodwill for impairment at October 1, 2025. The third-party expert’s assessment determined that it was more likely than not that the fair value of both the recreation lending and home improvement lending segments individually were not less than the carrying value of each of these segments. Based upon inputs and analysis deemed appropriate by the third-party expert, the third-party expert concluded that a fair value premium existed in excess of carrying value with respect to the recreation and home improvement lending segments.
In evaluating both segments, a combination of an income approach (weighted 50%), an earnings-based market approach (weighted 25%), and a book value-based market approach (weighted 25%) were employed by the third-party expert. For the income approach, a discounted cash flow analysis was used. Key inputs and assumptions used in the discounted cash flow analysis included future projected cash flows, risk-adjusted discount rates, capital requirements, and future economic and market conditions. For both segments, a discount rate was estimated using the risk-free interest rate adjusted for specific risk and size premiums, resulting in a discount rate of 16.2% for each of the recreation and home improvement lending segments. For both segments, growth rates consistent with our plan were employed by the third-party expert for a five year period, and a long-term growth rate of 3% was utilized in determining the terminal fair value.
Determining the fair value of a lending segment or an indefinite-lived intangible asset involves the use of significant estimates and assumptions. We believe that the fair value estimates determined by the third-party expert were based on reasonable assumptions and appropriate for the purpose of assessing goodwill for impairment. However, as these estimates and assumptions are unpredictable and inherently uncertain, actual future results may differ from these estimates. In addition, we also make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. To the extent that we are unable to grow either the recreation lending or home improvement lending segment at the levels forecasted, if we were unable to issue new consumer loans at rates and terms consistent with current practices, and if our cost of borrowings were to increase significantly from current levels without the ability to pass along those rate increases to new borrowers, the fair value of these segments could deteriorate to a level which would require an impairment of goodwill.
37
AVERAGE BALANCES AND RATES
The following table presents our consolidated average balance sheets, interest income and expense, and the average interest earning/bearing assets and liabilities, and which reflect the average yield on assets and average costs on liabilities as of and for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||||||||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||||||||||||||
(Dollars in thousands) |
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
|||||||||
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest earning cash equivalents |
|
$ |
34,831 |
|
|
$ |
1,245 |
|
|
|
3.57 |
% |
|
$ |
34,074 |
|
|
$ |
1,523 |
|
|
|
4.47 |
% |
|
$ |
23,773 |
|
|
$ |
881 |
|
|
|
3.71 |
% |
Federal funds sold |
|
|
67,425 |
|
|
|
3,687 |
|
|
|
5.47 |
|
|
|
61,975 |
|
|
|
3,789 |
|
|
|
6.11 |
|
|
|
70,021 |
|
|
|
3,130 |
|
|
|
4.47 |
|
Investment securities |
|
|
59,909 |
|
|
|
2,322 |
|
|
|
3.88 |
|
|
|
55,004 |
|
|
|
2,074 |
|
|
|
3.77 |
|
|
|
52,065 |
|
|
|
1,728 |
|
|
|
3.32 |
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Recreation |
|
|
1,566,131 |
|
|
|
209,321 |
|
|
|
13.37 |
|
|
|
1,459,456 |
|
|
|
194,131 |
|
|
|
13.30 |
|
|
|
1,283,434 |
|
|
|
167,765 |
|
|
|
13.07 |
|
Home improvement |
|
|
810,645 |
|
|
|
80,624 |
|
|
|
9.95 |
|
|
|
783,677 |
|
|
|
74,036 |
|
|
|
9.45 |
|
|
|
708,031 |
|
|
|
62,703 |
|
|
|
8.86 |
|
Commercial |
|
|
122,352 |
|
|
|
15,904 |
|
|
|
13.00 |
|
|
|
110,202 |
|
|
|
14,033 |
|
|
|
12.73 |
|
|
|
99,394 |
|
|
|
12,903 |
|
|
|
12.98 |
|
Taxi medallion |
|
|
1,524 |
|
|
|
432 |
|
|
|
28.35 |
|
|
|
3,278 |
|
|
|
623 |
|
|
|
19.01 |
|
|
|
5,924 |
|
|
|
1,550 |
|
|
|
26.16 |
|
Strategic partnerships |
|
|
11,350 |
|
|
|
1,785 |
|
|
|
15.73 |
|
|
|
2,624 |
|
|
|
493 |
|
|
|
18.75 |
|
|
|
1,387 |
|
|
|
380 |
|
|
|
27.40 |
|
Total loans |
|
|
2,512,002 |
|
|
|
308,066 |
|
|
|
12.26 |
|
|
|
2,359,237 |
|
|
|
283,316 |
|
|
|
12.01 |
|
|
|
2,098,170 |
|
|
|
245,301 |
|
|
|
11.69 |
|
Total interest-earning assets, before allowance |
|
|
2,674,167 |
|
|
|
|
|
|
11.74 |
|
|
|
2,510,290 |
|
|
|
|
|
|
11.56 |
|
|
|
2,244,029 |
|
|
|
|
|
|
11.19 |
|
|||
Allowance for credit losses |
|
|
(105,650 |
) |
|
|
|
|
|
|
|
|
(84,471 |
) |
|
|
|
|
|
|
|
|
(76,596 |
) |
|
|
|
|
|
|
||||||
Total interest-earning assets, net of allowance |
|
|
2,568,517 |
|
|
|
315,320 |
|
|
|
12.23 |
% |
|
|
2,425,819 |
|
|
|
290,702 |
|
|
|
11.99 |
% |
|
|
2,167,433 |
|
|
|
251,040 |
|
|
|
11.58 |
% |
Non-interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cash |
|
|
50,724 |
|
|
|
|
|
|
|
|
|
46,647 |
|
|
|
|
|
|
|
|
|
16,704 |
|
|
|
|
|
|
|
||||||
Equity investments |
|
|
8,849 |
|
|
|
|
|
|
|
|
|
11,175 |
|
|
|
|
|
|
|
|
|
11,036 |
|
|
|
|
|
|
|
||||||
Loan collateral in process of foreclosure |
|
|
8,678 |
|
|
|
|
|
|
|
|
|
9,692 |
|
|
|
|
|
|
|
|
|
18,230 |
|
|
|
|
|
|
|
||||||
Goodwill and intangible assets |
|
|
169,228 |
|
|
|
|
|
|
|
|
|
170,673 |
|
|
|
|
|
|
|
|
|
172,118 |
|
|
|
|
|
|
|
||||||
Other assets |
|
|
55,936 |
|
|
|
|
|
|
|
|
|
56,270 |
|
|
|
|
|
|
|
|
|
52,680 |
|
|
|
|
|
|
|
||||||
Total non-interest-earning assets |
|
|
293,415 |
|
|
|
|
|
|
|
|
|
294,457 |
|
|
|
|
|
|
|
|
|
270,768 |
|
|
|
|
|
|
|
||||||
Total assets |
|
$ |
2,861,932 |
|
|
|
|
|
|
|
|
$ |
2,720,276 |
|
|
|
|
|
|
|
|
$ |
2,438,201 |
|
|
|
|
|
|
|
||||||
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Deposits |
|
$ |
2,075,071 |
|
|
$ |
80,361 |
|
|
|
3.88 |
% |
|
$ |
1,994,406 |
|
|
$ |
70,509 |
|
|
|
3.54 |
% |
|
$ |
1,764,262 |
|
|
$ |
47,784 |
|
|
|
2.71 |
% |
Privately placed notes |
|
|
146,500 |
|
|
|
12,674 |
|
|
|
8.65 |
|
|
|
141,808 |
|
|
|
12,255 |
|
|
|
8.64 |
|
|
|
123,808 |
|
|
|
10,286 |
|
|
|
8.31 |
|
SBA debentures and borrowings |
|
|
75,250 |
|
|
|
3,168 |
|
|
|
4.21 |
|
|
|
72,173 |
|
|
|
2,850 |
|
|
|
3.95 |
|
|
|
68,519 |
|
|
|
2,387 |
|
|
|
3.48 |
|
Trust preferred securities |
|
|
33,000 |
|
|
|
2,224 |
|
|
|
6.74 |
|
|
|
33,000 |
|
|
|
2,553 |
|
|
|
7.74 |
|
|
|
33,000 |
|
|
|
2,489 |
|
|
|
7.54 |
|
Total interest-bearing liabilities |
|
|
2,329,821 |
|
|
|
98,427 |
|
|
|
4.22 |
|
|
|
2,241,387 |
|
|
|
88,167 |
|
|
|
3.93 |
|
|
|
1,989,589 |
|
|
|
62,946 |
|
|
|
3.16 |
|
Non-interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Deferred tax liability |
|
|
19,239 |
|
|
|
|
|
|
|
|
|
21,048 |
|
|
|
|
|
|
|
|
|
23,747 |
|
|
|
|
|
|
|
||||||
Other liabilities (1) |
|
|
28,635 |
|
|
|
|
|
|
|
|
|
34,010 |
|
|
|
|
|
|
|
|
|
37,749 |
|
|
|
|
|
|
|
||||||
Total non-interest-bearing liabilities |
|
|
47,874 |
|
|
|
|
|
|
|
|
|
55,058 |
|
|
|
|
|
|
|
|
|
61,496 |
|
|
|
|
|
|
|
||||||
Total liabilities |
|
|
2,377,695 |
|
|
|
|
|
|
|
|
|
2,296,445 |
|
|
|
|
|
|
|
|
|
2,051,085 |
|
|
|
|
|
|
|
||||||
Non-controlling interest |
|
|
94,987 |
|
|
|
|
|
|
|
|
|
69,253 |
|
|
|
|
|
|
|
|
|
69,253 |
|
|
|
|
|
|
|
||||||
Total stockholders’ equity |
|
|
389,250 |
|
|
|
|
|
|
|
|
|
354,578 |
|
|
|
|
|
|
|
|
|
317,863 |
|
|
|
|
|
|
|
||||||
Total liabilities and equity |
|
$ |
2,861,932 |
|
|
|
|
|
|
|
|
$ |
2,720,276 |
|
|
|
|
|
|
|
|
$ |
2,438,201 |
|
|
|
|
|
|
|
||||||
Net interest income |
|
|
|
|
$ |
216,893 |
|
|
|
|
|
|
|
|
$ |
202,535 |
|
|
|
|
|
|
|
|
$ |
188,094 |
|
|
|
|
||||||
Net interest margin, gross |
|
|
|
|
|
|
|
|
8.06 |
|
|
|
|
|
|
|
|
|
8.05 |
|
|
|
|
|
|
|
|
|
8.38 |
|
||||||
Net interest margin, net of allowance |
|
|
|
|
|
|
|
|
8.40 |
% |
|
|
|
|
|
|
|
|
8.35 |
% |
|
|
|
|
|
|
|
|
8.68 |
% |
||||||
38
For the year ended December 31, 2025, our total loans yielded 12.26% as compared to 12.01% for the year ended December 31, 2024. The 25 basis point increase reflects a higher yield on our loan portfolios, as we have increased the rates charged on new consumer originations over the past year. We have used the higher interest rate environment as an opportunity to increase the rates on both newly issued recreation and home improvement loans, which has increased the yield on these portfolios over time, as well as increased the credit quality of our new issuances, particularly in our recreation lending segment, with the average FICO scores, measured at origination, of our total recreation loans outstanding being 686 and 685 as of December 31, 2025 and 2024. We use weighted average FICO scores as an indicator of portfolio risk.
Our debt, with certificates of deposits being our largest source, funds our growing lending business. Our average interest cost for the year ended December 31, 2025 of 4.22% increased 29 basis points from 3.93% for the year ended December 31, 2024, attributable to the current higher interest rate environment, particularly the higher cost associated with issuing certificates of deposit. To the extent that prevailing market interest rates remain at current levels, we expect our cost of funds to continue to increase as we issue new certificates of deposit to replace maturing certificates of deposit and fund our growth. During the year ended December 31, 2025, we issued deposits for three-month certificates at rates as high as 4.15% and 4.35% for both 36 month and 60 month certificates, with the most recent 36 month and 60 month issuances in 2025 both at rates of 3.70%. We have taken, and continue to take, steps to pass along a portion of the interest rate increases on newly originated loans, the process for which is slower than the pace of funding cost increases, thereby compressing our net interest margins.
RATE/VOLUME ANALYSIS
The following table presents the change in interest income and expense due to changes in the average balances (volume) and average rates, calculated for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||||||||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||||||||||||||
(Dollars in thousands) |
|
Increase |
|
|
Increase |
|
|
Net Change |
|
|
Increase |
|
|
Increase |
|
|
Net Change |
|
|
Increase |
|
|
Increase |
|
|
Net Change |
|
|||||||||
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest earning cash and cash equivalents |
|
$ |
299 |
|
|
$ |
(680 |
) |
|
$ |
(381 |
) |
|
$ |
125 |
|
|
$ |
1,177 |
|
|
$ |
1,302 |
|
|
$ |
755 |
|
|
$ |
2,147 |
|
|
$ |
2,902 |
|
Investment securities |
|
|
190 |
|
|
|
58 |
|
|
|
248 |
|
|
|
111 |
|
|
|
235 |
|
|
|
346 |
|
|
|
174 |
|
|
|
378 |
|
|
|
552 |
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Recreation |
|
|
14,258 |
|
|
|
932 |
|
|
|
15,190 |
|
|
|
23,478 |
|
|
|
2,888 |
|
|
|
26,366 |
|
|
|
25,911 |
|
|
|
2,709 |
|
|
|
28,620 |
|
Home improvement |
|
|
2,682 |
|
|
|
3,906 |
|
|
|
6,588 |
|
|
|
7,166 |
|
|
|
4,167 |
|
|
|
11,333 |
|
|
|
16,087 |
|
|
|
1,913 |
|
|
|
18,000 |
|
Commercial |
|
|
1,579 |
|
|
|
292 |
|
|
|
1,871 |
|
|
|
1,380 |
|
|
|
(250 |
) |
|
|
1,130 |
|
|
|
1,487 |
|
|
|
1,711 |
|
|
|
3,198 |
|
Taxi medallion |
|
|
(497 |
) |
|
|
306 |
|
|
|
(191 |
) |
|
|
(504 |
) |
|
|
(423 |
) |
|
|
(927 |
) |
|
|
(2,062 |
) |
|
|
2,985 |
|
|
|
923 |
|
Strategic partnerships |
|
|
1,372 |
|
|
|
(80 |
) |
|
|
1,292 |
|
|
|
233 |
|
|
|
(121 |
) |
|
|
112 |
|
|
|
233 |
|
|
|
(9 |
) |
|
|
224 |
|
Total interest income from loans |
|
$ |
19,394 |
|
|
$ |
5,356 |
|
|
$ |
24,750 |
|
|
$ |
31,753 |
|
|
$ |
6,261 |
|
|
$ |
38,014 |
|
|
$ |
41,656 |
|
|
$ |
9,309 |
|
|
$ |
50,965 |
|
Total interest income from interest-earning assets |
|
$ |
19,883 |
|
|
$ |
4,734 |
|
|
$ |
24,617 |
|
|
$ |
31,989 |
|
|
$ |
7,673 |
|
|
$ |
39,662 |
|
|
$ |
42,585 |
|
|
$ |
11,834 |
|
|
$ |
54,419 |
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Deposits |
|
$ |
3,124 |
|
|
$ |
6,728 |
|
|
$ |
9,852 |
|
|
$ |
8,159 |
|
|
$ |
14,566 |
|
|
$ |
22,725 |
|
|
$ |
8,774 |
|
|
$ |
16,344 |
|
|
$ |
25,118 |
|
Privately placed notes |
|
|
406 |
|
|
|
13 |
|
|
|
419 |
|
|
|
1,560 |
|
|
|
409 |
|
|
|
1,969 |
|
|
|
233 |
|
|
|
45 |
|
|
|
278 |
|
SBA debentures and borrowings |
|
|
130 |
|
|
|
188 |
|
|
|
318 |
|
|
|
145 |
|
|
|
318 |
|
|
|
463 |
|
|
|
(23 |
) |
|
|
182 |
|
|
|
159 |
|
Trust preferred securities |
|
|
— |
|
|
|
(329 |
) |
|
|
(329 |
) |
|
|
— |
|
|
|
64 |
|
|
|
64 |
|
|
|
— |
|
|
|
1,206 |
|
|
|
1,206 |
|
Total interest expense from interest-bearing liabilities |
|
$ |
3,660 |
|
|
$ |
6,600 |
|
|
$ |
10,260 |
|
|
$ |
9,864 |
|
|
$ |
15,357 |
|
|
$ |
25,221 |
|
|
$ |
8,984 |
|
|
$ |
17,777 |
|
|
$ |
26,761 |
|
Net |
|
$ |
16,223 |
|
|
$ |
(1,866 |
) |
|
$ |
14,357 |
|
|
$ |
22,125 |
|
|
$ |
(7,684 |
) |
|
$ |
14,441 |
|
|
$ |
33,601 |
|
|
$ |
(5,943 |
) |
|
$ |
27,658 |
|
For the year ended December 31, 2025, the increase in interest income over the prior year periods was mainly driven by the increase in the size of the consumer loan portfolios, particularly recreation loans, as well as an increase in overall yield on interest-earning assets as we continued to issue new consumer loans at interest rates greater than the weighted average rates of our current portfolio. The increase in interest expense was driven by an increase in borrowing costs, primarily due to the increases in deposits as older deposits mature and are replaced at current market rates, as well as an overall increase in borrowings.
39
Our interest expense is driven by the interest rates payable on our bank certificates of deposit, privately placed notes, fixed-rate, long-term debentures issued to the SBA, trust preferred securities, and has historically included credit facilities with banks and other short-term notes payable. The Bank issues brokered time certificates of deposit, which are, on average, our lowest borrowing costs. The Bank is able to bid on these deposits at a variety of maturity options, which allows for more flexible interest rate management strategies.
Our cost of funds is primarily driven by the rates paid on our various borrowings and changes in the levels of average borrowings outstanding. See Note 5 to the consolidated financial statements for details on the terms of our outstanding debt.
We measure our borrowing costs as our aggregate interest expense for all of our interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period. The above table presents the average borrowings and related borrowing costs for the years ended December 31, 2025, 2024, and 2023. We expect our borrowing costs to further increase as we take deposits and borrow other funds at current prevailing rates.
We have sought SBA funding through Medallion Capital to the extent it offers attractive rates. SBA financing subjects recipients to limits on the amount of secured bank debt they may incur. We have used SBA funding to fund loans that qualify under the SBIA and SBA regulations. As of December 31, 2025 SBA borrowings were less than 4% of total borrowed funds. In February 2024, we obtained an $18.5 million commitment from the SBA, all of which had been utilized as of December 31, 2025. We do not currently have any commitments available from the SBA. Further SBA commitments for additional debenture financing are subject to the successful completion of an SBA review of Medallion Capital’s management team as further discussed under Item 1A. Risk Factors of this Annual Report on Form 10-K.
At December 31, 2025 and 2024, adjustable rate debt constituted less than 2% of total debt, and was comprised solely of our trust preferred securities borrowings.
LOANS
Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, which are amortized to interest income over the life of the loan. For the year ended December 31, 2025, there was continued growth in the recreation lending segment, as well as a small increase in the commercial lending segment, but a small decline in the home improvement lending segment, as compared to the prior year, as we intentionally managed origination volumes to align portfolio growth with capital. The following tables present the activity of the loan portfolio, inclusive of loans held for sale and loans held for investment.
