MFIN 10-K & 10-Q changes, risk factors and insider trading
Medallion Financial Corp. (also MBNKO) · Nasdaq · Finance Services · CIK 1000209 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Failure to raise additional capital could have a material adverse effect on our results of operations and financial position and impact our growth strategy.”
New heading “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.”
New heading “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.”
New heading “Our strategic investments may not produce anticipated returns.”
New heading “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.”
Removed heading “Failure to raise additional capital in the future could have a material adverse effect on our results of operations and financial position.”
Removed heading “We are subject to pending litigation with the SEC, the settlement of which remains subject to the approval of the Commissioners of the SEC and the Court, for certain violations of the federal securities laws, which could result in material fines and/or other sanctions and accordingly have a material adverse effect on our business, reputation, financial condition, results of operations and/or stock price, as well as a bar against our President and Chief Operating Officer.”
Removed heading “Climate change could disrupt our business and new regulations or guidance relating to climate change may affect whether and on what terms and conditions we engage in certain activities or offer certain products.”
Largest changes
“We are subject to pending litigation with the SEC, the settlement of which remains subject to the approval of the Commissioners of the SEC and the Court, for certain violations of the federal securities laws, which could result in material fines and/or other sanctions and accordingly have a material adverse effect on our business, reputation, financial condition, results of operations and/or stock price, as well as a bar against our President and Chief Operating Officer.”see in full comparison
“Climate change could disrupt our business and new regulations or guidance relating to climate change may affect whether and on what terms and conditions we engage in certain activities or offer certain products.”see in full comparison
“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.”see in full comparison
“Depending on the outcome of the litigation, and/or in the event that the Commissioners of the SEC or the Court were to decline to approve the settlement in principle, the Company could incur a loss and other penalties that could be material to the Company, its results of operations and/or financial condition, as well as a bar against its President and Chief Operating Officer. In addition, the Company has and may further incur significant legal fees and expenses in defending against such charges by the SEC and the Company may be subject to shareholder litigation relating to these SEC matters.”see in full comparison
“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.”see in full comparison
“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.”see in full comparison
Full comparison: every changed paragraph (70)
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.
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, collector cars,trailers, and other consumer recreational equipmentproducts (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.
Our balance sheet consists of a significant percentage of non-prime consumer loans, which are associated with higher-than-average delinquency rates.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 slow-downslowdown 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, which are in a greater state of flux under the new administration.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.
AsDuring ofthe year ended December 31, 2024,2025, 37%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 history.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.
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,contractors and FSPs. Although we have relationships with various dealers, contractors,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 (48% in our home improvement portfolio and 38% in our recreation portfolio in 2024),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 dealership,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.
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 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. For example, in 2024, as interest rates increased, our net interest margin decreased by 33 basis points. 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 earnings until we are able to originate new loans at higher prevailing interest rates. As noted above, the Federal Reserve has raised certain benchmark interest rates in the past in an effort to combat inflation.
Additionally, because 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. For example, in 2024 our net interest margin on gross loans decreased to 8.05% from 8.38%. 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.
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.
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.
Failure to raise additional capital in the future could have a material adverse effect on our results of operations and financial position.
Our privately placed notes contain certain provisions that require us to meet certain tests in order to raise additional debt. We cannot guarantee that we will continue to meet such tests in the future. Additionally, 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, we may need to raise additional capital in the future 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, particularly if the quality of our assets or earnings were to deteriorate significantly. Our ability to raise additional capital, if needed, 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, if we need to raise capital in the future, we may have to do so 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 when needed could have a material adverse effect on our business, financial condition, or results of operations.
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. In particular, recent industry events have highlighted that the availability of deposits can change suddenly and in unpredictable ways. 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.
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, 2024,2025, Medallion Bank’s Tier 1 leverage ratio was 15.7%.17.8%. We received dividends from Medallion Bank of $24.0 million in each of the years ended December 31, 2025 and $20.02024 and received dividends from Medallion Capital of $5.6 million and $1.6 million for the years ended December 31, 20242025 and 2023 and received dividends from Medallion Capital of $1.6 million and $4.8 million for the years ended December 31, 2024 and 2023. All of the amounts received from Medallion Capital in 2023 were reinvested in Medallion Capital.2024.
We are subject to pending litigation with the SEC, the settlement of which remains subject to the approval of the Commissioners of the SEC and the Court, for certain violations of the federal securities laws, which could result in material fines and/or other sanctions and accordingly have a material adverse effect on our business, reputation, financial condition, results of operations and/or stock price, as well as a bar against our President and Chief Operating Officer.
As described in Note 10 “Commitments and Contingencies” to the consolidated financial statements included in this Annual Report on Form 10-K, 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 antifraud, books and records, internal controls and anti-touting provisions of the federal securities laws. The litigation relates 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. We cannot assure you that such approvals will be obtained.
Depending on the outcome of the litigation, and/or in the event that the Commissioners of the SEC or the Court were to decline to approve the settlement in principle, the Company could incur a loss and other penalties that could be material to the Company, its results of operations and/or financial condition, as well as a bar against its President and Chief Operating Officer. In addition, the Company has and may further incur significant legal fees and expenses in defending against such charges by the SEC and the Company may be subject to shareholder litigation relating to these SEC matters.
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. ChangesElection outcomes may also drive shifts in thegovernmental Presidentialpolicy Administrationthat orcould controladversely ofaffect Congressus alsoor, increasemore broadly, the likelihoodbusiness ofenvironment further changes to laws, regulations and supervisory practices affecting financial institutions,in which couldwe include more stringent requirements and greater scrutiny from regulatory authorities.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. Recent political developments, including the new presidential administration in the U.S., have added additional uncertainty with respect to new laws or regulations or changes in the interpretations or enforcement of existing laws or regulations, including potential deregulation in some areas.
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.
Our deposits are insured by the FDIC up to legal limits and, accordingly, we are subject to FDIC deposit insurance assessments. We generallyhave, cannot controlin the amountpast, ofand premiumsmay we will be required to pay for FDIC insurance. In connection with financial institution failures or losses thatin the deposit insurance fund suffers, we mayfuture be required to pay higher FDIC premiums, orand the FDIC mayhas chargeimposed, and could impose in the future, special assessments or require future prepayments. For example, in October 2022 the FDIC increased the initial base deposit insurance assessment rates by 2 basis points beginning with the first quarterly assessment period of 2023 and in November 2023 the FDIC adopted a rule to recover, by special assessment, losses to the deposit insurance fund in connection with the closures of Silicon Valley Bank and Signature Bank.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.
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 anynonpublic 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 comprised ofcontaining safeguards appropriatelyconsidered 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, numerouslegislators statesand haveregulators adopted,are increasingly adopting or are considering adopting,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 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.
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 consumerborrower 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 consumersborrowers 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 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.
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,contractors and FSPs than we offer. Many of these competitors also have long-standing relationships with dealers, contractors,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, such as our Strategic Partnership Program, 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 markets.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.
In July 2019, we launched our Strategic Partnership Program, through which we partner with third parties to offer consumer loans and other financial services. Potential legal and regulatory risks associated with this line of business remain uncertain and may develop in ways that could affect us adversely, including as a result of legal proceedings brought against us on the basis that we are the “true lender” of the loans facilitated, held and serviced by our Strategic Partners, or on the basis of a determination by the FDIC or other financial regulators that our Strategic Partnership Program represents an unsafe and unsound practice.
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, including our Strategic Partnership Program,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.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services.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 effectively 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 wouldmay causenegatively impact our business and reputation to suffer.reputation.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customerscustomers, and thepersonally personalidentifiable information of our customers and employees, in third-party data centers,centers (including in the cloud or services), and on our systems.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,malfeasance or other disruptions, or vulnerable to disruptions,other includingdisruptions thoseas resultinga fromresult of systems failures, operational events, employee error,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 systemsnetworks, and the information stored there could be accessed, publicly disclosed, destroyed, lost,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, operations,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 homework-from-home arrangements, our use of cloud service providers, the outsourcing of some of our business operations, the ongoing shortage of qualified cybersecurity professionals, and the interconnectivity and interdependence of third parties to our systems. In addition, our increasing interconnectivity with service providers, dealers, contractors, FSPs,Strategic Partners and Strategic PartnersFSPs, including through application programming interfaces,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 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 andof Chiefthe ExecutiveBoard Officer,of Directors, Andrew M. Murstein, our PresidentPresident, Chief Executive Officer and Chief Operating Officer, Anthony N. Cutrone, our Executive Vice President and Chief Financial Officer, Donald S. Poulton, President and Chief Executive Officer, Medallion Bank, D. Justin Haley, Executive Vice President and Chief Financial Officer, 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 Artificial Intelligence, or AI,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 tools 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 make it more difficult for us to incorporate potentially beneficial AI tools in an efficient and effective manner, 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.