December 31, 2025 |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi |
|
|
Strategic |
|
|
Total |
|
||||||
Gross loans – December 31, 2024 |
|
$ |
1,543,243 |
|
|
$ |
827,211 |
|
|
$ |
111,273 |
|
|
$ |
1,909 |
|
|
$ |
7,386 |
|
|
$ |
2,491,022 |
|
Loan originations |
|
|
468,467 |
|
|
|
224,478 |
|
|
|
40,625 |
|
|
|
258 |
|
|
|
771,564 |
|
|
|
1,505,392 |
|
Principal receipts, sales, and maturities |
|
|
(293,199 |
) |
|
|
(225,794 |
) |
|
|
(24,870 |
) |
|
|
(973 |
) |
|
|
(763,806 |
) |
|
|
(1,308,642 |
) |
Charge-offs |
|
|
(75,486 |
) |
|
|
(16,577 |
) |
|
|
(5,165 |
) |
|
|
(15 |
) |
|
|
— |
|
|
|
(97,243 |
) |
Transfer to loan collateral in process of foreclosure, net |
|
|
(30,223 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,223 |
) |
Amortization of origination fees and costs, net |
|
|
(14,653 |
) |
|
|
4,117 |
|
|
|
(56 |
) |
|
|
— |
|
|
|
— |
|
|
|
(10,592 |
) |
Origination fees and costs, net |
|
|
19,072 |
|
|
|
(3,198 |
) |
|
|
100 |
|
|
|
— |
|
|
|
— |
|
|
|
15,974 |
|
Paid-in-kind interest |
|
|
— |
|
|
|
— |
|
|
|
1,161 |
|
|
|
— |
|
|
|
— |
|
|
|
1,161 |
|
Gross loans – December 31, 2025 |
|
$ |
1,617,221 |
|
|
$ |
810,237 |
|
|
$ |
123,068 |
|
|
$ |
1,179 |
|
|
$ |
15,144 |
|
|
$ |
2,566,849 |
|
December 31, 2024 |
|
Recreation (1) |
|
|
Home |
|
|
Commercial |
|
|
Taxi |
|
|
Strategic |
|
|
Total |
|
||||||
Gross loans – December 31, 2023 |
|
$ |
1,336,226 |
|
|
$ |
760,617 |
|
|
$ |
114,827 |
|
|
$ |
3,663 |
|
|
$ |
553 |
|
|
$ |
2,215,886 |
|
Loan originations |
|
|
526,634 |
|
|
|
298,642 |
|
|
|
14,300 |
|
|
|
250 |
|
|
|
203,627 |
|
|
|
1,043,453 |
|
Principal receipts, sales, and maturities |
|
|
(232,414 |
) |
|
|
(213,600 |
) |
|
|
(17,949 |
) |
|
|
(886 |
) |
|
|
(196,794 |
) |
|
|
(661,643 |
) |
Charge-offs |
|
|
(69,349 |
) |
|
|
(18,035 |
) |
|
|
(71 |
) |
|
|
(124 |
) |
|
|
— |
|
|
|
(87,579 |
) |
Transfer to loan collateral in process of foreclosure, net |
|
|
(24,921 |
) |
|
|
— |
|
|
|
(1,627 |
) |
|
|
(994 |
) |
|
|
— |
|
|
|
(27,542 |
) |
Amortization of origination fees and costs, net |
|
|
(13,502 |
) |
|
|
4,288 |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
(9,173 |
) |
Origination fees and costs, net |
|
|
20,569 |
|
|
|
(4,701 |
) |
|
|
(78 |
) |
|
|
— |
|
|
|
— |
|
|
|
15,790 |
|
Paid-in-kind interest |
|
|
— |
|
|
|
— |
|
|
|
1,830 |
|
|
|
— |
|
|
|
— |
|
|
|
1,830 |
|
Gross loans – December 31, 2024 |
|
$ |
1,543,243 |
|
|
$ |
827,211 |
|
|
$ |
111,273 |
|
|
$ |
1,909 |
|
|
$ |
7,386 |
|
|
$ |
2,491,022 |
|
40
The following table presents the maturities and sensitivity to change in interest rates for our loans as of December 31, 2025.
|
|
Loan Maturity |
|
|||||||||||||||||
|
|
Within 1 year |
|
|
After 1 to 5 years |
|
|
After 5 to 15 years |
|
|
After 15 years |
|
|
Total |
|
|||||
Fixed-rate |
|
$ |
29,937 |
|
|
$ |
226,694 |
|
|
$ |
1,988,071 |
|
|
$ |
269,814 |
|
|
$ |
2,514,516 |
|
Recreation |
|
|
3,971 |
|
|
|
105,235 |
|
|
|
1,388,345 |
|
|
|
64,241 |
|
|
|
1,561,792 |
|
Home improvement |
|
|
3,752 |
|
|
|
26,245 |
|
|
|
577,615 |
|
|
|
205,573 |
|
|
|
813,185 |
|
Commercial |
|
|
6,731 |
|
|
|
94,374 |
|
|
|
22,111 |
|
|
|
— |
|
|
|
123,216 |
|
Strategic partnerships |
|
|
15,144 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,144 |
|
Taxi medallion |
|
|
339 |
|
|
|
840 |
|
|
|
— |
|
|
|
— |
|
|
|
1,179 |
|
Adjustable-rate |
|
$ |
309 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
309 |
|
Recreation |
|
|
309 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
309 |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Taxi medallion |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total loans (1) |
|
$ |
30,246 |
|
|
$ |
226,694 |
|
|
$ |
1,988,071 |
|
|
$ |
269,814 |
|
|
$ |
2,514,825 |
|
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level estimated by management to absorb expected future losses in the portfolios. As of December 31, 2025 and 2024, the allowance totaled $114.8 million and $97.4 million, which represented 4.50% and 4.12% of total loans held for investment, respectively. The provision for credit losses was $89.8 million for the year ended December 31, 2025 compared to $76.5 million for the year ended December 31, 2024 as a result of rising loss rates, fluctuation in delinquencies, and higher expected losses in our recreation loan portfolio and lower recoveries on taxi medallion loans.
During the year ended December 31, 2025, we recognized provisions of $9.0 million related to specific commercial loans, compared to $1.1 million in 2024. Provisions and the correlated allowance for credit losses of commercial loans are assessed on specific indicators, such as, the underlying borrower not performing as expected and consideration of the current economic environment and economic policies which impact, or are likely to impact, the borrower's underlying business operations.
The following table presents the activity in the allowance for credit losses for December 31, 2025 and 2024.
(Dollars in thousands) |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi |
|
|
Total |
|
|||||
Balance at December 31, 2023 |
|
$ |
57,532 |
|
|
$ |
21,019 |
|
|
$ |
4,148 |
|
|
$ |
1,536 |
|
|
$ |
84,235 |
|
Charge-offs |
|
|
(69,349 |
) |
|
|
(18,035 |
) |
|
|
(71 |
) |
|
|
(124 |
) |
|
|
(87,579 |
) |
Recoveries |
|
|
14,924 |
|
|
|
4,094 |
|
|
|
29 |
|
|
|
5,163 |
|
|
|
24,210 |
|
Provision (benefit) for credit losses |
|
|
67,995 |
|
|
|
13,458 |
|
|
|
1,084 |
|
|
|
(6,035 |
) |
|
|
76,502 |
|
Balance at December 31, 2024 |
|
|
71,102 |
|
|
|
20,536 |
|
|
|
5,190 |
|
|
|
540 |
|
|
|
97,368 |
|
Charge-offs |
|
|
(75,486 |
) |
|
|
(16,577 |
) |
|
|
(5,165 |
) |
|
|
(15 |
) |
|
|
(97,243 |
) |
Recoveries |
|
|
16,432 |
|
|
|
5,423 |
|
|
|
— |
|
|
|
2,987 |
|
|
|
24,842 |
|
Provision (benefit) for credit losses |
|
|
73,908 |
|
|
|
10,181 |
|
|
|
9,027 |
|
|
|
(3,294 |
) |
|
|
89,822 |
|
Balance at December 31, 2025 |
|
$ |
85,956 |
|
|
$ |
19,563 |
|
|
$ |
9,052 |
|
|
$ |
218 |
|
|
$ |
114,789 |
|
41
The following tables present the gross charge-offs for the years ended December 31, 2025 and 2024, by the year of origination:
December 31, 2025 |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Total |
|
|||||||
Recreation |
|
$ |
3,280 |
|
|
$ |
15,870 |
|
|
$ |
16,369 |
|
|
$ |
17,582 |
|
|
$ |
8,310 |
|
|
$ |
14,075 |
|
|
$ |
75,486 |
|
Home improvement |
|
|
108 |
|
|
|
3,668 |
|
|
|
5,141 |
|
|
|
4,365 |
|
|
|
1,824 |
|
|
|
1,471 |
|
|
|
16,577 |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
152 |
|
|
|
— |
|
|
|
5,013 |
|
|
|
5,165 |
|
Taxi medallion |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
15 |
|
Total |
|
$ |
3,388 |
|
|
$ |
19,538 |
|
|
$ |
21,510 |
|
|
$ |
22,099 |
|
|
$ |
10,134 |
|
|
$ |
20,574 |
|
|
$ |
97,243 |
|
December 31, 2024 |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Total |
|
|||||||
Recreation |
|
$ |
3,203 |
|
|
$ |
18,540 |
|
|
$ |
22,883 |
|
|
$ |
10,789 |
|
|
$ |
4,222 |
|
|
$ |
9,712 |
|
|
$ |
69,349 |
|
Home improvement |
|
|
841 |
|
|
|
5,766 |
|
|
|
6,412 |
|
|
|
3,131 |
|
|
|
815 |
|
|
|
1,070 |
|
|
|
18,035 |
|
Commercial |
|
|
— |
|
|
|
71 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
71 |
|
Taxi medallion |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
124 |
|
|
|
124 |
|
Total |
|
$ |
4,044 |
|
|
$ |
24,377 |
|
|
$ |
29,295 |
|
|
$ |
13,920 |
|
|
$ |
5,037 |
|
|
$ |
10,906 |
|
|
$ |
87,579 |
|
The following tables present the allowance for credit losses for loans held for investment, by type, as of December 31, 2025 and 2024:
December 31, 2025 |
|
Amount |
|
|
Percentage |
|
|
Allowance as |
|
|||
Recreation |
|
$ |
85,956 |
|
|
|
75 |
% |
|
|
5.32 |
% |
Home improvement |
|
|
19,563 |
|
|
|
17 |
|
|
|
2.41 |
|
Commercial |
|
|
9,052 |
|
|
|
8 |
|
|
|
7.36 |
|
Taxi medallion |
|
|
218 |
|
|
* |
|
|
|
18.49 |
|
|
Total (2) |
|
$ |
114,789 |
|
|
|
100 |
% |
|
|
|
|
(*) Less than 0.1%.
December 31, 2024 |
|
Amount |
|
|
Percentage |
|
|
Allowance as |
|
|||
Recreation |
|
$ |
71,102 |
|
|
|
73 |
% |
|
|
5.00 |
% |
Home improvement |
|
|
20,536 |
|
|
|
21 |
|
|
|
2.48 |
|
Commercial |
|
|
5,190 |
|
|
|
5 |
|
|
|
4.66 |
|
Taxi medallion |
|
|
540 |
|
|
|
1 |
|
|
|
28.29 |
|
Total (2) |
|
$ |
97,368 |
|
|
|
100 |
% |
|
|
|
|
The following table presents the trend in loans 90 days or more past due as of the dates indicated.
|
|
Year Ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
(Dollars in thousands) |
|
Amount |
|
|
% (1) |
|
|
Amount |
|
|
% (1) |
|
|
Amount |
|
|
% (1) |
|
||||||
Recreation |
|
$ |
12,856 |
|
|
|
0.5 |
% |
|
$ |
10,018 |
|
|
|
0.4 |
% |
|
$ |
9,095 |
|
|
|
0.4 |
% |
Home improvement |
|
|
1,300 |
|
|
* |
|
|
|
1,386 |
|
|
* |
|
|
|
1,502 |
|
|
|
0.1 |
|
||
Commercial |
|
|
10,274 |
|
|
|
0.4 |
|
|
|
16,337 |
|
|
|
0.7 |
|
|
|
6,240 |
|
|
|
0.3 |
|
Taxi medallion |
|
|
41 |
|
|
* |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total loans 90 days or more past due |
|
$ |
24,471 |
|
|
|
1.0 |
% |
|
$ |
27,741 |
|
|
|
1.1 |
% |
|
$ |
16,837 |
|
|
|
0.8 |
% |
(*) Less than 0.1%.
As of December 31, 2025 taxi medallion loans in the process of foreclosure included 281 taxi medallions in the New York market, 186 taxi medallions in the Chicago market, 22 taxi medallions in the Newark market, and 31 taxi medallions in various other markets.
42
SEGMENT RESULTS
We manage our financial results under four operating segments; recreation lending, home improvement lending, commercial lending, and taxi medallion lending. We also present results for a non-operating segment, corporate and other investments.
Recreation Lending
Recreation lending is a return-oriented business focused on originating prime and non-prime recreation loans which is a significant source of income for us, accounting for 66%, 67%, and 67% of our interest income for the years ended December 31, 2025, 2024, and 2023.
We maintain relationships with approximately 3,400 dealers and financial service providers, or FSPs, not all of which are active at any one time. FSPs are entities that provide finance and insurance, or F&I, services to small dealers that do not have the desire or ability to provide F&I services themselves. The ability of FSPs to aggregate the financing and relationship management for many small dealers makes them valuable. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten relationships were responsible for 39% of recreation lending’s new loan originations for the year ended December 31, 2025. The percentage of new loan originations by the top ten dealers and/or FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.
The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $22,000 as of December 31, 2025, with an average loan size originated in 2025 of approximately $29,000. The loans are fixed rate with an average term at origination of approximately 15 years. The weighted average maturity of our loans outstanding as of December 31, 2025 is 11 years.
The loans are secured primarily by RVs, boats, collector cars, and trailers, with RV loans making up 54% of the portfolio, boat loans making up 21%, and collector cars making up 13% of the portfolio as of December 31, 2025, compared to 55%, 20%, and 11% as of December 31, 2024. Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, at 17% and 10% of loans outstanding with no other states at or above 10%. As of December 31, 2025, 2024, and 2023, the weighted average FICO, measured at origination, scores of all recreation loans outstanding were 686, 685 (683 exclusive of loans held for sale), and 683. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, and 2023 were 688, 685 (686 exclusive of loans held for sale), and 686.
During the year ended December 31, 2025, the recreation portfolio grew 5% from $1.5 billion to $1.6 billion, with the average coupon rate at origination increasing 9 basis points to 15.16% from a year ago. Additionally, during the year ended December 31, 2025, the allowance for credit losses increased 21% from December 31, 2024, with the increase reflecting the 5% growth in the portfolio we experienced as well as rising loss rates and various economic factors resulting in a higher allowance.
During the year ended December 31, 2025, we originated $468.5 million in recreation loans, a decrease from the $526.6 million originated in 2024. The lower origination volumes during the year reflects our focus on originating loans that we believe will perform better during economic downturns, as well as our efforts to maintain origination volumes that align with our capital levels. The following table presents quarterly originations for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
First Quarter |
|
$ |
86,833 |
|
|
$ |
105,765 |
|
|
$ |
101,681 |
|
Second Quarter |
|
|
142,789 |
|
|
|
209,563 |
|
|
|
190,007 |
|
Third Quarter |
|
|
141,667 |
|
|
|
139,105 |
|
|
|
92,603 |
|
Fourth Quarter |
|
|
97,178 |
|
|
|
72,201 |
|
|
|
62,748 |
|
Year Ended |
|
$ |
468,467 |
|
|
$ |
526,634 |
|
|
$ |
447,039 |
|
As of December 31, 2025, 36% of the recreation loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history. The following table presents non-prime originations in comparison to total originations for the years ended December 31, 2025, 2024, and 2023.
(Dollars in thousands) |
|
Total |
|
|
Non-prime |
|
|
Non-prime |
|
|||
2025 |
|
$ |
468,467 |
|
|
$ |
169,498 |
|
|
|
36 |
% |
2024 |
|
$ |
526,634 |
|
|
$ |
185,334 |
|
|
|
35 |
% |
2023 |
|
$ |
447,039 |
|
|
$ |
152,045 |
|
|
|
34 |
% |
43
The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Selected Earnings Data |
|
|
|
|
|
|
|
|
|
|||
Total interest income |
|
$ |
209,321 |
|
|
$ |
194,131 |
|
|
$ |
167,765 |
|
Total interest expense |
|
|
51,966 |
|
|
|
46,123 |
|
|
|
31,436 |
|
Net interest income |
|
|
157,355 |
|
|
|
148,008 |
|
|
|
136,329 |
|
Provision for credit losses |
|
|
73,908 |
|
|
|
67,995 |
|
|
|
44,592 |
|
Net interest income after credit loss provision |
|
|
83,447 |
|
|
|
80,013 |
|
|
|
91,737 |
|
Other income |
|
|
1,937 |
|
|
|
756 |
|
|
|
376 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Salaries |
|
|
(13,926 |
) |
|
|
(12,644 |
) |
|
|
(11,734 |
) |
Loan servicing fees and collection costs |
|
|
(13,841 |
) |
|
|
(12,038 |
) |
|
|
(10,714 |
) |
Other costs |
|
|
(12,800 |
) |
|
|
(8,446 |
) |
|
|
(10,153 |
) |
Net income before taxes |
|
|
44,817 |
|
|
|
47,641 |
|
|
|
59,512 |
|
Income tax provision |
|
|
(13,770 |
) |
|
|
(15,181 |
) |
|
|
(17,231 |
) |
Net income after taxes |
|
$ |
31,047 |
|
|
$ |
32,460 |
|
|
$ |
42,281 |
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|||
Total loan, gross (1) |
|
$ |
1,617,221 |
|
|
$ |
1,543,243 |
|
|
$ |
1,336,222 |
|
Allowance for credit losses |
|
|
85,956 |
|
|
|
71,102 |
|
|
|
57,532 |
|
Total loans, net |
|
|
1,531,265 |
|
|
|
1,472,141 |
|
|
|
1,278,690 |
|
Total assets |
|
|
1,552,257 |
|
|
|
1,494,445 |
|
|
|
1,297,870 |
|
Total segment borrowings |
|
|
1,262,575 |
|
|
|
1,239,592 |
|
|
|
1,062,584 |
|
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|||
Return on average assets |
|
|
2.05 |
% |
|
|
2.29 |
% |
|
|
3.36 |
% |
Return on average equity |
|
|
12.00 |
|
|
|
15.11 |
|
|
|
21.24 |
|
Interest yield |
|
|
13.37 |
|
|
|
13.30 |
|
|
|
13.07 |
|
Net interest margin, gross |
|
|
10.05 |
|
|
|
10.14 |
|
|
|
10.62 |
|
Net interest margin, net of allowance |
|
|
10.56 |
|
|
|
10.58 |
|
|
|
11.09 |
|
Reserve coverage (2) |
|
|
5.32 |
|
|
|
5.00 |
|
|
|
4.31 |
|
Delinquency status (3) |
|
|
0.82 |
|
|
|
0.67 |
|
|
|
0.70 |
|
Charge-off ratio (4) |
|
|
3.77 |
|
|
|
3.72 |
|
|
|
3.04 |
|
Home Improvement Lending
The home improvement lending segment works with contractors and financial service providers to finance home improvements and is concentrated in swimming pools, roofs, and windows at 32%, 28%, and 11% of total loans outstanding as of December 31, 2025, as compared to 27%, 36%, and 13% as of December 31, 2024, with no other collateral types at or above 10%. Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Florida and Texas at 14% and 12% of loans outstanding December 31, 2025, with no other states at or above 10%. As of December 31, 2025, 2024, and 2023, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 767, 767, and 764. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, and 2023 were 779, 781, and 771.
A large proportion of our home improvement-financed sales are facilitated by contractor salespeople with limited financing backgrounds rather than by contractor employees who provide F&I services. The result is contractor demand for financing services that facilitate an in-home transaction (e.g., digital tools, including mobile applications for phone or tablet, support for E-SIGN compliant electronic signatures, and extended operating hours), and additional resources for the salesperson throughout the financing process. We currently maintain relationships with approximately 700 contractors and FSPs. Our top ten contractors and/or FSP relationships were responsible for 61% of home improvement lending’s new loan originations for the year ended December 31, 2025. The percentage of new loan originations by the top ten contractors and/or FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.
The home improvement loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $22,000 as of December 31, 2025, with an average loan size originated in 2025 of $31,000. The loans are fixed rate with an average term at origination of approximately 15 years. The weighted average maturity of our loans outstanding as of December 31, 2025 is 13 years.
As of the year ended December 31, 2025, the home improvement portfolio totaled $810.2 million, with the allowance for credit losses decreasing 5% from a year ago reflecting primarily improvement in credit performance and various other economic factors. The average interest rate charged on our loans increased 6 basis points to 9.87% from the prior year.
44
During the year ended December 31, 2025, we originated $224.5 million home improvement loans, compared to $298.6 million in the prior year. The lower origination volumes reflect our focus on originating loans that we believe will perform better during economic downturns, as well as our efforts to maintain origination volumes that align with our capital levels. The following table presents quarterly originations for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
First Quarter |
|
$ |
48,796 |
|
|
$ |
51,576 |
|
|
$ |
94,981 |
|
Second Quarter |
|
|
54,253 |
|
|
|
67,990 |
|
|
|
117,035 |
|
Third Quarter |
|
|
59,711 |
|
|
|
96,545 |
|
|
|
79,333 |
|
Fourth Quarter |
|
|
61,718 |
|
|
|
82,531 |
|
|
|
66,045 |
|
Year Ended |
|
$ |
224,478 |
|
|
$ |
298,642 |
|
|
$ |
357,394 |
|
As of December 31, 2025, less than 1% of the home improvement loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history. The following table presents non-prime originations in comparison to total originations for the years ended December 31, 2025, 2024, and 2023.
(Dollars in thousands) |
|
Total |
|
|
Non-prime |
|
|
Non-prime |
|
|||
2025 |
|
$ |
224,478 |
|
|
$ |
65 |
|
|
* |
|
|
2024 |
|
$ |
298,642 |
|
|
$ |
586 |
|
|
* |
|
|
2023 |
|
$ |
357,394 |
|
|
$ |
3,094 |
|
|
|
1 |
% |
(*) Less than 1%.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Selected Earnings Data |
|
|
|
|
|
|
|
|
|
|||
Total interest income |
|
$ |
80,624 |
|
|
$ |
74,036 |
|
|
$ |
62,703 |
|
Total interest expense |
|
|
28,931 |
|
|
|
26,277 |
|
|
|
18,137 |
|
Net interest income |
|
|
51,693 |
|
|
|
47,759 |
|
|
|
44,566 |
|
Provision for credit losses |
|
|
10,181 |
|
|
|
13,458 |
|
|
|
17,583 |
|
Net interest income after credit loss provision |
|
|
41,512 |
|
|
|
34,301 |
|
|
|
26,983 |
|
Other income |
|
|
12 |
|
|
|
11 |
|
|
|
6 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Salaries |
|
|
(8,910 |
) |
|
|
(8,031 |
) |
|
|
(8,226 |
) |
Loan servicing fees and collection costs |
|
|
(3,880 |
) |
|
|
(3,263 |
) |
|
|
(3,024 |
) |
Other costs |
|
|
(6,456 |
) |
|
|
(4,292 |
) |
|
|
(5,502 |
) |
Net income before taxes |
|
|
22,278 |
|
|
|
18,726 |
|
|
|
10,237 |
|
Income tax provision |
|
|
(6,845 |
) |
|
|
(5,967 |
) |
|
|
(2,964 |
) |
Net income after taxes |
|
$ |
15,433 |
|
|
$ |
12,759 |
|
|
$ |
7,273 |
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|||
Total loans, gross |
|
$ |
810,237 |
|
|
$ |
827,211 |
|
|
$ |
760,621 |
|
Allowance for credit losses |
|
|
19,563 |
|
|
|
20,536 |
|
|
|
21,019 |
|
Total loans, net |
|
|
790,674 |
|
|
|
806,675 |
|
|
|
739,602 |
|
Total assets |
|
|
796,254 |
|
|
|
811,442 |
|
|
|
744,904 |
|
Total segment borrowings |
|
|
647,657 |
|
|
|
673,064 |
|
|
|
609,863 |
|
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|||
Return on average assets |
|
|
1.94 |
% |
|
|
1.66 |
% |
|
|
1.04 |
% |
Return on average equity |
|
|
11.36 |
|
|
|
10.76 |
|
|
|
6.60 |
|
Interest yield |
|
|
9.95 |
|
|
|
9.45 |
|
|
|
8.86 |
|
Net interest margin, gross |
|
|
6.38 |
|
|
|
6.09 |
|
|
|
6.29 |
|
Net interest margin, net of allowance |
|
|
6.54 |
|
|
|
6.24 |
|
|
|
6.45 |
|
Reserve coverage (1) |
|
|
2.41 |
|
|
|
2.48 |
|
|
|
2.76 |
|
Delinquency status (2) |
|
|
0.16 |
|
|
|
0.17 |
|
|
|
0.20 |
|
Charge-off ratio (3) |
|
|
1.38 |
|
|
|
1.78 |
|
|
|
1.33 |
|
45
Commercial Lending
We originate both senior and subordinated loans nationwide to businesses in a variety of industries, with California, Wisconsin, and New York having 20%, 12%, and 11% of the segment portfolio, and no other states having a concentration at or above 10%. These mezzanine loans are primarily secured by a second position on all assets of the businesses and generally range in amount from $2.5 million to $6.0 million at origination, and typically include an equity component as part of the financing. These equity components, although a small portion of the overall financing, have the potential to generate significant yield enhancement when the underlying portfolio company enters a capital transaction. During the year ended December 31, 2025, net gains of $24.6 million were recognized with respect to these equity investments. The commercial lending business has concentrations in manufacturing, wholesale trade, and construction, that make up 63%, 11%, and 10% of total loans outstanding as of December 31, 2025, as compared to 57%, 12%, and 12% as of December 31, 2024. During the year ended December 31, 2025, we originated $40.6 million of loans, compared to $14.3 million in originations in 2024. As of December 31, 2025, commercial loans totaled $123.1 million.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023. The commercial segment encompasses the mezzanine lending business, and the other legacy commercial loans (immaterial to total) have been allocated to corporate and other investments.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Selected Earnings Data |
|
|
|
|
|
|
|
|
|
|||
Total interest income |
|
$ |
15,904 |
|
|
$ |
14,007 |
|
|
$ |
12,719 |
|
Total interest expense |
|
|
4,824 |
|
|
|
4,294 |
|
|
|
3,597 |
|
Net interest income |
|
|
11,080 |
|
|
|
9,713 |
|
|
|
9,122 |
|
Provision for credit losses |
|
|
9,027 |
|
|
|
1,093 |
|
|
|
1,988 |
|
Net interest income after credit loss provision |
|
|
2,053 |
|
|
|
8,620 |
|
|
|
7,134 |
|
Other income: |
|
|
|
|
|
|
|
|
|
|||
Gains on equity investments, net |
|
|
24,552 |
|
|
|
6,917 |
|
|
|
5,178 |
|
Other income |
|
|
697 |
|
|
|
943 |
|
|
|
793 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Salaries |
|
|
(5,086 |
) |
|
|
(3,564 |
) |
|
|
(3,079 |
) |
Other costs |
|
|
(1,115 |
) |
|
|
(1,428 |
) |
|
|
(468 |
) |
Net income before taxes |
|
|
21,101 |
|
|
|
11,488 |
|
|
|
9,558 |
|
Income tax provision |
|
|
(6,497 |
) |
|
|
(3,661 |
) |
|
|
(2,767 |
) |
Net income after taxes |
|
$ |
14,604 |
|
|
$ |
7,827 |
|
|
$ |
6,791 |
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|||
Total loans, gross |
|
$ |
123,068 |
|
|
$ |
111,273 |
|
|
$ |
114,827 |
|
Allowance for credit losses |
|
|
9,052 |
|
|
|
5,190 |
|
|
|
4,148 |
|
Total loans, net |
|
|
114,016 |
|
|
|
106,083 |
|
|
|
110,679 |
|
Total assets |
|
|
115,601 |
|
|
|
106,258 |
|
|
|
110,850 |
|
Total segment borrowings |
|
|
94,028 |
|
|
|
88,137 |
|
|
|
90,754 |
|
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|||
Return on average assets |
|
|
12.80 |
% |
|
|
7.38 |
% |
|
|
6.65 |
% |
Return on average equity |
|
|
76.06 |
|
|
|
47.93 |
|
|
|
41.51 |
|
Interest yield |
|
|
13.00 |
|
|
|
12.71 |
|
|
|
12.80 |
|
Net interest margin, gross |
|
|
9.09 |
|
|
|
8.81 |
|
|
|
9.18 |
|
Net interest margin, net of allowance |
|
|
9.78 |
|
|
|
9.18 |
|
|
|
9.45 |
|
Reserve coverage (1) |
|
|
7.36 |
|
|
|
4.66 |
|
|
|
3.61 |
|
Delinquency status (2) |
|
|
8.34 |
|
|
|
14.66 |
|
|
|
5.40 |
|
Charge-off ratio (3) |
|
|
4.22 |
|
|
|
0.04 |
|
|
|
1.02 |
|
|
|
As of December 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
Geographic Concentrations |
|
Gross Commercial |
|
|
% of |
|
|
Gross Commercial |
|
|
% of |
|
||||
California |
|
$ |
24,988 |
|
|
|
20 |
% |
|
$ |
31,049 |
|
|
|
28 |
% |
Wisconsin |
|
|
14,791 |
|
|
|
12 |
|
|
|
10,662 |
|
|
|
10 |
|
New York |
|
|
13,630 |
|
|
|
11 |
|
|
|
8,580 |
|
|
|
8 |
|
Texas |
|
|
7,576 |
|
|
|
6 |
|
|
|
10,676 |
|
|
|
10 |
|
Other (1) |
|
|
62,083 |
|
|
|
51 |
|
|
|
50,306 |
|
|
|
44 |
|
Total |
|
$ |
123,068 |
|
|
|
100 |
% |
|
$ |
111,273 |
|
|
|
100 |
% |
46
Taxi Medallion Lending
The taxi medallion lending segment operates in the New York City metropolitan area. During the year ended December 31, 2025, we continued to utilize a taxi medallion value of $79,500 in the New York City and Newark markets despite fluctuating transfer prices that have exceeded that value, with all other markets being valued at $0 at the end of the year. We continued to not recognize interest income with all loans being on nonaccrual (except for settled loans with interest being paid in excess of the loan balance), and by transferring underperforming loans from the portfolio to loan collateral in process of foreclosure with charge-offs to collateral value, once loans become more than 120 days past due.
During the year ended December 31, 2025, we collected $13.6 million related to taxi medallion assets, which resulted in net recoveries and gains of $7.9 million, and collected $12.1 million related to taxi medallion assets in the prior year, which resulted in net recoveries and gains of $6.9 million. The amount of cash collected as well as recoveries recorded vary greatly from period to period due to a wide variety of circumstances surrounding each of the underlying assets, and while we continue to focus on collection and recovery efforts, it is unlikely that there will be future collections at levels experienced in recent years.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Selected Earnings Data |
|
|
|
|
|
|
|
|
|
|||
Total interest income |
|
$ |
432 |
|
|
$ |
659 |
|
|
$ |
1,596 |
|
Total interest expense |
|
|
73 |
|
|
|
102 |
|
|
|
72 |
|
Net interest income |
|
|
359 |
|
|
|
557 |
|
|
|
1,524 |
|
Benefit for credit losses |
|
|
(3,294 |
) |
|
|
(6,035 |
) |
|
|
(26,318 |
) |
Net interest income after credit loss benefit |
|
|
3,653 |
|
|
|
6,592 |
|
|
|
27,842 |
|
Other income |
|
|
4,671 |
|
|
|
910 |
|
|
|
3,358 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Salaries |
|
|
(2,130 |
) |
|
|
(2,947 |
) |
|
|
(4,849 |
) |
Loan servicing fees and collection costs |
|
|
(410 |
) |
|
|
(724 |
) |
|
|
(1,006 |
) |
Other costs |
|
|
(1,107 |
) |
|
|
(902 |
) |
|
|
(1,401 |
) |
Net income before taxes |
|
|
4,677 |
|
|
|
2,929 |
|
|
|
23,944 |
|
Income tax provision |
|
|
(1,438 |
) |
|
|
(933 |
) |
|
|
(6,933 |
) |
Net income after taxes |
|
$ |
3,239 |
|
|
$ |
1,996 |
|
|
$ |
17,011 |
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|||
Total loans, gross |
|
$ |
1,179 |
|
|
$ |
1,909 |
|
|
$ |
3,663 |
|
Allowance for credit losses |
|
|
218 |
|
|
|
540 |
|
|
|
1,536 |
|
Total loans, net |
|
|
961 |
|
|
|
1,369 |
|
|
|
2,127 |
|
Total assets |
|
|
4,329 |
|
|
|
6,573 |
|
|
|
12,247 |
|
Total segment borrowings |
|
|
3,521 |
|
|
|
5,452 |
|
|
|
10,027 |
|
47
Corporate and Other Investments
This non-operating segment relates to our equity and investment securities as well as our legacy commercial business, and other assets, liabilities, revenues, and expenses, which are not specifically allocated to the operating segments. Additionally, we historically and continue to account for goodwill in this non-operating segment. All goodwill relates to the Bank, specifically the recreation and home improvement lending segments. Commencing with the 2020 second quarter, the Bank began issuing loans related to the new strategic partnership business, which is included within this segment. The associated activities of the strategic partnership business are currently limited to originating loans or other receivables facilitated by our strategic partners and selling those loans or receivables to our strategic partners or other third parties, without recourse, within a specified time after origination, such as three business days. Strategic partnership loans were $15.1 million and $7.4 million in net loans as of December 31, 2025 and December 31, 2024, with originations of $771.6 million and $203.6 million during the years ended December 31, 2025 and December 31, 2024.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.
(Dollars in thousands) |
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Selected Earnings Data |
|
|
|
|
|
|
|
|
|
|||
Total interest income |
|
$ |
9,039 |
|
|
$ |
7,869 |
|
|
$ |
6,257 |
|
Total interest expense |
|
|
12,633 |
|
|
|
11,371 |
|
|
|
9,704 |
|
Net interest expense |
|
|
(3,594 |
) |
|
|
(3,502 |
) |
|
|
(3,447 |
) |
Benefit for credit losses |
|
|
— |
|
|
|
(9 |
) |
|
|
(35 |
) |
Net interest expense after credit loss benefit |
|
|
(3,594 |
) |
|
|
(3,493 |
) |
|
|
(3,412 |
) |
Other income |
|
|
6,124 |
|
|
|
1,793 |
|
|
|
1,609 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Salaries |
|
|
(11,612 |
) |
|
|
(11,158 |
) |
|
|
(9,674 |
) |
Loan servicing fees and collection costs |
|
|
(50 |
) |
|
|
(1,126 |
) |
|
|
(799 |
) |
Other costs |
|
|
(3,856 |
) |
|
|
(3,864 |
) |
|
|
(4,939 |
) |
Net loss before taxes |
|
|
(12,988 |
) |
|
|
(17,848 |
) |
|
|
(17,215 |
) |
Income tax benefit |
|
|
4,006 |
|
|
|
4,731 |
|
|
|
4,985 |
|
Net loss after taxes |
|
$ |
(8,982 |
) |
|
$ |
(13,117 |
) |
|
$ |
(12,230 |
) |
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|||
Total loans, net |
|
|
15,144 |
|
|
|
7,386 |
|
|
|
553 |
|
Total assets |
|
|
487,023 |
|
|
|
449,888 |
|
|
|
421,956 |
|
Total segment borrowings |
|
|
396,135 |
|
|
|
373,168 |
|
|
|
345,462 |
|
Summary Consolidated Financial Ratios
The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Return on average assets |
|
|
1.93 |
% |
|
|
1.54 |
% |
|
|
2.51 |
% |
Return on average stockholder's equity |
|
|
11.06 |
|
|
|
10.12 |
|
|
|
17.33 |
|
Return on average equity |
|
|
11.43 |
|
|
|
9.89 |
|
|
|
15.79 |
|
Net interest margin, gross |
|
|
8.06 |
|
|
|
8.05 |
|
|
|
8.38 |
|
Equity to assets (1) |
|
|
17.19 |
|
|
|
15.30 |
|
|
|
15.91 |
|
Debt to equity (2) |
|
4.7x |
|
|
5.4x |
|
|
5.1x |
|
|||
Net loans to assets |
|
|
83 |
% |
|
|
83 |
% |
|
|
82 |
% |
Net charge-offs |
|
|
72,401 |
|
|
|
63,369 |
|
|
|
31,132 |
|
Net charge-offs as a % of average loans receivable (3) |
|
|
2.88 |
% |
|
|
2.69 |
% |
|
|
1.48 |
% |
Reserve coverage (4) |
|
|
4.50 |
|
|
|
4.12 |
|
|
|
3.80 |
|
48
CONSOLIDATED RESULTS OF OPERATIONS
For the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Net income attributable to shareholders was $43.0 million, or $1.78 per diluted share, for the year ended December 31, 2025, compared to $35.9 million, or $1.52 per diluted share, for the year ended December 31, 2024.
Total interest income was $315.3 million for the year ended December 31, 2025, compared to $290.7 million for the year ended December 31, 2024. The increase in interest income reflects the continued growth in our lending segments, particularly recreation lending, as well as increased weighted average interest rates charged on loans. As of December 31, 2025, the weighted average coupon rates at origination of our recreation, home improvement, and commercial loans were 15.16%, 9.87%, and 14.22% compared to 15.07%, 9.81%, and 12.97% as of December 31, 2024. The yield on interest earning assets was 11.74% for the year ended December 31, 2025, compared to 11.56% for the year ended December 31, 2024, which reflects higher interest rates on new originations in our recreation and home improvement lending segments, with segment-specific yields anticipated to remain near these levels as older loans, written at lower rates, amortize and newer originations at the higher current rates continue to become a larger portion of our portfolios.
Loans, inclusive of loans held for sale, were $2.567 billion as of December 31, 2025, comprised of recreation ($1.617 billion), home improvement ($810.2 million), commercial ($123.1 million), strategic partnership ($15.1 million), and taxi medallion ($1.2 million) loans. We had an allowance for credit losses as of December 31, 2025 of $114.8 million, attributable to the recreation (75%), home improvement (17%), commercial (8%), and taxi medallion (less than a percent) loan portfolios.
Loans increased $75.8 million, or 3%, to $2.567 billion as of December 31, 2025 from $2.491 billion as of December 31, 2024. Loan originations for the year ended December 31, 2025 were $1.505 billion, with $468.5 million of recreation loan originations, $224.5 million of home improvement originations, $771.6 million of strategic partnership loan originations, and $40.6 million of commercial loan originations. Comparatively, loan originations for the year ended December 31, 2024 included $526.6 million of recreation loan originations, $298.6 million of home improvement originations, $203.6 million of strategic partnership loan originations, and $14.3 million of commercial loan originations. Originations decreased in both of our consumer lending segments as we continued to focus on originating loans that we believe will perform better during economic downturns, as well as adjusting origination volumes to align with our capital requirements.