The risks would increase asFurther, we may increase our use of AI models,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.
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 createcause panica 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.
We dependdepend, to a significant extentextent, 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,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 cyber-attackcyberattack 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.
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 consumerloan 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.
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 borrowhistorically have borrowed from the brokered CD market, private and public note placementsplacements, andissuance issueof 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.
Approximately $0.9$777.4 billionmillion of our borrowing relationships have maturity dates during 2025,2026, 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.
Our portfolio is and may continue to be concentrated in a limited number of portfolio companies, industries and sectors. In addition, taxi companies that constitute separate issuers may have related management or guarantors and constitute larger business relationships to us. 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.
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.
Management's Discussion & Analysis (MD&A)
New heading “For the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024”
Removed heading “For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022”
Largest changes
“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. …”see in full comparison
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.see in full comparisonNet 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, gas prices, labor shortages, unemployment, and other factors contributing to U.S. inflation and economic health, as well as other factors which contribute to competition and changes in the demand for our loan products. We are taking steps in the event of a potential economic downturn and in light of the current inflationary environment to moderate the pace of our recent growth.
“Operating expenses were $74.4 million for the year ended December 31, 2024, up from $75.6 million for the year ended December 31, 2023. Salaries and benefits were $38.3 million for the year ended December 31, 2024, up from $37.6 million for the year ended December 31, 2023, with the increase attributable to a higher head count, annual cost of living increases, and higher long-term performance based equity compensation. Professional fees were a net benefit of $1.4 million for the year ended December 31, 2024, compared to at a cost of $5.9 million for the year ended December 31, 2023. …”see in full comparison
“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. …”see in full comparison
“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.”see in full comparison
“On January 1, 2023, we adopted Accounting Standards Update 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", or ASC 326, which replaced the incurred loss methodology that delayed recognition until it was probable a loss had been incurred with a lifetime expected loss methodology using "reasonable and supportable" expectations about the future, referred to as the current expected credit loss, or CECL, methodology. …”see in full comparison
Full comparison: every changed paragraph (120)
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, gas prices, labor shortages, unemployment, and other factors contributing to U.S. inflation and economic health, as well as other factors which contribute to competition and changes in the demand for our loan products. We are taking steps in the event of a potential economic downturn and in light of the current inflationary environment to moderate the pace of our recent growth.
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.
In 2019, the Bank launched a strategic partnership program to provide lending and other services to financial technology, or fintech,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.
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 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.
The 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, the Company uses historical delinquency and actual loss rates with a three-year look-back period for taxi medallion loans and a one-year look-back period for recreation and home improvement loans and uses historical loss experience and other projections for commercial loans. The allowance 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 size 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. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.
Our methodology to calculate the general reserve portion of the allowance includes the use of quantitative and qualitative factors. We initially determine an allowance based on quantitative loss factors for loans evaluated collectively for impairment. The quantitative loss factors are based primarily on historical loss rates, after considering loan type, historical loss and delinquency experience. The quantitative loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels or other risks. Qualitative loss factors are used to modify the reserve determined by the quantitative factors and are designed to account for losses that may not be included in the quantitative calculation according to management’s best judgment. If our qualitative loss factor rates were to increase 50 basis points, our recreation and home improvement general reserve would increase by $7.1 million and $4.1 million, respectively. Likewise, if our qualitative loss factor rates were to decrease 50 basis points, our recreation and home improvement general reserve would decrease by $7.1 million and $4.1 million, respectively.