The provision for credit losses was $89.8 million for the year ended December 31, 2025 compared to $76.5 million for the year ended December 31, 2024. The current year provision included net charge-offs of $72.4 million, of which $59.1 million, $11.2 million and $5.2 million related to recreation, home improvement, and commercial loans. This compares to net-charge offs of $63.4 million, of which $54.4 million, $13.9 million, and less than $0.1 million related to recreation, home improvement, and commercial lending segments, for the year ended December 31, 2024. Additionally, the allowance for the year ended December 31, 2025 included net recoveries of taxi medallion loans of $3.0 million compared to $5.0 million for the year ended December 31, 2024. Charge-offs in the recreation loan portfolio continued to trend higher in 2025, a reflection of the broader economy. For the year ended December 31, 2025, net charge offs were 3.95% of recreation loans and 1.38% of home improvement loans, compared to 3.72% and 1.78% for the year ended December 31, 2024. As of December 31, 2025, current loans (those less than 30 days past due) were 94% and 99% of the recreation and home improvement loan portfolios, similar to December 31, 2024. Charge-off activity and loan delinquency are two of the more prominent indicators of future loss experience and thus have a significant impact on our determination of allowance for credit loss. As of December 31, 2025, the allowance for credit loss on loans held for investment was 5.32% and 2.41% for recreation and home improvement loans, compared to 5.00% and 2.48% a year ago. See Note 4 of the accompanying consolidated financial statements for additional information on loans and allowance for credit losses.
Interest expense was $98.4 million for the year ended December 31, 2025, compared to $88.2 million for the year ended December 31, 2024, reflecting both higher average borrowings and higher average borrowing costs in 2025. The average cost of borrowed funds was 4.22% for the year ended December 31, 2025, compared to 3.93% for the year ended December 31, 2024. The average cost of the certificates of deposit was 3.88% during the current year, 34 basis points higher than the 3.54% average cost in the prior year, reflecting a higher rate on newly issued deposits when compared to the maturing deposits which were issued at lower rates in previous years. As we replace upcoming deposit maturities with new issues, we expect our average cost of funds to further increase. During the year ended December 31, 2025, we issued deposits for 36 month certificates at rates as high as 4.15% and 4.35% for 36 month and 60 month certificates, with the most recent 36 month and 60 month issuances at the end of 2025 at rates up to 3.70%. Average debt outstanding was $2.330 billion for the year ended December 31, 2025, up from $2.241 billion for the year ended December 31, 2024, as we issued additional certificates of deposit to fund our loan growth. See page 38 for tables that show average balances and cost of funds for our funding sources.
49
Net interest income was $216.9 million for the year ended December 31, 2025, compared to $202.5 million for the year ended December 31, 2024. Net interest margin, excluding the impact of allowance for credit loss, was 8.06% for the year ended December 31, 2025, compared to 8.05%, for the year ended December 31, 2024, reflecting the above, particularly our higher yield over the prior year, largely offset by the rising cost of borrowings experienced. With the rates we charge on outstanding loans being fixed, and our average cost of funds increasing, our net interest margin had tightened in prior years, as we can only increase our yield through higher rates charged on new originations. Accordingly, during the year ended December 31, 2025, our net interest margins remained steady compared to the prior year. We expect this trend to continue, with fluctuations dependent upon how our loan portfolio mix changes in the coming years.
Net other income, which is comprised primarily of net gains related to equity investments, net gains associated with the disposition of taxi medallion assets and fees earned in our strategic partnership business, was $38.0 million and $11.3 million for the years ended December 31, 2025 and 2024. Net gains on equity investments were $24.6 million in 2025 and $6.9 million in 2024, while gains related to the taxi medallion assets were $4.6 million in 2025, compared to $0.9 million in 2024. Additionally, during 2025 we recognized a gain of $1.3 million on the sale of recreation loans held for sale.
Operating expenses were $85.2 million for the year ended December 31, 2025, up from $74.4 million for the year ended December 31, 2024. Salaries and benefits were $41.7 million for the year ended December 31, 2025, up from $38.3 million for the year ended December 31, 2024, with the increase attributable to a higher head count, annual cost of living increases, higher long-term performance based equity compensation, and higher incentive compensation at our subsidiaries. Professional fees were $5.0 million for the year ended December 31, 2025, compared to a net benefit of $1.4 million for the year ended December 31, 2024 which was due in large part to $5.5 million of benefits related to insurance coverage of costs associated with the SEC litigation.
During 2025, the Bank redeemed its Series F Preferred Stock, in its entirety, at an aggregate redemption price of $46.0 million. Upon redemption, we incurred a charge of approximately $3.5 million in calculating earnings attributable to common shareholders representing the excess of the redemption price over the carrying amount of $42.5 million.
For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
For a comparison of the Company’s results of operations for the year ended December 31, 2024 to the year ended December 31, 2023, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission on March 13, 2025.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity
We, like other financial institutions, are subject to interest rate risk to the extent that our interest-earning assets (consisting of consumer, commercial, and taxi medallion loans, and investment securities) reprice on a different basis over time in comparison to our interest-bearing liabilities (consisting primarily of bank certificates of deposit, historically credit facilities, and borrowings from banks and other lenders).
Having interest-bearing liabilities that mature or reprice more frequently on average than assets may be beneficial in times of declining interest rates, although such an asset/liability structure may result in declining net earnings during periods of rising interest rates. Abrupt increases in market rates of interest may have an adverse impact on our earnings until we are able to originate new consumer loans at the higher prevailing interest rates. Conversely, having interest-earning assets that mature or reprice more frequently on average than liabilities may be beneficial in times of rising interest rates, although this asset/liability structure may result in declining net earnings during periods of falling interest rates. This mismatch between maturities and interest rate sensitivities of our interest-earning assets and interest-bearing liabilities results in interest rate risk.
The effect of changes in interest rates is mitigated by regular turnover of the portfolios. We believe that the average life of our loan portfolios varies to some extent as a function of changes in interest rates. Borrowers are more likely to exercise prepayment rights in a decreasing interest rate environment because the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. Conversely, borrowers are less likely to prepay in a rising interest rate environment. However, borrowers may prepay for a variety of other reasons, such as to monetize increases in the underlying collateral values. In addition, we manage our exposure to increases in market rates of interest by incurring fixed-rate indebtedness and by setting repricing intervals on certificates of deposit, for terms of up to five years.
A relative measure of interest rate risk can be derived from our interest rate sensitivity gap. The interest rate sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities, which mature and/or reprice within specified intervals of time. The gap is considered to be positive when repriceable assets exceed repriceable liabilities, and negative when repriceable liabilities exceed repriceable assets. A relative measure of interest rate sensitivity is provided by the cumulative difference between interest sensitive assets and interest sensitive liabilities for a given time interval expressed as a percentage of total assets.
50
The following table presents our interest rate sensitivity gap at December 31, 2025. The principal amounts of interest earning assets are assigned to the time frames in which such principal amounts are contractually obligated to be repriced. We do not reflect any prepayment assumptions in preparing the analysis, despite historical average life experience being significantly shorter than contractual terms.
December 31, 2025 Cumulative Gap (1) |
|
|||||||||||||||||||||||||||||||
(Dollars in thousands) |
|
Less |
|
|
More |
|
|
More |
|
|
More |
|
|
More |
|
|
More |
|
|
Thereafter |
|
|
Total |
|
||||||||
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed-rate (2) |
|
$ |
29,937 |
|
|
$ |
38,821 |
|
|
$ |
43,834 |
|
|
$ |
60,247 |
|
|
$ |
83,792 |
|
|
$ |
90,093 |
|
|
$ |
2,167,792 |
|
|
$ |
2,514,516 |
|
Adjustable rate (2) |
|
|
309 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
309 |
|
Investment securities and equity investments |
|
|
4,032 |
|
|
|
2,980 |
|
|
|
217 |
|
|
|
10,309 |
|
|
|
6,268 |
|
|
|
9,559 |
|
|
|
34,917 |
|
|
|
68,282 |
|
Cash |
|
|
201,564 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
201,564 |
|
Total earning assets |
|
$ |
235,842 |
|
|
$ |
41,801 |
|
|
$ |
44,051 |
|
|
$ |
70,556 |
|
|
$ |
90,060 |
|
|
$ |
99,652 |
|
|
$ |
2,202,709 |
|
|
$ |
2,784,671 |
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Deposits (3) |
|
$ |
682,132 |
|
|
$ |
576,313 |
|
|
$ |
424,188 |
|
|
$ |
169,783 |
|
|
$ |
230,919 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,083,335 |
|
Privately placed notes |
|
|
31,250 |
|
|
|
53,750 |
|
|
|
39,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,500 |
|
|
|
146,500 |
|
SBA debentures and borrowings |
|
|
14,000 |
|
|
|
2,000 |
|
|
|
1,250 |
|
|
|
1,250 |
|
|
|
3,000 |
|
|
|
8,500 |
|
|
|
55,000 |
|
|
|
85,000 |
|
Trust preferred securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,000 |
|
|
|
33,000 |
|
Federal reserve and other borrowings |
|
|
50,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,000 |
|
Strategic partner collateral deposits |
|
|
6,081 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,081 |
|
Total liabilities |
|
$ |
783,463 |
|
|
$ |
632,063 |
|
|
$ |
464,438 |
|
|
$ |
171,033 |
|
|
$ |
233,919 |
|
|
$ |
8,500 |
|
|
$ |
110,500 |
|
|
$ |
2,403,916 |
|
Interest gap |
|
$ |
(547,621 |
) |
|
$ |
(590,262 |
) |
|
$ |
(420,387 |
) |
|
$ |
(100,477 |
) |
|
$ |
(143,859 |
) |
|
$ |
91,152 |
|
|
$ |
2,092,209 |
|
|
$ |
380,755 |
|
Cumulative interest gap |
|
$ |
(547,621 |
) |
|
$ |
(590,262 |
) |
|
$ |
(420,387 |
) |
|
$ |
(100,477 |
) |
|
$ |
(143,859 |
) |
|
$ |
91,152 |
|
|
$ |
2,092,209 |
|
|
$ |
— |
|
December 31, 2024 (4) |
|
$ |
(584,817 |
) |
|
$ |
(456,813 |
) |
|
$ |
(426,717 |
) |
|
$ |
(114,216 |
) |
|
$ |
(80,863 |
) |
|
$ |
70,765 |
|
|
$ |
1,930,856 |
|
|
$ |
— |
|
December 31, 2023 (4) |
|
$ |
(498,772 |
) |
|
$ |
(1,015,143 |
) |
|
$ |
(1,335,301 |
) |
|
$ |
(1,474,758 |
) |
|
$ |
(1,578,162 |
) |
|
$ |
(1,494,411 |
) |
|
$ |
281,971 |
|
|
$ |
— |
|
Our interest rate sensitive assets were $2.8 billion and interest rate sensitive liabilities were $2.4 billion at December 31, 2025. The one-year cumulative interest rate gap was a negative $0.5 billion or 20% of interest rate sensitive assets. We actively monitor the level of exposure with the goal that movements in interest rates not adversely and unexpectedly negatively affect future earnings. We use net interest income sensitivity analysis as our primary metric to measure and manage the interest rate sensitivities of our loan and investment securities portfolios.
Our trust preferred securities bear a variable rate of interest of the 90-day Secured Overnight Financing Rate, or SOFR, adjusted by a relevant spread adjustment of approximately 26 basis points. As of December 31, 2025, these borrowings had a cost of 6.12%, a reduction of 71 basis points from a year ago.
Liquidity and Capital Resources
Our sources of liquidity include brokered certificates of deposit and other borrowings at the Bank, loan amortization and prepayments, private and public issuances of debt securities, participations or sales of loans to third parties, issuances of preferred securities at our subsidiaries, and the disposition of our other assets.
In February 2026, we repaid, at maturity, $31.25 million aggregate principal amount of our privately placed notes. We have been seeking, and continue to actively seek, additional debt financing to support our growth strategy.
In February 2026, we repaid $11.5 million of SBA debentures, in full, which had a maturity date of March 1, 2026. We currently do not have any commitments to access new debentures from the SBA.
In May 2025, the Bank closed an initial public offering of 3,100,000 shares of its Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series G, with a $77.5 million aggregate liquidation amount, or $25 per share, yielding net proceeds of $73.1 million. Dividends are payable quarterly from the date of issuance to, but excluding July 1, 2030, at a fixed rate equal to 9.00% per annum, and from and including July 1, 2030, during each reset period at a rate equal to the five-year U.S. Treasury rate plus a spread of 4.94% per annum.
In August 2024, we completed a private placement to certain institutional investors of $5.0 million aggregate principal amount of 8.625% unsecured senior notes due August 2039, with interest payable semiannually. We used the net proceeds from the offering for general corporate purposes.
51
In June 2024, we amended the notes previously issued in a private placement to certain institutional investors in December 2023, increasing the principal amount from $12.5 million to $17.5 million, reducing the interest rate to 8.875% from 9.0%, and extending the maturity date from December 2033 to June 2039. We used the net proceeds from the offering for general corporate purposes, which included the repayment of the remaining 8.25% notes that matured in March 2024 described below.
Over the years, the SBA has approved commitments for Medallion Capital, typically for a four and a half year term and a 1% fee. On February 28, 2024, Medallion Capital accepted a commitment from the SBA for $18.5 million in debenture financing, all of which had been utilized as of December 31, 2025. We do not currently have any commitments available from the SBA. Further SBA commitments for additional debenture financing are subject to the successful completion of an SBA review of Medallion Capital’s management team as further discussed under Item 1A. Risk Factors of this Annual Report on Form 10-K.
In September 2023, we completed a private placement to certain institutional investors of $39.0 million aggregate principal amount of 9.25% unsecured senior notes due September 2028, with interest payable semiannually.
In April 2023, the Bank began to originate retail savings deposits through a third-party service provider and, as of December 31, 2025, the Bank had $3.7 million in retail savings deposit balances.
In March 2023, the Bank established a discount window line of credit at the Federal Reserve. As of December 31, 2025, the Bank had $591.9 million in home improvement loans pledged as collateral to the Federal Reserve. The advance rate on the pledged securities is approximately 49% of book value, for a total of approximately $292.9 million in secured borrowing capacity, of which $50.0 million was utilized as of December 31, 2025. The discount window facility is not committed, and any borrowings by the Bank from the discount window facility are at the discretion of the Federal Reserve. The weighted average interest rate on funds borrowed from the discount window was 3.75% as of December 31, 2025.
The Bank has borrowing arrangements with several commercial banks. These agreements are accommodations that can be terminated at any time, for any reason and allow the Bank to borrow up to $75.0 million. As of December 31, 2025, there were no outstanding amounts with respect to these arrangements.
Subject to market conditions, the Bank may seek to issue one or more additional series of preferred stock in order to increase capital levels, grow the consumer loan portfolios or, depending on the size and other terms of any such issuance and subject to receipt of any required regulatory approvals, redeem some or all of its outstanding preferred stock. Any determination to seek to redeem some or all of the Bank’s outstanding preferred stock would be based on its actual and anticipated capital levels and capital deployment opportunities. There can be no assurance that the Bank will issue additional series of preferred stock or, if it does, that it will apply the proceeds to redeem any series of preferred stock. On July 1, 2025, the Bank redeemed its Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, or Series F, in its entirety, for an aggregate amount of $46.0 million, which resulted in a $3.5 million charge to earnings attributable to common shareholders upon the redemption.
The table below presents the components of our debt as of December 31, 2025, exclusive of deferred financing costs of $8.4 million. See Note 5 to the consolidated financial statements for details of the contractual terms of our borrowings.
(Dollars in thousands) |
|
Balance |
|
|
Percentage |
|
|
Rate (1) |
|
|||
Deposits |
|
$ |
2,083,335 |
|
|
|
87 |
% |
|
|
3.87 |
% |
Privately placed notes |
|
|
146,500 |
|
|
|
6 |
|
|
|
8.12 |
|
SBA debentures and borrowings |
|
|
85,000 |
|
|
|
4 |
|
|
|
3.98 |
|
Trust preferred securities |
|
|
33,000 |
|
|
|
1 |
|
|
|
6.12 |
|
Federal reserve and other borrowings |
|
|
50,000 |
|
|
|
2 |
|
|
|
3.75 |
|
Strategic partner collateral deposits |
|
|
6,081 |
|
|
* |
|
|
|
3.87 |
|
|
Total outstanding debt |
|
$ |
2,403,916 |
|
|
|
100 |
% |
|
|
4.16 |
% |
(*) Less than 1%.
52
Our contractual obligations expire on or mature at various dates through September 2037. The following table presents our contractual obligations at December 31, 2025.
|
|
Payments due by period |
|
|
|
|
||||||||||||||||||||||
(Dollars in thousands) |
|
Less than |
|
|
1 – 2 |
|
|
2 – 3 |
|
|
3 – 4 |
|
|
4 – 5 |
|
|
More than |
|
|
Total |
|
|||||||
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Deposits (1) |
|
$ |
682,132 |
|
|
$ |
576,313 |
|
|
$ |
424,188 |
|
|
$ |
169,783 |
|
|
$ |
230,919 |
|
|
$ |
— |
|
|
$ |
2,083,335 |
|
Privately placed notes (2) |
|
|
31,250 |
|
|
|
53,750 |
|
|
|
39,000 |
|
|
|
— |
|
|
|
— |
|
|
|
22,500 |
|
|
|
146,500 |
|
SBA debentures and borrowings (3) |
|
|
14,000 |
|
|
|
2,000 |
|
|
|
1,250 |
|
|
|
1,250 |
|
|
|
3,000 |
|
|
|
63,500 |
|
|
|
85,000 |
|
Trust preferred securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,000 |
|
|
|
33,000 |
|
Federal reserve and other borrowings |
|
|
50,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,000 |
|
Strategic partner collateral deposits |
|
|
6,081 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,081 |
|
Total outstanding borrowings |
|
|
783,463 |
|
|
|
632,063 |
|
|
|
464,438 |
|
|
|
171,033 |
|
|
|
233,919 |
|
|
|
119,000 |
|
|
|
2,403,916 |
|
Operating lease obligations |
|
|
2,546 |
|
|
|
1,340 |
|
|
|
756 |
|
|
|
777 |
|
|
|
797 |
|
|
|
2,070 |
|
|
|
8,286 |
|
Total contractual obligations |
|
$ |
786,009 |
|
|
$ |
633,403 |
|
|
$ |
465,194 |
|
|
$ |
171,810 |
|
|
$ |
234,716 |
|
|
$ |
121,070 |
|
|
$ |
2,412,202 |
|
Approximately $1.4 billion of our borrowings have maturity dates during the next two years, a majority of which are brokered certificates of deposits that have no right of voluntary withdrawal.
In addition, the illiquidity of portions of our loan portfolio and investments may adversely affect our ability to dispose of them at times when it may be advantageous for us to liquidate such portfolio or investments. In addition, if we were required to liquidate some or all of our portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net interest income.
We use a combination of long-term and short-term borrowings and equity capital to finance our lending and investing activities. Our long-term fixed-rate investments are financed primarily with fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. We have analyzed the potential impact of changes in interest rates on net interest income. Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2025 by $1.3 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $5.4 million at December 31, 2025. Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size, and composition of the assets on the balance sheet, and other business developments that could affect net income from operations in a particular quarter or for the year taken as a whole. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.
From time to time, we work with investment banking firms and other financial intermediaries to investigate the viability of several other financing options which include, among others, the sale or spinoff of certain assets or divisions, the development of a securitization conduit program, and other independent financing for certain subsidiaries or asset classes. These financing options would also provide additional sources of funds for both external expansion and continuation of internal growth.
53
The following table presents sources of available funds for us and each of our subsidiaries, and amounts outstanding under trust preferred securities and borrowings and their respective end of period weighted average interest rates at December 31, 2025. See Note 5 to the consolidated financial statements for additional information about each borrowing.
(Dollars in thousands) |
|
Medallion |
|
|
Medallion |
|
|
Medallion |
|
|
Freshstart Venture Capital Corp. |
|
|
Medallion |
|
|
December 31, |
|
|
December 31, |
|
|||||||
Cash, cash equivalents and federal funds sold |
|
$ |
20,002 |
|
|
$ |
515 |
|
|
$ |
31,597 |
|
(1) |
$ |
2,001 |
|
|
$ |
147,449 |
|
|
$ |
201,564 |
|
|
$ |
169,572 |
|
Trust preferred securities |
|
|
33,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,000 |
|
|
|
33,000 |
|
||||
Average interest rate |
|
|
6.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.12 |
% |
|
|
6.83 |
% |
||||
Maturity |
|
9/37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/37 |
|
|
9/37 |
|
|||||||
Privately placed notes (3) |
|
|
146,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,500 |
|
|
|
146,500 |
|
||||
Average interest rate |
|
|
8.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.12 |
% |
|
|
8.12 |
% |
||||
Maturity |
|
2/26 - 8/39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26 - 8/39 |
|
|
2/26 - 8/39 |
|
|||||||
SBA debentures & borrowings (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Amounts available |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
28,750 |
|
||||
Amounts outstanding |
|
|
|
|
|
|
|
|
85,000 |
|
|
|
|
|
|
|
|
|
85,000 |
|
|
|
70,250 |
|
||||
Average interest rate |
|
|
|
|
|
|
|
|
3.98 |
% |
|
|
|
|
|
|
|
|
3.98 |
% |
|
|
3.53 |
% |
||||
Maturity |
|
|
|
|
|
|
|
3/26 - 9/35 |
|
|
|
|
|
|
|
|
3/25- 3/34 |
|
|
3/25- 3/34 |
|
|||||||
Brokered certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,089,416 |
|
(2) |
|
2,089,416 |
|
|
|
2,094,663 |
|
||||
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.87 |
% |
|
|
3.87 |
% |
|
|
3.71 |
% |
||||
Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26 - 12/30 |
|
|
1/26 - 12/30 |
|
|
1/25 - 12/29 |
|
|||||||
Federal reserve and other borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
35,000 |
|
||||
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.75 |
% |
|
|
3.75 |
% |
|
|
4.50 |
% |
||||
Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||||||
Total cash |
|
$ |
20,002 |
|
|
$ |
515 |
|
|
$ |
31,597 |
|
|
$ |
2,001 |
|
|
$ |
147,449 |
|
|
$ |
201,564 |
|
|
$ |
169,572 |
|
Total debt outstanding |
|
$ |
179,500 |
|
|
$ |
— |
|
|
$ |
85,000 |
|
|
$ |
— |
|
|
$ |
2,139,416 |
|
|
$ |
2,403,916 |
|
|
$ |
2,379,413 |
|
Loan amortization, prepayments, and sales also provide a source of funding for us. Prepayments on loans are influenced significantly by general interest rates, taxi medallion loan market values, economic conditions, and competition.
54
We also generate liquidity through deposits generated at the Bank, the offering of privately placed notes, through our trust preferred securities, and through preferred securities at our subsidiaries and have utilized borrowing arrangements with other banks in the past, as well as from cash flow from operations. In addition, we may choose to participate out a greater portion of our loan portfolio to third parties. We regularly seek additional sources of liquidity; however, given current market conditions, there can be no assurance that we will be able to secure additional liquidity on terms favorable to us or at all. If that occurs, we may decline to underwrite lower yielding loans in order to conserve capital until credit conditions in the market become more favorable; or we may be required to dispose of assets when we would not otherwise do so, and at prices which may be below the net book value of such assets in order for us to repay indebtedness on a timely basis.
Recently Adopted Accounting Standards
In December 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-09, Income Taxes, or Topic 740: Improvements to Income Tax Disclosures. The main objective of this update is to improve financial reporting disclosure of incremental segment information on an annual and interim basis. The amendments in this update became effective for the annual periods beginning after December 15, 2024. We adopted the amended tax presentation pursuant to this ASU in our financial statements for the year ended December 31, 2025. This ASU did not have a material change to the presentation of income tax expense in the Statement of Operations.
Recently Issued Accounting Standards
In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income – Expense Disaggregation of Income Statement Expenses. This update requires additional disaggregation of specific types of expenses within the notes to consolidated financial statements on an annual and interim basis. In January 2025, the FASB issued ASU 2025-01 to clarify that all public business entities are required to adopt ASU 2024-03 for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are assessing the impact of the update on the accompanying financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our business activities contain elements of risk. We consider the principal types of risk to be fluctuations in interest rates and portfolio valuations. We consider the management of risk essential to conducting our businesses. Accordingly, our risk management systems and procedures are designed to identify and analyze our risks, to set appropriate policies and limits, and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.
In addition, the illiquidity of portions of our loan portfolio and investments may adversely affect our ability to dispose of them at times when it may be advantageous for us to liquidate such portfolio or investments. In addition, if we were required to liquidate some or all of our portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net interest income. We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with long-term fixed-rate debt, and to a lesser extent by floating-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. We have analyzed the potential impact of changes in interest rates on net interest income. Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2025 by $1.3 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $5.4 million at December 31, 2025. Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size, and composition of the assets on the balance sheet, and other business developments that could affect net income from operations in a particular quarter or for the year taken as a whole. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.
55
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements set forth under Item 15 (A) (1) in this Annual Report on Form 10-K, which financial statements are incorporated herein by reference in response to this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a—15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, and have concluded that they are effective as of December 31, 2025 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
56
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework (2013). Based on its assessment and those criteria, management believes that we maintained effective internal control over financial reporting as of December 31, 2025.
We believe that the consolidated financial statements included in this report fairly represent our consolidated financial position and consolidated results of operations for all periods presented.
Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated our internal control over financial reporting to determine whether any changes occurred during the 2025 fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, and have concluded that there have been no changes that occurred during the 2025 fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
57
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Medallion Financial Corp.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting as of December 31, 2025 of Medallion Financial Corp. (the “Company”), based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in the COSO framework.
We also have audited the accompanying consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”), in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our report dated March 10, 2026, expresses an unqualified opinion.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Plante & Moran, PLLC
We have served as the Company’s auditor since 2024.
Chicago, Illinois
March 10, 2026
58
ITEM 9B. OTHER INFORMATION
None of our directors or officers
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2026 for our 2026 Annual Meeting of Shareholders under the captions “Proposal No. 1 Election of Class III Directors", “Our Directors and Executive Officers", “Corporate Governance”, and "Executive Compensation".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2026 for our 2026 Annual Meeting of Shareholders under the captions “Corporate Governance”, “Executive Compensation”, "Director Compensation", and “Compensation Committee Interlocks and Insider Participation.”
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2026 for our 2026 Annual Meeting of Shareholders under the captions “Stock Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”
Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2026 for our 2026 Annual Meeting of Shareholders under the captions “Certain Relationships and Related Party Transactions”, “Our Directors and Executive Officers,” and “Corporate Governance.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2026 for our 2026 Annual Meeting of Shareholders under the caption “Principal Accountant Fees and Services.”
59
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) 1. FINANCIAL STATEMENTS
The consolidated financial statements of Medallion Financial Corp. and the Report of Independent Public Accountants thereon are included as set forth on the Index to Financial Statements on F-1.
2. FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statements on F-1.
3. EXHIBITS
3.1(a) |
Restated Medallion Financial Corp. Certificate of Incorporation. Filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (File No. 000-27812) and incorporated by reference herein. |
3.1(b) |
Amendment to Restated Certificate of Incorporation. Filed as Exhibit 3.1.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 (File No. 000-27812) and incorporated by reference herein. |
3.2 |
Fourth Amended and Restated By-Laws of Medallion Financial Corp., as amended and restated as of October 24, 2025. Filed as Exhibit 3.1 to the Current Report on Form 8-K filed on October 28, 2025 (File No. 001-37747) and incorporated by reference herein. |
4.1 |
Description of Registered Securities of Medallion Financial Corp. Filed as Exhibit 4.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No. 001-37747) and incorporated by reference herein. |
4.2 |
Fixed/Floating Rate Junior Subordinated Note, dated June 7, 2007, by Medallion Financial Corp., in favor of Medallion Financing Trust I. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on June 11, 2007 (File No. 814-00188) and incorporated by reference herein. |
4.3 |
Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on December 23, 2020 (File No. 001-37747) and incorporated by reference herein. |
4.4 |
Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on March 1, 2021 (File No. 001-37747) and incorporated by reference herein. |
4.5 |
Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on October 2, 2023 (File No. 001-37747) and incorporated by reference herein. |
4.6 |
Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on June 25, 2024 (File No. 001-37747) and incorporated by reference herein. |
10.1 |
First Amended and Restated Employment Agreement, between Medallion Financial Corp. and Alvin Murstein dated May 29, 1998. Filed as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 814-00188) and incorporated by reference herein.* |
10.2 |
Amendment No. 1 to First Amended and Restated Employment Agreement, dated and effective as of April 27, 2017, by and between Medallion Financial Corp. and Alvin Murstein. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on May 3, 2017 (File No. 814-00188) and incorporated by reference herein.* |
10.3 |
Amendment No. 2 to First Amended and Restated Employment Agreement, dated and effective as of December 22, 2017, by and between Medallion Financial Corp. and Alvin Murstein. Filed as Exhibit 10.3 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 814-00188) and incorporated by reference herein.* |
10.4 |
Amendment No. 3 to First Amended and Restated Employment Agreement, dated and effective as of October 24, 2025, by and between Medallion Financial Corp. and Alvin Murstein. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on October 28, 2025 (File No. 001-37747) and incorporated by reference herein.* |
10.5 |
First Amended and Restated Employment Agreement, between Medallion Financial Corp. and Andrew Murstein dated May 29, 1998. Filed as Exhibit 10.20 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 814-00188) and incorporated by reference herein.* |
10.6 |
Amendment No. 1 to First Amended and Restated Employment Agreement, dated and effective as of April 27, 2017, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.2 to the Current Report on Form 8-K filed on May 3, 2017 (File No. 814-00188) and incorporated by reference herein.* |
60
10.7 |
Amendment No. 2 to First Amended and Restated Employment Agreement, dated and effective as of December 22, 2017, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.6 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 814-00188) and incorporated by reference herein.* |
10.8 |
Amendment No. 3 to First Amended and Restated Employment Agreement, dated April 27, 2023, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (File No. 001-37747) and incorporated by reference herein.* |
10.9 |
Amendment No. 4 to First Amended and Restated Employment Agreement, dated and effective as of October 24, 2025, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.2 to the Current Report on Form 8-K filed on October 28, 2025 (File No. 001-37747) and incorporated by reference herein.* |
10.10 |
Employment Agreement, dated June 27, 2016, between Donald Poulton, Medallion Financial Corp. and Medallion Bank. Filed as Exhibit 10.2 to the Current Report on Form 8-K filed on June 30, 2016 (File No. 814-00188) and incorporated by reference herein.* |
10.11 |
Amendment No. 1 to Employment Agreement, dated and effective as of January 12, 2026 by and between Donald Poulton, Medallion Financial Corp. and Medallion Bank. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 12, 2026 (File No. 001-37747) and incorporated by reference herein.* |
10.12 |
Amended and Restated Employment Agreement, dated June 13, 2022, by and between Anthony N. Cutrone and Medallion Financial Corp. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 15, 2022 (File No. 001-37747) and incorporated by reference herein.* |
10.13 |
Second Amended and Restated Employment Agreement, dated and effective as of January 12, 2026, by and between David Justin Haley, Medallion Financial Corp. and Medallion Bank. Filed as Exhibit 10.2 to the Current Report on Form 8-K filed on January 12, 2026 (File No. 001-37747) and incorporated by reference herein.* |
10.14 |
First Amended and Restated 2006 Non-Employee Director Stock Option Plan. Filed as Exhibit B to Amendment No. 3 to Form 40-APP filed on June 18, 2012 (File No. 812-13666) and incorporated by reference herein.* |
10.15 |
2015 Non-Employee Director Stock Option Plan. Filed as Exhibit B to Amendment No. 2 to Form 40-APP filed on January 14, 2016 (File No. 812-14458) and incorporated by reference herein.* |
10.16 |
2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2018 Annual Meeting of Shareholders filed on April 30, 2018 (File No. 001-37747) and incorporated by reference herein.* |
10.17 |
Amendment to Medallion Financial Corp. 2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2020 Annual Meeting of Shareholders filed on April 28, 2020 (File No. 001-37747) and incorporated by reference herein.* |
10.18 |
Amendment No. 2 to Medallion Financial Corp. 2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2022 Annual Meeting of Shareholders filed on May 2, 2022 (File No. 001-37747) and incorporated by reference herein.* |
10.19 |
Amendment No. 3 to Medallion Financial Corp. 2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2025 Annual Meeting of Shareholders filed on April 30, 2025 (File No. 001-37747) and incorporated by reference herein.* |
10.20 |
Medallion Financial Corp. Annual Short Term Incentive Plan, adopted by the Board of Directors on June 1, 2022. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 7, 2022 (File No. 001-37747) and incorporated by reference herein.* |
10.21 |
Form of Performance Stock Unit Notice and Agreement. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 (File No. 001-37747) and incorporated by reference herein.* |
10.22 |
Junior Subordinated Indenture, dated as of June 7, 2007, between Medallion Financing Trust I and Wilmington Trust Company as trustee. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 11, 2007 (File No. 814-00188) and incorporated by reference herein. |
10.23 |
Purchase Agreement, dated as of June 7, 2007, among Medallion Financial Corp., Medallion Financing Trust I, and Merrill Lynch International. Filed as Exhibit 10.3 to the Current Report on Form 8-K filed on June 11, 2007 (File No. 814-00188) and incorporated by reference herein. |
61
10.24 |
Cooperation Agreement, dated as of May 1, 2022, by and among Medallion Financial Corp., KORR Value L.P., KORR Acquisitions Group, Inc., Kenneth Orr, David Orr, and Jonathan Orr. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on May 2, 2022 (File No. 001-37747) and incorporated by reference herein. |
10.25 |
Amendment to Cooperation Agreement, dated as of August 10, 2022, by and among Medallion Financial Corp., KORR Value L.P., KORR Acquisitions Group, Inc., Kenneth Orr, David Orr, and Jonathan Orr. Filed as Exhibit 10.2 to the Current Report on Form 8-K/A filed on August 11, 2022 (File No. 001-37747) and incorporated by reference herein. |
10.26 |
Amendment 2 to Cooperation Agreement, dated as of November 1, 2024, by and among Medallion Financial Corp., KORR Value L.P., KORR Acquisitions Group, Inc., Kenneth Orr, David Orr, and Jonathan Orr. Filed as Exhibit 10.3 to the Current Report on Form 8-K/A filed on November 4, 2024 (File No. 001-37747) and incorporated by reference herein. |
19.1 |
Medallion Financial Corp. Code of Ethical Conduct and Insider Trading Policy. Filed as Exhibit 10.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (File No. 001-37747) and incorporated by reference herein. |
21.1 |
List of Subsidiaries of Medallion Financial Corp. Filed herewith. |
23.1 |
Consent of Plante & Moran, PLLC, independent registered public accounting firm, related to reports on financial statements of Medallion Financial Corp. Filed herewith. |
23.2 |
Consent of Mazars USA LLP, independent registered public accounting firm, related to reports on financial statements of Medallion Financial Corp. Filed herewith. |
31.1 |
Certification of Andrew M. Murstein pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
31.2 |
Certification of Anthony N. Cutrone pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
32.1 |
Certification of Andrew M. Murstein pursuant to 18 USC. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
32.2 |
Certification of Anthony N. Cutrone pursuant to 18 USC. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
97.1 |
Medallion Financial Corp. Amended and Restated Compensation Recoupment Policy. Filed as Exhibit 97.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (File No. 001-37747) and incorporated by reference herein. |
101.INS |
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this Annual Report on Form 10-K.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange of Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MEDALLION FINANCIAL CORP.
Date: |
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March 10, 2026 |
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By: |
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/s/ Andrew M. Murstein |
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Andrew M. Murstein |
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President, Chief Executive Officer, and Chief Operating Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures |
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Title |
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Date |
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President, Chief Executive Officer, Chief Operating Officer, and Director (Principal Executive Officer) |
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/s/ Andrew M. Murstein |
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March 10, 2026 |
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Andrew M. Murstein |
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/s/ Anthony N. Cutrone |
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Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
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March 10, 2026 |
Anthony N. Cutrone |
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/s/ Alvin Murstein |
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Executive Chairman of the Board of Directors |
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March 10, 2026 |
Alvin Murstein |
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/s/ John Everets |
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Director |
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March 10, 2026 |
John Everets |
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/s/ Cynthia Hallenbeck |
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Director |
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March 10, 2026 |
Cynthia Hallenbeck |
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/s/ Brent O. Hatch |
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Director |
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March 10, 2026 |
Brent O. Hatch |
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/s/ Robert M. Meyer |
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Director |
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March 10, 2026 |
Robert M. Meyer |
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/s/ David L. Rudnick |
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Director |
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March 10, 2026 |
David L. Rudnick |
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/s/ Allan J. Tanenbaum |
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Director |
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March 10, 2026 |
Allan J. Tanenbaum |
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63
MEDALLION FINANCIAL CORP.
INDEX TO FINANCIAL STATEMENTS
|
Page |
Report of Independent Registered Public Accounting Firm ( USA LLP, New York, NY, PCAOB ID 339)) |
F-2 |
Consolidated Balance Sheets as of December 31, 2025 and 2024 |
F-6 |
Consolidated Statements of Operations for the Years Ended December 31, 2025, 2024, and 2023 |
F-7 |
Consolidated Statements of Other Comprehensive Income for the Years Ended December 31, 2025, 2024, and 2023 |
F-8 |
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2025, 2024, and 2023 |
F-9 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024, and 2023 |
F-10 |
Notes to Consolidated Financial Statements |
F-11 |
F-1
Report of Independent Registered Public Accounting Firm
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Medallion Financial Corp. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited the Company’s internal control over financial reporting as of December 31, 2025, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our report dated March 10, 2026 expresses an unqualified opinion.
Basis for Opinion
The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses - Refer to Notes 2 and 4 to the Financial Statements
Critical Audit Matter Description
The Company has established an allowance for credit losses (the “ACL”) to recognize estimated credit losses over the lives of loans. The Company has segregated its ACL into four segments, (1) recreation, (2) home improvement, (3) commercial, and (4) taxi medallion. The ACL related to recreation, home improvement, and commercial loans is material to the consolidated financial statements. Recreation and home improvement loans are considered consumer loans whereby homogeneous pools of loans are reviewed for impairment collectively. The Company’s quantitative model for consumer loans uses historical loss rates and current delinquency characteristics and is adjusted for macroeconomic forecasts for the foreseeable future. The Company evaluates the output of the quantitative model in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers’ ability to repay, estimated value of underlying collateral, prevailing economic conditions, and excess concentration risk and applies a qualitative adjustment, if warranted. For commercial loans, the ACL is estimated by determining the fair value of the borrowers’ equity interests securing the loan.
F-2
Significant judgment was required by management in the selection and application of the ACL, specifically those related to the consumer and commercial loan segments. Accordingly, performing audit procedures to evaluate the Company’s estimated ACL involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the Company’s estimate of the ACL included, but were not limited to, the following:
Goodwill - Refer to Note 2 to the Financial Statements
Critical Audit Matter Description
The Company used a combination of a weighted income valuation methodology, comprising a discounted cash flow analysis, and a market valuation methodology to determine the fair value of the reporting units. The discounted cash flow analysis included the use of assumptions, such as multiyear cash flow projections that rely on internal forecasts and discount rate. The market approach considers a combination of price to book value and price to earnings, adjusted based on peer data for companies similar to the reporting units. Auditing management’s impairment test of goodwill was complex and highly judgmental due to the significant measurement uncertainty in determining the fair value of the reporting units. In particular, the fair value estimates of the reporting units were sensitive to changes in significant assumptions, including discount rates, projected balance sheet growth, the selection of comparable company multiples, and the weighting of outcomes of the income- and market-based methods. All of these assumptions are affected by expected future market or economic conditions.
F-3
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the Company’s goodwill impairment assessment included, but were not limited to, the following:
/s/ Plante & Moran, PLLC
We have served as the Company’s auditor since 2024.
Chicago, Illinois
March 10, 2026
F-4
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Mazars USA LLP 135 West 50th Street New York, New York 10020 Tel: 212.812.7000 www.mazars.us |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Medallion Financial Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of operations, other comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2023 for Medallion Financial Corp. and subsidiaries (collectively, the “Company”) and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
PCAOB ID
We served as the Company’s auditor from 2005 to 2024.
March 7, 2024
F-5
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
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December 31, |
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(Dollars in thousands, except share and per share data) |
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2025 |
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2024 |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Federal funds sold |
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Investment securities |
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Equity investments |
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Loans held for sale, at lower of amortized cost or fair value |
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Loans |
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Allowance for credit losses |
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( |
) |
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( |
) |
Net loans |
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Goodwill |
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Intangible assets, net |
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Property, equipment, and right-of-use lease asset, net |
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Accrued interest receivable |
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Loan collateral in process of foreclosure |
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Income tax receivable |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Deposits (1) |
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$ |
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$ |
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Long-term debt (2) |
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Short-term debt |
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Deferred tax liabilities, net (3) |
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Operating lease liabilities |
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Accrued interest payable |
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Income tax payable |
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Accounts payable and accrued expenses (4) |
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Total liabilities |
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(5) |
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Stockholders’ equity |
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Preferred stock ( |
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Common stock ( |
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Additional paid in capital |
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Treasury stock ( |
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( |
) |
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( |
) |
Accumulated other comprehensive income (loss) |
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( |
) |
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( |
) |
Retained earnings |
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Total stockholders’ equity |
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Non-controlling interest in consolidated subsidiaries |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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Number of shares outstanding |
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Book value per share |
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$ |
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$ |
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The accompanying notes should be read in conjunction with these consolidated financial statements.
F-6
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
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Year Ended December 31, |
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(Dollars in thousands, except share and per share data) |
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2025 |
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2024 |
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2023 |
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Interest and fees on loans |
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$ |
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$ |
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$ |
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Non-loan interest and dividend income |
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Total interest income |
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Interest on deposits |
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Interest on long-term debt |
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|
|
|||
Interest on short-term borrowings |
|
|
|
|
|
|
|
|
|
|||
Total interest expense (1) |
|
|
|
|
|
|
|
|
|
|||
Net interest income |
|
|
|
|
|
|
|
|
|
|||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|||
Net interest income after provision for credit losses |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
|
|
|
|
|||
Gain on equity investments, net |
|
|
|
|
|
|
|
|
|
|||
Gain on taxi medallion assets, net |
|
|
|
|
|
|
|
|
|
|||
Strategic partnership fees |
|
|
|
|
|
|
|
|
|
|||
Gain on sale of recreation loans held for sale |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
|
|
|
|
|||
Total other income, net |
|
|
|
|
|
|
|
|
|
|||
Other expenses |
|
|
|
|
|
|
|
|
|
|||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|||
Loan servicing fees |
|
|
|
|
|
|
|
|
|
|||
Collection costs |
|
|
|
|
|
|
|
|
|
|||
Regulatory fees |
|
|
|
|
|
|
|
|
|
|||
Professional fee costs (benefits), net |
|
|
|
|
|
( |
) |
|
|
|
||
Rent expense |
|
|
|
|
|
|
|
|
|
|||
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
|||
Penalties |
|
|
|
|
|
|
|
|
|
|||
Other expenses |
|
|
|
|
|
|
|
|
|
|||
Total other expenses |
|
|
|
|
|
|
|
|
|
|||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
|
|
|
|
|
|
|
|
|||
Net income after taxes |
|
|
|
|
|
|
|
|
|
|||
Less: income attributable to the non-controlling interest |
|
|
|
|
|
|
|
|
|
|||
Less: redemption of Series F preferred stock - funds paid in excess of carrying value |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to Medallion Financial Corp. |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Basic earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Diluted earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
The accompanying notes should be read in conjunction with these consolidated financial statements.
F-7
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net income after taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Change in unrealized gains (losses) on investment securities |
|
|
|
|
|
|
|
|
( |
) |
||
Tax effect on unrealized (losses) gains on investments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Less: comprehensive income attributable to the non-controlling interest |
|
|
|
|
|
|
|
|
|
|||
Less: redemption of Series F preferred stock - funds paid in excess of carrying value |
|
|
|
|
|
|
|
|
|
|||
Total comprehensive income attributable to Medallion Financial Corp. |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes should be read in conjunction with these consolidated financial statements.
F-8
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands) |
|
Common |
|
|
Common |
|
|
Additional |
|
|
Treasury |
|
|
Treasury |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|
Non- |
|
|
Total |
|
||||||||||
Balance at December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Adoption of ASU 2016-13, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at January 1, 2023 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Distributions to non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Withheld restricted stock for employees' tax obligation |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of restricted stock, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock, net |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance in connection with vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Dividends paid on common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income (loss), net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Distributions to non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Exercise of stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Withheld restricted stock for employees' tax obligation |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of restricted stock, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock, net |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance in connection with vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Purchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends paid on common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income (loss), net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Distributions to non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Non-controlling interest equity raised by Medallion Bank |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Non-controlling interest redemption at Medallion Bank |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Withheld restricted stock for employees' tax obligation |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of restricted stock, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock, net |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance in connection with vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Purchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends paid on common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income (loss), net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The accompanying notes should be read in conjunction with these consolidated financial statements.
F-9
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net income resulting from operations to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|||
Proceeds from sales of strategic partnership loans held for sale |
|
|
|
|
|
|
|
|
|
|||
Origination of loans held for sale |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on sale of recreation loans held for sale |
|
|
( |
) |
|
|
|
|
|
|
||
Paid-in-kind interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Amortization of origination fees, net |
|
|
|
|
|
|
|
|
|
|||
Increase (decrease) in deferred and other tax liabilities, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net change in value of loan collateral in process of foreclosure |
|
|
|
|
|
|
|
|
|
|||
Net gains on equity investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|||
Increase in accrued interest receivable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Increase in other assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
(Increase) decrease in accounts payable and accrued expenses |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Decrease (increase) in accrued interest payable |
|
|
( |
) |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Loans originated |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from principal receipts, sales, maturities, and recoveries of loans |
|
|
|
|
|
|
|
|
|
|||
Purchases of investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from principal receipts, sales, and maturities of investments |
|
|
|
|
|
|
|
|
|
|||
Proceeds from the sale and principal payments on loan collateral in process of foreclosure |
|
|
|
|
|
|
|
|
|
|||
Net cash used for investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Proceeds from time deposits and funds borrowed |
|
|
|
|
|
|
|
|
|
|||
Repayments of time deposits and funds borrowed |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Non-controlling interest equity raised by Medallion Bank |
|
|
|
|
|
|
|
|
|
|||
Non-controlling interest redemption at Medallion Bank |
|
|
( |
) |
|
|
|
|
|
|
||
Cash dividends paid on common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions to non-controlling interests |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payment of withholding taxes on net settlement of vested stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Treasury stock repurchased |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
|
|
|
|
|
|
|||
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, beginning of period (1) |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, end of period (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
|
|
|||
Cash paid during the period for interest |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash paid during the period for income taxes |
|
|
|
|
|
|
|
|
|
|||
NON-CASH INVESTING |
|
|
|
|
|
|
|
|
|
|||
Transfer of loans (from) to loans held for sale |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
Loans transferred to loan collateral in process of foreclosure, net |
|
|
|
|
|
|
|
|
|
|||
The accompanying notes should be read in conjunction with these consolidated financial statements.
F-10
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(1) ORGANIZATION OF MEDALLION FINANCIAL CORP. AND ITS SUBSIDIARIES
Medallion Financial Corp., or the Company, is a specialty finance company organized as a Delaware corporation that reports as a bank holding company, but is not a bank holding company for regulatory purposes. The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Bank, or the Bank, a Federal Deposit Insurance Corporation, or FDIC, insured industrial bank that originates consumer loans, raises deposits, and conducts other banking activities. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies, and undergoes examinations by those agencies. The Bank was formed in May 2002 for the purpose of obtaining an industrial bank charter pursuant to the laws of the State of Utah. The Bank originates consumer loans on a national basis for the purchase of recreational vehicles, or RVs, boats, collector cars, and other consumer recreational equipment and to finance home improvements such as roofs, swimming pools, roofs, and windows. The loans are financed primarily with time certificates of deposit which are originated nationally through a variety of brokered deposit relationships.
The Company also conducts business through its subsidiaries Medallion Capital, Inc., or Medallion Capital, a Small Business Investment Company, or SBIC, which conducts a mezzanine financing business; Medallion Funding LLC, or MFC, an SBIC, which historically was the Company's primary taxi medallion lending company; and Freshstart Venture Capital Corp., or Freshstart, which historically originated and serviced taxi medallion and commercial loans, Medallion Capital, and MFC, as SBICs, are regulated by the Small Business Administration, or SBA. Medallion Capital is financed in part by the SBA.
The Company established a wholly-owned subsidiary, Medallion Financing Trust I, or Fin Trust, for the purpose of issuing unsecured trust preferred securities to investors. Fin Trust is a separate legal and corporate entity with its own creditors who, in any liquidation of Fin Trust, will be entitled to be satisfied out of Fin Trust’s assets prior to any value in Fin Trust becoming available to Fin Trust’s equity holders. The assets of Fin Trust, aggregating $
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the U.S., or GAAP, requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties. All of these estimates reflect management’s best judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions change, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of goodwill and intangible assets, and allowance for credit losses, among other effects.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and all of its wholly-owned and controlled subsidiaries. All significant intercompany transactions, balances, and profits (losses) have been eliminated in consolidation.
The consolidated financial statements have been prepared in accordance with GAAP. The Company consolidates all entities it controls through a majority voting interest, a controlling interest through other contractual rights, or as being identified as the primary beneficiary of variable interest entities, or VIEs. The primary beneficiary is the party who has both (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and (2) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third-party’s holding is recorded as non-controlling interest.
F-11
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original purchased maturity of three months or less, federal funds sold, interest-bearing deposits in other banks, and money market mutual funds to be cash equivalents. A non-interest-bearing compensating balance of $
Fair Value of Assets and Liabilities
The Company follows the Financial Accounting Standards Board, or FASB, FASB Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, or FASB ASC 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 defines fair value as an exit price (i.e. a price that would be received to sell, as opposed to acquire, an asset or transfer a liability), and emphasizes that fair value is a market-based measurement. It establishes a fair value hierarchy that distinguishes between assumptions developed based on market data obtained from independent external sources and the reporting entity’s own assumptions. Further, it specifies that fair value measurement should consider adjustment for risk, such as the risk inherent in the valuation technique or its inputs. See also Notes 13 and 14 to the consolidated financial statements.
Equity Investments
The Company follows FASB ASC Topic 321, Investments – Equity Securities, or ASC 321, which requires all applicable investments in equity securities with a readily determinable fair value to be valued as such, and those without a readily determinable fair value, are measured at cost, less any impairment plus or minus any observable price changes. Equity investments of $
During 2021, the Company purchased $
Investment Securities
The Company follows FASB ASC Topic 320, Investments – Debt Securities, or ASC 320, which requires that all applicable investments in debt securities be classified as trading securities, available-for-sale securities, or held-to-maturity securities. Investment securities are purchased from time-to-time in the open market at prices that are greater or lesser than the par value of the investment. The resulting premium or discount is deferred and recognized using the interest method. ASC 320 further requires that held-to-maturity securities be reported at amortized cost and available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings at the date of the consolidated financial statements, and reported in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity, net of the effect of income taxes, until they are sold. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results and any amounts previously included in stockholders’ equity, which were recorded net of the income tax effect, will be reversed. In accordance with ASC 326, the Company does not maintain an allowance for credit losses for accrued interest receivable.
For available-for-sale debt securities in an unrealized loss position, the Company first determines if it intends to sell the security, or if it is more likely than not that the Company will be required to sell it before recovering its amortized cost basis. If either condition is met, the security’s amortized cost basis is written down to its fair value through earnings. If neither condition is met, the Company assesses whether the decline in fair value is the result of credit losses or other factors. This assessment includes reviewing changes in the rating of the security by a rating agency, increases in defaults on the underlying collateral, and the extent to which the securities are issued by the federal government or its agencies, including the amount of the guarantee issued by those agencies, among other factors. If a credit loss exists, the Company compares the present value of expected cash flows from the security to its amortized cost basis. If the present value is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded through earnings, but limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment not recorded through an allowance for credit losses is recognized in other comprehensive (loss) income, net of taxes.
F-12
Changes in the allowance for credit losses are recorded as a provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management confirms the uncollectibility of an available-for-sale debt security or when either of the criteria regarding intent or requirement to sell is met. There were
Loans
The Company’s loans, classified as held for investment, are currently reported at amortized cost, which is the principal amount outstanding, inclusive of loan origination costs, which primarily includes deferred costs paid to loan originators, and which are amortized to interest income over the life of the loan.
Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. As of December 31, 2025 and 2024, net loan origination costs were $
Interest income is recorded on the accrual basis. The consumer loan portfolio is typified by a larger number of smaller dollar loans that have similar characteristics. A loan is nonperforming when based on current information and events, it is unlikely the Company will be able to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be nonperforming. Loans are considered past due when a borrower fails to make a full payment by the payment due date or maturity date. Consumer loans are placed on nonaccrual when they become 90 days past due, and are charged-off in their entirety when deemed uncollectible, if they enter bankruptcy, or when they become 120 days past due, whichever occurs first. The Company takes appropriate recovery efforts against both the borrower and the underlying collateral are initiated for nonaccrual loans. For the recreation loan portfolio, the process to repossess the collateral is generally started at 60 days past due. If the collateral is not located and the account reaches 120 days delinquent, the account is charged-off. If the collateral is repossessed, a loss is recorded by writing the collateral down to its fair value less selling costs, and the collateral is sent to auction. When the collateral is sold, the net auction proceeds are applied to the account, and any remaining balance is written off. Proceeds collected on charged-off accounts are recorded as recoveries. Commercial loans and taxi medallion loans are placed on nonaccrual status, and all uncollected accrued interest is reversed, when there is doubt as to the collectability of interest or principal, or if loans are 90 days or more past due, unless management has determined that they are both well-secured and in the process of collection. Interest income on nonaccrual loans is generally recognized when cash is received, unless a determination has been made to apply all cash receipts to principal.
The Company may modify the contractual cash flow of loans in situations where borrowers are experiencing financial difficulties. The Company strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before they reach nonaccrual status. These modified terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance and other actions intended to minimize the economic loss to the Company and to avoid foreclosure or repossession of the collateral. For modifications where the Company forgives principal, the entire amount of such principal forgiveness is immediately charged off.
Loan collateral in process of foreclosure primarily includes taxi medallion loans that have reached 120 days past due and have been charged down to the net realizable value of the underlying collateral, in addition to consumer repossessed collateral in the process of being sold. For New York City taxi medallion loans in the process of foreclosure, the Company continued to utilize a net value of $
Loans Held for Sale
Loans held for sale consist of consumer loans and strategic partnership loans intended to be sold in the secondary market. Loans held for sale are recorded at the lower of amortized cost or fair value. Changes in fair value are recognized in non-interest income. For loans transferred into the held for sale classification from the held for investment classification, any allowance for credit losses previously recorded is reversed at the transfer date, and the loans are transferred at their amortized cost basis (which is reduced by any previous charge-offs, but excludes any allowance for credit losses). For the years ended December 31, 2025 and 2024, the Company did
F-13
Allowance for Credit Losses
The Company follows Accounting Standards Update, or ASU, 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", or ASC 326, which requires recognition of lifetime expected losses using "reasonable and supportable" expectations about the future, referred to as the current expected credit loss, or CECL, methodology. For consumer loans, the Company uses historical delinquent loan performance, qualitative adjustments, and actual loss rates modified by quantitative adjustments based on macroeconomic factors over a twelve-month reasonable and supportable forecast period followed by a six month reversion period. For commercial loans, the Company assesses the historical impact that macroeconomic indicators have had on the loan portfolio, to determine an approximate allowance for credit loss. Unlike consumer loans, where loans may have similar performing characteristics, each commercial loan is unique. The Company evaluates each commercial loan for specific impairment with additional allowance for credit losses recognized as necessary. For taxi medallion loans, the Company individually evaluates each loan and establishes a reserve based on fair value of collateral less cost to sell.
The allowance is evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation is inherently subjective, as it requires estimates, including those based on changes in economic conditions, that are susceptible to significant revision as more information becomes available. Credit losses are deducted from the allowance, and subsequent recoveries are added back to the allowance. The Company has elected to exclude accrued interest from its measurement of the allowance for credit losses.
Goodwill and Intangible Assets
Goodwill assets arose as a result of the excess of fair value over book value for several of our previously unconsolidated portfolio investment companies as of April 2, 2018. This fair value was brought forward under the Company's requirement to consolidate these previously unconsolidated subsidiaries and was subject to a purchase price accounting allocation process conducted by an independent third-party expert to arrive at the current categories and amounts. Goodwill is not amortized, but is subject to quarterly review by management to determine whether additional impairment testing is needed, and such testing is performed at least on an annual basis.
Through December 31, 2024, the Company evaluated goodwill for impairment on an annual basis at December 31 of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. On October 1, 2025, the Company changed its annual goodwill impairment testing date from December 31 to October 1 to better align with the timing of its annual long-term planning process. This change was not material to the consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge.
Other intangible assets with finite useful lives are amortized either on an accelerated or straight-line basis over their estimated useful lives. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
As of December 31, 2025 and 2024, the Company had goodwill of $
Management engaged an independent third-party expert to perform a quantitative assessment of goodwill for impairment at October 1, 2025. The third-party expert’s assessment determined that it was more likely than not that the fair value of both the recreation lending and home improvement lending segments individually were not less than the carrying value of each of these segments. Based upon inputs and analysis deemed appropriate by the third-party expert, the third-party expert concluded that a fair value premium existed in excess of carrying value with respect to the recreation and home improvement lending segments.
In evaluating both segments, a combination of an income approach (weighted
F-14
Determining the fair value of a lending segment or an indefinite-lived intangible asset involves the use of significant estimates and assumptions. The Company believes that the fair value estimates determined by the third-party expert were based on reasonable assumptions and appropriate for the purpose of assessing goodwill for impairment. However, as these estimates and assumptions are unpredictable and inherently uncertain, actual future results may differ from these estimates. In addition, the Company also makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of the Company’s reporting units. To the extent that the Company was unable to grow either the recreation lending or home improvement lending segment at the levels forecasted, if the Company were unable to issue new consumer loans at rates and terms consistent with current practices, and if the Company's cost of borrowings were to increase significantly from current levels without the ability to pass along those rate increases to new borrowers, the fair value of these segments could deteriorate to a level which would require an impairment of goodwill.
The table below presents the intangible assets as of the dates presented:
|
|
December 31, |
|
|||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
||
Brand-related intellectual property |
|
$ |
|
|
$ |
|
||
Home improvement contractor relationships |
|
|
|
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
|
||
Fixed Assets
Fixed assets are carried at cost less accumulated depreciation and amortization, and are depreciated on a straight-line basis over their estimated useful lives of
Deferred Costs
Deferred financing costs represent costs associated with obtaining the Company’s borrowing facilities, and are amortized on a straight line basis over the lives of the related financing agreements and life of the respective pool. Amortization expense, included as interest expense in the Consolidated Statements of Operations, was $
Income Taxes
Income taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes, or ASC 740. Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at the enacted tax rates expected to apply in the year when taxes are actually paid or recovered. Deferred tax assets are also recorded for net operating losses, capital losses and any tax credit carryforwards. A valuation allowance is provided against a deferred tax asset when it is more likely than not that some or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether a valuation allowance for deferred tax assets is needed. Items considered in determining the Company’s valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods and the expected timing of the reversal of temporary differences. The Company recognizes tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. The Company records income tax related interest and penalties, if applicable, within current income tax expense.
F-15
Earnings Per Share (EPS)
Basic earnings per share are computed by dividing net income resulting from operations available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if option contracts to issue common stock were exercised, or if restricted stock vests, and has been computed after considering the weighted average dilutive effect of the Company’s stock options and restricted stock. The Company uses the treasury stock method to calculate diluted EPS, which is a method of recognizing the use of proceeds that could be obtained upon exercise of options and warrants, including unvested compensation expense related to the shares, in computing diluted EPS. It assumes that any proceeds would be used to purchase common stock at the average market price during the period.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands, except share and per share data) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net income attributable to common stockholders |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average common shares outstanding applicable to basic EPS |
|
|
|
|
|
|
|
|
|
|||
Effect of restricted stock grants |
|
|
|
|
|
|
|
|
|
|||
Effect of dilutive stock options |
|
|
|
|
|
|
|
|
|
|||
Effect of performance stock unit grants |
|
|
|
|
|
|
|
|
|
|||
Adjusted weighted average common shares outstanding applicable to diluted EPS |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Basic earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|||
Potentially dilutive common shares excluded from the above calculations aggregated
Stock Compensation
The Company follows FASB ASC Topic 718, or ASC 718, Compensation – Stock Compensation, for its equity incentive, stock option, and restricted stock plans, and accordingly, the Company recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options are reflected in net income resulting from operations for any new grants using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option. Stock-based employee compensation costs pertaining to restricted stock and performance stock units, or PSUs, are reflected in net income resulting from operations for any new grants using the grant date fair value of the shares and units granted, expensed over the vesting period of the underlying stock.
Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the bank regulators about components, risk weightings, and other factors.
FDIC-insured banks, including the Bank, are subject to certain federal laws, which impose various legal limitations on the extent to which banks may finance or otherwise supply funds to certain of their affiliates. In particular, the Bank is subject to certain restrictions on any extensions of credit to, or other covered transactions with, such as certain purchases of assets, the Company or its affiliates.
F-16
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios as defined in the regulations (presented in the table below). Additionally, as conditions of granting the Bank’s application for federal deposit insurance, the FDIC ordered that the Tier 1 leverage capital to total assets ratio, as defined, be not less than
|
|
Regulatory |
|
|
December 31, |
|
||||||||||
(Dollars in thousands) |
|
Adequately Capitalized |
|
|
Well-Capitalized |
|
|
2025 |
|
|
2024 |
|
||||
Common equity tier 1 capital |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Tier 1 capital |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total capital |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Leverage ratio (1) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Common equity tier 1 capital ratio (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tier 1 capital ratio (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total capital ratio (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
In the above table, the minimum risk-based ratios as of December 31, 2025 and 2024 reflect the capital conservation buffer of
Recently Adopted Accounting Standards
In December 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-09, Income Taxes, or Topic 740: Improvements to Income Tax Disclosures. The main objective of this update is to improve financial reporting disclosure of incremental segment information on an annual and interim basis. The amendments in this update became effective for the annual periods beginning after December 15, 2024. The Company adopted the amended tax presentation pursuant to this ASU in the financial statements for the year ended December 31, 2025. This ASU did not have a material change to the presentation of income tax expense in the Statement of Operations.
Recently Issued Accounting Standards
In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income – Expense Disaggregation of Income Statement Expenses. This update requires additional disaggregation of specific types of expenses within the notes to consolidated financial statements on an annual and interim basis. In January 2025, the FASB issued ASU 2025-01 to clarify that all public business entities are required to adopt ASU 2024-03 for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is assessing the impact of the update on the accompanying financial statements.
Reclassifications
Certain reclassifications have been made to prior year balances to conform with the current year presentation. These reclassifications have no effect on the previously reported results of operations.
F-17
(3) INVESTMENT SECURITIES
The following tables present details of fixed maturity securities available for sale as of December 31, 2025 and 2024:
December 31, 2025 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
State and municipalities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Agency bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2024 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Mortgage-backed securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
State and municipalities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Agency bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The amortized cost and estimated fair market value of investment securities as of December 31, 2025 by contractual maturity are presented below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage‑backed securities are included in the table based on their contractual maturities and are reflected in the each category below.
December 31, 2025 |
|
Amortized |
|
|
Fair |
|
||
Due in one year or less |
|
$ |
|
|
$ |
|
||
Due after one year through five years |
|
|
|
|
|
|
||
Due after five years through ten years |
|
|
|
|
|
|
||
Due after ten years |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The following tables present information pertaining to securities with gross unrealized losses as of December 31, 2025 and 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position.
|
|
Less than Twelve Months |
|
|
Twelve Months and Over |
|
||||||||||
December 31, 2025 |
|
Gross |
|
|
Fair |
|
|
Gross |
|
|
Fair |
|
||||
Mortgage-backed securities |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
State and municipalities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Agency bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Less than Twelve Months |
|
|
Twelve Months and Over |
|
||||||||||
December 31, 2024 |
|
Gross |
|
|
Fair |
|
|
Gross |
|
|
Fair |
|
||||
Mortgage-backed securities |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
State and municipalities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Agency bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
As of December 31, 2025 and 2024, the Company had
F-18
(4) LOANS AND ALLOWANCE FOR CREDIT LOSSES
The following table presents the major classification of loans, inclusive of capitalized loan origination costs, as of December 31, 2025 and 2024.
|
|
As of December 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
(Dollars in thousands) |
|
Amount |
|
|
As a |
|
|
Amount |
|
|
As a |
|
||||
Loans held for investment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recreation |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Taxi medallion |
|
|
|
|
* |
|
|
|
|
|
* |
|
||||
Total loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans held for sale, at lower of amortized cost or fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recreation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic partnership |
|
|
|
|
* |
|
|
|
|
|
* |
|
||||
Total loans held for sale, at lower of amortized cost or fair value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total loans and loans held for sale |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
(1)
(*) Less than 1%.
The following tables present the activity of the gross loans and loans held for sale for the years ended December 31, 2025 and 2024.
December 31, 2025 |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi |
|
|
Strategic |
|
|
Total |
|
||||||
Gross loans – December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Loan originations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Principal receipts, sales, and maturities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Charge-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Transfer to loan collateral in process of foreclosure, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Amortization of origination fees and costs, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Origination fees and costs, net |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Paid-in-kind interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross loans – December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
December 31, 2024 |
|
Recreation (1) |
|
|
Home |
|
|
Commercial |
|
|
Taxi |
|
|
Strategic |
|
|
Total |
|
||||||
Gross loans – December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Loan originations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Principal receipts, sales, and maturities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Charge-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Transfer to loan collateral in process of foreclosure, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Amortization of origination fees and costs, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Origination fees and costs, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Paid-in-kind interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross loans – December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The following table presents the activity in the allowance for credit losses for the years ended December 31, 2025 and 2024.
(Dollars in thousands) |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi |
|
|
Total |
|
|||||
Balance at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Charge-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Provision (benefit) for credit losses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Balance at December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Charge-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Provision (benefit) for credit losses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Balance at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
F-19
The following tables present the gross charge-offs for the years ended December 31, 2025 and 2024, by the year of origination:
December 31, 2025 |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Total |
|
|||||||
Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
December 31, 2024 |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Total |
|
|||||||
Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The following tables present the allowance for credit losses by type as of December 31, 2025 and 2024.
December 31, 2025 |
|
Amount |
|
|
Percentage |
|
|
Allowance as |
|
|||
Recreation |
|
$ |
|
|
|
% |
|
|
% |
|||
Home improvement |
|
|
|
|
|
|
|
|
|
|||
Commercial |
|
|
|
|
|
|
|
|
|
|||
Taxi medallion |
|
|
|
|
* |
|
|
|
|
|||
Total (2) |
|
$ |
|
|
|
% |
|
|
|
|||
(*) Less than 0.1%.
December 31, 2024 |
|
Amount |
|
|
Percentage |
|
|
Allowance as |
|
|||
Recreation |
|
$ |
|
|
|
% |
|
|
% |
|||
Home improvement |
|
|
|
|
|
|
|
|
|
|||
Commercial |
|
|
|
|
|
|
|
|
|
|||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|||
Total (2) |
|
$ |
|
|
|
% |
|
|
|
|||
The following tables present the performance status of loans as of December 31, 2025 and 2024.
December 31, 2025 |
|
Performing |
|
|
Nonperforming |
|
|
Total |
|
|
Percentage of |
|
||||
Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic partnership |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2024 |
|
Performing |
|
|
Nonperforming |
|
|
Total |
|
|
Percentage of |
|
||||
Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic partnership |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
For those loans aged under 90 days past due, there is a possibility that their delinquency status will continue to deteriorate and they will subsequently be placed on nonaccrual status and be reserved for, and as a result, deemed nonperforming.
F-20
The following tables present the aging of all loans as of December 31, 2025 and 2024.
December 31, 2025 |
|
Days Past Due |
|
|
|
|
|
|
|
|
|
|
|
Recorded |
|
|||||||||||||
(Dollars in thousands) |
|
30-59 |
|
|
60-89 |
|
|
90 + |
|
|
Total |
|
|
Current |
|
|
Total (1) |
|
|
Accruing |
|
|||||||
Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Strategic partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
December 31, 2024 |
|
Days Past Due |
|
|
|
|
|
|
|
|
|
|
|
Recorded |
|
|||||||||||||
(Dollars in thousands) |
|
30-59 |
|
|
60-89 |
|
|
90 + |
|
|
Total |
|
|
Current |
|
|
Total (1) |
|
|
Accruing |
|
|||||||
Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Taxi medallion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Strategic partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The following table presents loan delinquency for recreation and home improvement loans for the year ended December 31, 2025 by the year of origination:
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Total (1) |
|
|||||||
Recreation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Current |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
30-59 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
60-89 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
90 + Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Current |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
30-59 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
60-89 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
90 + Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Home improvement |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The following table presents loan delinquency for recreation and home improvement loans for the year ended December 31, 2024 by the year of origination:
(Dollars in thousands) |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Total (1) |
|
|||||||
Recreation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Current |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
30-59 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
60-89 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
90 + Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Recreation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Home improvement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Current |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
30-59 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
60-89 Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
90 + Days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Home improvement |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
F-21
(5) FUNDS BORROWED
The following table presents outstanding balances of funds borrowed.
|
|
Payments Due for the Year Ending December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(Dollars in thousands) |
|
2026 |
|
|
2027 |
|
|
2028 |
|
|
2029 |
|
|
2030 |
|
|
Thereafter |
|
|
December 31, 2025 (1) |
|
|
December 31, 2024 (1) |
|
|
Interest |
|
|||||||||
Deposits (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
|||||||||
Privately placed notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
SBA debentures and borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Trust preferred securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Federal reserve and other borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Strategic partner collateral deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
|||||||||
(A) DEPOSITS
Most deposits are raised through the use of investment brokerage firms that package time deposits in denominations of less than $
(Dollars in thousands) |
|
December 31, 2025 |
|
|
Three months or less |
|
$ |
|
|
Over three months through six months |
|
|
|
|
Over six months through one year |
|
|
|
|
Over one year |
|
|
|
|
Deposits |
|
|
|
|
Strategic partner collateral deposits |
|
|
|
|
Total deposits |
|
$ |
|
|
(B) FEDERAL RESERVE DISCOUNT WINDOW AND OTHER BORROWINGS
As of December 31, 2025, the Bank had $
The Bank has borrowing arrangements with several commercial banks. These agreements are accommodations that can be terminated at any time, for any reason and allow the Bank to borrow up to $
F-22
(C) PRIVATELY PLACED NOTES
The Company has entered into various private placements with certain institutional investors over time.
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
December 31, |
|
||||||
|
Date of Notes |
|
Maturity |
|
Interest Rate |
|
|
Interest Payable |
|
2025 |
|
|
2024 |
|
|||
|
December 2020 |
|
|
|
% |
|
|
$ |
|
|
$ |
|
|||||
|
February 2021 (1) |
|
|
|
% |
|
|
|
|
|
|
|
|||||
|
September 2023 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
|
June 2024 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
|
August 2024 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
(D) SBA DEBENTURES AND BORROWINGS
Over the years, the SBA has approved commitments for Medallion Capital, typically for a year term and a
The following table presents the SBA debentures and borrowings for the years ended December 31, 2025 and 2024.
(Dollars in thousands) |
|
|
|
|
|
|
|
|
December 31, |
|
||||||
Date of Notes |
|
Maturity |
|
Interest Rate |
|
|
Interest Payable |
|
2025 |
|
|
2024 |
|
|||
March 2015 |
|
|
|
% |
|
|
$ |
|
|
$ |
|
|||||
September 2015 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
March 2016 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
March 2016 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
May 2016 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
March 2017 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
September 2018 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
March 2019 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
September 2020 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
June 2021 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
October 2021 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
October 2022 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
April 2023 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
September 2023 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
November 2023 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
March 2025 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
August 2025 |
|
|
|
% |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
(E) TRUST PREFERRED SECURITIES
In June 2007, the Company issued and sold $
(F) COVENANT COMPLIANCE
Certain of the Company's debt agreements contain financial covenants that require the Company to maintain certain financial ratios and minimum tangible net worth. As of December 31, 2025, the Company was in compliance with all such covenants.
F-23
(6) LEASES
The Company has leased premises that expire at various dates through November 30, 2033 subject to various operating leases.
The following table presents the operating lease costs and additional information for the years ended December 31, 2025, 2024, and 2023.
|
|
December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
|
|||
Operating cash flows from operating leases |
|
|
|
|
|
|
|
|
|
|||
Right-of-use asset obtained in exchange for lease liability |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
The following table presents the breakout of the operating leases as of December 31, 2025 and 2024.
|
|
December 31, |
|
|||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
||
|
$ |
|
|
$ |
|
|||
Other current liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Total operating lease liabilities |
|
|
|
|
|
|
||
Weighted average remaining lease term |
|
|
|
|
||||
Weighted average discount rate |
|
|
% |
|
|
|||
At December 31, 2025, maturities of the lease liabilities were as follows:
(Dollars in thousands) |
|
|
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less imputed interest |
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
(7) INCOME TAXES
The Company is subject to federal and applicable state corporate income taxes on its taxable ordinary income and capital gains. As a corporation taxed under Subchapter C of the Internal Revenue Code, the Company is able, and intends, to file a consolidated federal income tax return with corporate subsidiaries in which it holds 80% or more of the outstanding equity interest measured by both vote and fair value.
The following table presents the significant components of the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024.
|
|
December 31, |
|
|||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Provision for credit losses |
|
$ |
|
|
$ |
|
||
Accrued expenses, compensation, and other assets |
|
|
|
|
|
|
||
Net operating loss carryforwards (1) |
|
|
|
|
|
|
||
Other investments and investment securities |
|
|
|
|
|
|
||
Valuation allowance |
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets |
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Goodwill and other intangibles |
|
|
|
|
|
|
||
Total deferred tax liabilities |
|
|
|
|
|
|
||
Deferred tax liability, net |
|
$ |
|
|
$ |
|
||
F-24
The following table presents the components of the Company's tax provision for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
|
|
$ |
|
|
$ |
|
|||
State |
|
|
|
|
|
|
|
|
|
|||
Deferred |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
State |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax provision reported for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||||||||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Amount |
|
|
Percent (1) |
|
|
Amount |
|
|
Percent (1) |
|
|
Amount |
|
|
Percent (1) |
|
||||||
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|||||||
State and local income taxes, net of federal income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Valuation allowance against deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in effective state income tax rates and accrual |
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
( |
) |
|
* |
|
|||||
Non-deductible expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
* |
|
|||||
Total income tax provision |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
(1)
(*) Less than 1%.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible pursuant to ASC 740. The Company considers the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company’s evaluation of the realizability of deferred tax assets must consider both positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. The Company has determined that a valuation allowance is necessary for net operating losses which the Company does not believe will be utilized as well as for deferred compensation in excess of statutory limits. Based upon these considerations, the Company determined the necessary valuation allowance as of December 31, 2025.
(8) STOCK OPTIONS AND RESTRICTED STOCK
The Company’s Board of Directors approved the 2018 Equity Incentive Plan, or the 2018 Plan, which was approved by the Company’s stockholders on June 15, 2018. The terms of the 2018 Plan provide for grants of a variety of different type of stock awards to the Company’s employees and non-employee directors, including options, restricted stock, restricted stock units, PSUs, and stock appreciation rights, etc. On April 22, 2020, the Company’s Board of Directors approved an amendment to the 2018 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 19, 2020. On April 26, 2022, the Company’s Board of Directors approved an additional amendment to the 2018 Plan to further increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 14, 2022. On April 25, 2025, the Company’s Board of Directors approved an additional amendment to the 2018 Plan to further increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 12, 2025. A total of
F-25
The Company’s Board of Directors approved the 2015 Non-Employee Director Stock Option Plan, or the 2015 Director Plan, on March 12, 2015, which was approved by the Company’s shareholders on June 5, 2015, and on which exemptive relief to implement the 2015 Director Plan was received from the SEC on February 29, 2016. A total of
The Company’s Board of Directors approved the First Amended and Restated 2006 Director Plan, or the Amended Director Plan, on April 16, 2009, which was approved by the Company’s shareholders on June 5, 2009, and on which exemptive relief to implement the Amended Director Plan was received from the SEC on July 17, 2012. A total of
Additional shares are only available for future issuance under the 2018 Plan. As of December 31, 2025,
The fair value of each restricted stock grant, each restricted stock unit, and each PSU is determined on the date of grant by the closing market price of the Company’s common stock on the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. There were
The Company’s Compensation Committee of the Board of Directors grants PSUs, to certain officers and employees of the Company. Granted PSUs are subject to specified performance criteria for a particular performance period. The number of PSUs that vest can range from
The PSUs have vesting conditions based upon certain levels of total pre-tax income as well as return on common equity attained over a three-year period. The PSUs cliff vest after three years based upon the performance of the Company. Dividend equivalent PSUs accumulate and convert to additional shares for the benefit of the grantee at the vesting date or are forfeited if the performance conditions are not met.
|
|
Number of |
|
|
|
Grant |
|
|
Weighted |
|
|||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
|
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
|
|
|
|
|
|
|
|
|||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
|
|
|
|
|
|
|
|
|||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
|
|
|
|
|
|
|
|
|||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
||||
F-26
The following table presents the restricted stock activity for the years ended December 31, 2025, 2024, and 2023.
|
|
Number of |
|
|
|
Grant |
|
Weighted |
|
||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
||
Vested (1) |
|
|
( |
) |
|
|
|
|
|
||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
||
Vested (1) |
|
|
( |
) |
|
|
|
|
|
||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
||
Vested (1) |
|
|
( |
) |
|
|
|
|
|
||
Outstanding at December 31, 2025 (2) |
|
|
|
|
$ |
|
$ |
|
|||
The following table presents stock option activity for the years ended December 31, 2025, 2024, and 2023.
|
|
Number of |
|
|
|
Exercise |
|
|
Weighted |
|
|||
Outstanding at December 31, 2022 |
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|||
Exercised (1) |
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding at December 31, 2023 |
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|||
Exercised (1) |
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding at December 31, 2024 |
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|||
Exercised (1) |
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding at December 31, 2025 (2) |
|
|
|
|
$ |
|
|
$ |
|
||||
Options exercisable at |
|
|
|
|
|
|
|
|
|
|
|||
December 31, 2023 |
|
|
|
|
|
|
|
$ |
|
||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
||||
The following table presents the activity for the unvested options outstanding under the plans for the year ended December 31, 2025.
|
|
Number of |
|
|
|
Exercise Price |
|
|
Weighted |
|
|||
Outstanding at December 31, 2022 |
|
|
|
|
|
|
|
$ |
|
||||
Granted |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|||
Vested (1) |
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding at December 31, 2023 |
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|||
Vested (1) |
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding at December 31, 2024 |
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|
||
Vested (1) |
|
|
( |
) |
|
|
|
|
|
|
|||
Outstanding at December 31, 2025 |
|
|
— |
|
|
$ |
|
— |
|
|
$ |
— |
|
F-27
During the year ended December 31, 2025, the Company granted
(9) SEGMENT REPORTING
The Company has
The four lending segments reflect the main types of lending performed at the Company, which are recreation, home improvement, commercial, and taxi medallion lending. The recreation and home improvement lending segments are operated by the Bank and loans are made to borrowers residing nationwide. The recreation lending segment is a consumer finance business that works with third-party dealers and financial service providers to finance RVs, boats, collector cars, and other consumer recreational equipment, of which RVs, boats, and collector cars make up
The Company's corporate and other investments segment is a non-operating segment that includes items not allocated to the Company's operating segments such as investment securities, equity investments, intercompany eliminations, goodwill, and other corporate elements. The Company allocates portions of centrally incurred costs inclusive of overhead and interest expense formulaically based upon overall capital allocated to the lending segments.
As part of segment reporting, capital ratios for all operating segments have been normalized as a percentage of consolidated total equity divided by total assets, with the net adjustment applied to corporate and other investments. In addition, the commercial segment primarily represents the mezzanine lending business, with certain legacy commercial loans (immaterial to total) allocated to corporate and other investments.
The Company's chief operating decision maker (CODM) is a group comprised of the Executive Chairman, , and other senior members of management.
F-28
The following table presents segment data as of and for the year ended December 31, 2025.
Year Ended December 31, 2025 |
|
Consumer Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(Dollars in thousands) |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi Medallion |
|
|
Corporate and Other Investments |
|
|
Consolidated |
|
||||||
Total interest income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Provision (benefit) for credit losses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Net interest income (loss) after loss provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Income tax (provision) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net income (loss) after taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Income attributable to the non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Less: redemption of Series F preferred stock - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total net income attributable to Medallion Financial Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total loan, gross (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total funds borrowed (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return on average assets |
|
|
% |
|
|
% |
|
|
% |
|
NM |
|
|
NM |
|
|
|
% |
||||||
Return on average stockholders' equity |
|
* |
|
|
* |
|
|
* |
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Return on average equity |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Interest yield |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Net interest margin, gross |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Net interest margin, net of allowance |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Reserve coverage (3) |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Delinquency status (4) |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
Charge-off (recovery) ratio (5) |
|
|
|
|
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
||||||
(1) Inclusive of recreation and strategic partnership loans held for sale, at lower of amortized cost or fair value.
(2) Excludes deferred financing costs of $
(3) Allowance for credit loss as a percent of gross loans held for investment and excludes loans held for sale.
(4) Loans 90 days or more past due as a percent of total gross loans.
(5) Net charge-offs as a percent of annual average gross loans. Charge-off ratio in the recreation lending segment was
(NM) Not meaningful.
(*) Line item is not applicable to segments.
F-29
The following table presents segment data as of and for the year ended December 31, 2024.
Year Ended December 31, 2024 |
|
Consumer Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(Dollars in thousands) |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi Medallion |
|
|
Corporate and Other Investments |
|
|
Consolidated |
|
||||||
Total interest income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Provision (benefit) for credit losses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Net interest income (loss) after loss provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Income tax (provision) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net income (loss) after taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Income attributable to the non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total net income attributable to Medallion Financial Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total loan, gross (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total funds borrowed (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return on average assets |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
( |
)% |
|
|
% |
|||||
Return on average stockholders' equity |
|
* |
|
|
* |
|
|
* |
|
|
* |
|
|
* |
|
|
|
|
||||||
Return on average equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Interest yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Net interest margin, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Net interest margin, net of allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Reserve coverage (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Delinquency status (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Charge-off (recovery) ratio (5) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
NM |
|
|
|
|
|||||
(1)
(2) Excludes deferred financing costs of $
(3)
(4)
(5) Net charge-offs as a percent of annual average gross loans.
(NM) Not meaningful.
(*) Line item is not applicable to segments.
F-30
The following table presents segment data as of and for the year ended December 31, 2023.
Year Ended December 31, 2023 |
|
Consumer Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(Dollars in thousands) |
|
Recreation |
|
|
Home |
|
|
Commercial |
|
|
Taxi Medallion |
|
|
Corporate and Other Investments |
|
|
Consolidated |
|
||||||
Total interest income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Provision (benefit) for credit losses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Net interest income (loss) after loss provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Income tax (provision) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net income (loss) after taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Income attributable to the non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total net income attributable to Medallion Financial Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total loans, gross |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total funds borrowed (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selected Financial Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return on average assets |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
( |
)% |
|
|
% |
|||||
Return on average stockholders' equity |
|
* |
|
|
* |
|
|
* |
|
|
* |
|
|
* |
|
|
|
|
||||||
Return on average equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Interest yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Net interest margin, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Net interest margin, net of allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Reserve coverage (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Delinquency status (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
||||||
Charge-off (recovery) ratio (4) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
NM |
|
|
|
|
|||||
(1) Excludes deferred financing costs of $
(2)
(3)
(4)
(NM) Not meaningful.
(*) Line item is not applicable to segments.
F-31
(10) COMMITMENTS AND CONTINGENCIES
(A) EMPLOYMENT AGREEMENTS
The Company has employment agreements with certain key officers, including Mr. Alvin Murstein and Mr. Andrew M. Murstein, for either a one-, two-, or three-year term. Typically, the contracts will renew for new one-, two- or three- year terms unless prior to the term either the Company or the executive provides notice to the other party of its intention not to extend the employment period beyond the current one-, two- or three-year term (as applicable); however, there is currently one agreement that renews after two years for additional one-year terms and one agreement with a three-year term that does not have a renewal period. In the event of a change in control, as defined, during the employment period, the agreements provide for severance compensation to the executive in an amount equal to the balance of the salary, bonus, and value of fringe benefits which the executive would be entitled to receive for the remainder of the employment period.
On October 24, 2025, Mr. Alvin Murstein, the Company's current Executive Chairman of the Board of Directors, or the Board, entered into an amendment to the First Amended and Restated Employment Agreement, dated May 29, 1998, as amended, between him and the Company. Pursuant to such amendment: (i) effective as of January 31, 2026 (the “Transition Date”), Mr. Murstein no longer served as the Chief Executive Officer and became the Executive Chairman of the Board to serve through May 29, 2027 (the “Term”); (ii) during the period between the date of such amendment and the Transition Date, Mr. Murstein, among other things, continued to serve as Chief Executive Officer of the Company; (iii) during the period from the Transition Date until the end of the Term (the “Retirement Date”), Mr. Murstein shall, among other things, continue to serve as Executive Chairman of the Board with the Company's expectation that Mr. Murstein will be nominated to serve a new three-year term as a Board member at the 2026 Annual Meeting of Shareholders of the Company and a failure by the Board to so nominate Mr. Murstein would constitute termination without cause under his employment agreement; (iv) Mr. Murstein remains an employee of the Company in his role as Executive Chairman of the Board; (v) Mr. Murstein's compensation shall be determined without regard to the transition to Executive Chairman, provided that, all incentive equity awards that are determined to be granted to Mr. Murstein in respect of calendar years 2025, 2026 and 2027 shall be granted solely in the form of restricted stock and options; and (vi) on the Retirement Date (or earlier if termination occurs by reason of death or disability), all outstanding unvested equity awards, other than performance awards, will immediately vest and, if applicable, become exercisable and all outstanding performance awards will remain outstanding until the end of the relevant performance periods and vest and be earned to the extent applicable objects have been met, on a prorated basis for the portion of the performance period that Mr. Murstein was employed.
In addition, on October 24, 2025, Mr. Andrew Murstein, the Company’s current President, Chief Executive Officer and Chief Operating Officer, entered into an amendment to the First Amended and Restated Employment Agreement, dated May 29, 1998, as amended, between him and the Company. Pursuant to such amendment, effective as of January 31, 2026, Mr. Andrew Murstein became the President, Chief Executive Officer and Chief Operating Officer of the Company and shall remain President, Chief Executive Officer and Chief Operating Officer through the remainder of the employment term.
On January 12, 2026, the Company, Medallion Bank, and Mr. Donald Poulton entered into an amendment to the Employment Agreement, dated June 27, 2016 by and between Mr. Poulton, the Company and Medallion Bank. Pursuant to such Amendment, effective January 12, 2026, Donald Poulton no longer served as President of Medallion Bank, but remains the Chief Executive Officer of Medallion Bank through the remainder of the employment term. All other terms of his existing employment agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
In addition, on January 12, 2026, the Company, Medallion Bank and Mr. D. Justin Haley entered into a Second Amended and Restated Employment Agreement. Pursuant to the agreement, effective January 12, 2026, Mr. Haley no longer served as Executive Vice President and Chief Financial Officer of Medallion Bank, but became the President of Medallion Bank. The employment agreement has a two-year term that automatically renews each year for an additional two-year term commencing on January 1, 2027 unless terminated by either party. Under the employment agreement, Mr. Haley is entitled to an annual base salary of $
F-32
As of December 31, 2025,
(Dollars in thousands) |
|
|
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total |
|
$ |
|
|
(B) OTHER COMMITMENTS
As of December 31, 2025 the Company had
(C) SEC LITIGATION
On December 29, 2021, the SEC filed a civil complaint in the U.S. District Court for the Southern District of New York against the Company and its President and Chief Operating Officer alleging certain violations of the anti-fraud, books and records, internal controls and anti-touting provisions of the federal securities laws. The litigation related to certain issues that occurred during the period 2015 to 2017, including (i) the Company’s retention of third parties in 2015 and 2016 concerning posting information about the Company on certain financial websites and (ii) the Company’s financial reporting and disclosures concerning certain assets, including Medallion Bank, in 2016 and 2017, a period when the Company had previously reported as a business development company (BDC) under the Investment Company Act of 1940. In December 2024, the Company and its President and Chief Operating Officer reached an agreement in principle with the Division of Enforcement of the SEC, that if approved by the Commissioners of the SEC and the Court, would resolve this litigation. On May 30, 2025, the Court entered a Final Judgment as to the Company and its President and Chief Operating Officer resolving this litigation. The parties agreed to settle the matter with the SEC, consenting to the entry of the Final Judgment, without admitting or denying the allegations of the SEC complaint. Pursuant to the Final Judgment, among other things, (i) the parties were enjoined from violating specified provisions of the federal securities laws and rules thereunder, (ii) the Company paid a civil penalty of $
(D) OTHER LITIGATION AND REGULATORY MATTERS
The Company and its subsidiaries are subject to inquiries from certain regulators and are currently involved in various legal proceedings incident to the normal course of business, including collection matters with respect to certain loans. The Company intends to vigorously defend any outstanding claims and pursue its legal rights. In the opinion of management, based on the advice of legal counsel, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision could result in a material adverse impact on the financial condition or results of operations of the Company.
(11) RELATED PARTY TRANSACTIONS
Certain directors, officers, and stockholders of the Company are also directors and officers of its main consolidated subsidiaries, MFC, Medallion Capital, FSVC, and the Bank, as well as other subsidiaries. Officer salaries are set by the Board of Directors of the Company.
Jeffrey Rudnick, the son of one of the Company’s directors and brother-in-law of one of the Company’s officers and directors, previously served as the Company’s Senior Vice President and effective July 24, 2025, serves as the Company's Executive Vice President at a salary of $
Jameson Poulton, the son of one of Medallion Bank’s officers, serves as Medallion Bank’s Manager of Data Analytics at a salary of $
.
F-33
(12) EMPLOYEE BENEFIT PLANS
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB ASC Topic 825, “Financial Instruments,” requires disclosure of fair value information about certain financial instruments, whether assets, liabilities, or off-balance-sheet commitments, if practicable.
|
|
December 31, 2025 |
|
|||||||||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash, cash equivalents, and federal funds sold (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment, net of allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for sale, at lower of amortized cost or fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity securities (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Funds borrowed (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accrued interest payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, 2024 |
|
|||||||||||||||||
(Dollars in thousands) |
|
Carrying |
|
|
Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash, cash equivalents, and federal funds sold (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment, net of allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for sale, at lower of amortized cost or fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity securities (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Funds borrowed (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accrued interest payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(14) FAIR VALUE OF ASSETS AND LIABILITIES
The Company follows the provisions of FASB ASC 820, which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.
In accordance with FASB ASC 820, the Company has categorized its assets and liabilities measured at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The Company's assessment and classification of an investment within a level can change over time based upon maturity or liquidity of the investment and would be reflected at the beginning of the quarter in which the change occurred.
F-34
As required by FASB ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a level 3 fair value measurement may include inputs that are observable (levels 1 and 2) and unobservable (level 3). Therefore, gains and losses for such assets and liabilities categorized within the level 3 table below may include changes in fair value that are attributable to both observable inputs (levels 1 and 2) and unobservable inputs (level 3).
Assets and liabilities measured at fair value, recorded on the consolidated balance sheets, are categorized based on the inputs to the valuation techniques as follows:
Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations).
Level 2. Assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
The Company’s investment securities are recorded at the estimated fair value of such investments.
Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the assets or liability (examples include certain private equity investments, and certain residential and commercial mortgage-related assets, including loans, securities, and derivatives).
A review of fair value hierarchy classification is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain assets or liabilities. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in/out of the level 3 category as of the beginning of the quarter in which the reclassifications occur.
Equity investments were recorded at cost less impairment plus or minus observable price changes. Commencing in 2020, the Company elected to measure equity investments at fair value on a non-recurring basis.
The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024.
December 31, 2025 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities (1) |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Equity securities (2) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
December 31, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities (1) |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Equity securities (2) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
F-35
The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2025 and 2024.
December 31, 2025 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity investments (1) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
December 31, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity investments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Significant Unobservable Inputs
ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as level 3 within the fair value hierarchy. The tables below are not intended to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.
The valuation techniques and significant unobservable inputs used in non-recurring level 3 fair value measurements of assets and liabilities as of December 31, 2025 and 2024.
(Dollars in thousands) |
|
Fair Value |
|
|
Valuation Techniques |
|
Unobservable Inputs |
|
Range |
|
Equity investments |
|
$ |
|
|
Investee financial analysis |
|
Financial condition and operating performance of the borrower (1) |
|
N/A |
|
(Dollars in thousands) |
|
Fair Value |
|
|
Valuation Techniques |
|
Unobservable Inputs |
|
Range |
|
Equity investments |
|
$ |
|
|
Investee financial analysis |
|
Financial condition and operating performance of the borrower (1) |
|
N/A |
|
(15) MEDALLION BANK PREFERRED STOCK (Non-controlling interest)
On July 21, 2011, the Bank issued, and the ,
On December 17, 2019, the Bank closed an initial public offering of
On May 29, 2025, the Bank closed an initial public offering of
On July 1, 2025, the Bank redeemed its Series F Preferred Stock, in its entirety, at an aggregate redemption price of $
F-36
(16) PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
The following presents the condensed financial information of Medallion Financial Corp. (parent company only).
Condensed Balance Sheets
|
|
December 31, |
|
|||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
||
Assets |
|
|
|
|
|
|
||
Cash |
|
$ |
|
|
$ |
|
||
Investment in bank subsidiary (1) |
|
|
|
|
|
|
||
Investment in non-bank subsidiaries |
|
|
|
|
|
|
||
Income tax receivable |
|
|
|
|
|
|
||
Intercompany receivable |
|
|
|
|
|
|
||
Net loans receivable |
|
|
|
|
|
|
||
Loan collateral in process of foreclosure |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities |
|
|
|
|
|
|
||
Long-term borrowings (2) |
|
$ |
|
|
$ |
|
||
Short-term borrowings |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Intercompany payables |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
Parent company equity |
|
|
|
|
|
|
||
Non-controlling interest |
|
|
|
|
|
|
||
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and equity |
|
$ |
|
|
$ |
|
||
Condensed Statements of Operations
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Dividend income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Total dividend and interest income |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
|
|
|
|
|
|
|
|
|||
Net interest income |
|
|
|
|
|
|
|
|
|
|||
Benefit for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net interest income after allowance for credit losses |
|
|
|
|
|
|
|
|
|
|||
Other income, net (1) |
|
|
|
|
|
|
|
|
|
|||
Other expense, net |
|
|
|
|
|
|
|
|
|
|||
Loss before income taxes and undistributed earnings of subsidiaries |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|||
Loss before undistributed earnings of subsidiaries |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Undistributed earnings of subsidiaries |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to parent company |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Condensed Statements of Other Comprehensive Income
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net income attributable to parent company |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Change in unrealized gains (losses) on investment securities |
|
|
|
|
|
|
|
|
( |
) |
||
Tax effect on unrealized (losses) gains on investments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Total comprehensive income attributable to Medallion Financial Corp. |
|
$ |
|
|
$ |
|
|
$ |
|
|||
F-37
Condensed Statements of Cash Flow
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Net income/net decrease in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net income/net decrease in net assets resulting from |
|
|
|
|
|
|
|
|
|
|||
Equity in undistributed earnings of subsidiaries |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Benefit for credit losses |
|
|
( |
) |
|
|
( |
) |
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( |
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Depreciation and amortization |
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Change in deferred and other tax assets/liabilities, net |
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( |
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Net change in loan collateral in process of foreclosure |
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Stock-based compensation expense |
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Decrease in other assets |
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Decrease (increase) in deferred financing costs |
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( |
) |
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( |
) |
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( |
) |
Decrease in intercompany payables |
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( |
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( |
) |
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( |
) |
Decrease in other liabilities |
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( |
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( |
) |
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( |
) |
Net cash used for operating activities |
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( |
) |
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( |
) |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Loans originated |
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( |
) |
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( |
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( |
) |
Proceeds from principal receipts, sales, and maturities of loans and investments |
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Proceeds from sale and principal payments of loan collateral in process of foreclosure |
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Investment in subsidiaries |
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( |
) |
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( |
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Dividends from subsidiaries |
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Net cash provided by investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from funds borrowed |
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Repayments of funds borrowed |
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( |
) |
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( |
) |
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Treasury stock repurchased |
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( |
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( |
) |
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Dividends paid to shareholders |
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( |
) |
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( |
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( |
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Payment of withholding taxes on net settlement of vested stock |
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( |
) |
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( |
) |
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( |
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Proceeds from the exercise of stock options |
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Net cash (used for) provided by financing activities |
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( |
) |
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( |
) |
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
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( |
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( |
) |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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$ |
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(17) SUBSEQUENT EVENTS
On January 13, 2026, approximately $
On February 26, 2026, the Company repaid $
In February 2026, the Company repaid $
The Company has evaluated the effects of events that have occurred subsequent to December 31, 2025, through the date of financial statement issuance for potential recognition or disclosure. As of such date, there were no additional subsequent events that required recognition or disclosure.
F-38
FAQ
What is Medallion Financial Corp. (MFIN) and its main business focus?
How is Medallion Financial (MFIN) loan portfolio structured as of December 31, 2025?
What credit quality indicators does Medallion Financial (MFIN) disclose for its consumer loans?
How does Medallion Financial (MFIN) fund its lending operations?
What are key risks Medallion Financial (MFIN) highlights in its lending model?
How well capitalized and regulated is Medallion Bank, the Medallion Financial (MFIN) subsidiary?
What role do strategic partnerships and fintech play in Medallion Financial (MFIN) growth?