The allowance is maintained at a level estimated by management to absorb probable credit losses inherent in the loan portfolios based on management’s evaluation of the portfolios, the related credit characteristics, and macroeconomic factors affecting the portfolios. As of December 31, 2024 and 2023, the allowance totaled $97.4 million and $84.2 million, which represented 4.12% and 3.80% of total loans held for investment, respectively. The increase in the allowance for credit losses as of December 31, 2024 was primarily driven by the changes in qualitative factors which increased the necessary allowance for credit losses for recreation loans which were partially offset by the decrease in the necessary allowance for home improvement loans. Additionally, growth in our recreation and home improvement loan portfolios required additional allowance commensurate with portfolio growth.
The methodology used in the periodic review of reserve adequacy, which is performed at least quarterly, is designed to be responsive to changes in portfolio credit quality and inherent credit losses. The changes are reflected in both the pooled formula reserve and in specific reserves as the collectability of larger classified loans is regularly recalculated with new information as it becomes available. Management is primarily responsible for the overall adequacy of the allowance.
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.
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, 20242025 and 2023,2024, we had goodwill of $150.8 million, all of which related to ourthe recreation and home improvement lending segments. As of December 31, 20242025 and 2023,2024, we had intangible assets of $19.1$17.7 million and $20.6$19.1 million. We recognized $1.4 million of amortization expense on the intangible assets for each of the years ended December 31, 2024,2025, 20232024 and 2022.2023.
Management engaged an independent third-party expert to perform a quantitative assessment of goodwill for impairment at DecemberOctober 31,1, 2024.2025. 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 17.5%16.2% for each of the recreation lending segment and 16.5% for the home improvement lending segment.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 wereare 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.
For the year ended December 31, 2024,2025, our total loans yielded 12.01%12.26% as compared to 11.69%12.01% for the year ended December 31, 2023.2024. The 3225 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 as prevailing market interest rates have remained high.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 ishas expected to continue to increaseincreased the yield on these portfolios over time, as well as increaseincreased 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 685686 and 683685 as of December 31, 20242025 and 2023.2024. 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, 20242025 of 3.93%4.22% increased 7729 basis points from 3.16%3.93% for the year ended December 31, 2023,2024, attributable to the current higher interest rate environment, particularly the higher cost associated with ourissuing deposits.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, 2024,2025, we issued deposits for three-month certificates at rates as high as 4.89%4.15% and 4.35% for both 36 month and 60 month certificates, with the most recent 36 month and 60 month issuances in 20242025 both at rates of 4.19%. and 4.13%.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.
For the year ended December 31, 2024,2025, 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.
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. As further described below, in September 2023, we issued and sold $39.0 million aggregate principal amount of 9.25% senior notes due in September 2028, in June 2024, we amended our senior notes previously issued in December 2023, increasing the aggregate 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, and in August 2024, we issued and sold $5.0 million aggregate principal amount of 8.625% senior notes due in August 2039. The net proceeds were used, in large part, to repurchase and settle, in full, $36.0 million aggregate principal amount of our 8.25% senior notes issued in 2019 and which matured in March 2024, as well as for general corporate purposes.
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. Our debentures issued to the SBA typically have terms of ten years.
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, 2023, and 2022.2023. We expect our borrowing costs to further increase as we take deposits and borrow other funds at the currently highercurrent prevailing rates.
We continuehave to seeksought 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 usehave used SBA funding to fund loans that qualify under the SBIA and SBA regulations. In July 2023, we obtained a $20.0 million commitment from the SBA, $9.8 million of which has been utilized asAs of December 31, 2024,2025 withSBA $10.2borrowings millionwere currentlyless drawable.than 4% of total borrowed funds. In February 2024, we obtained an $18.5 million commitment from the SBA, withall $0.3of millionwhich had been utilized as of December 31, 2025. We do not currently drawable,have andany commitments available from the balanceSBA. Further SBA commitments for additional debenture financing are subject to the successful completion of $18.2an millionSBA drawable upon the infusionreview of $9.1Medallion millionCapital’s management team as further discussed under Item 1A. Risk Factors of capital.this Annual Report on Form 10-K.
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 yearsyear ended December 31, 2024 and 2023,2025, there was continued growth in the recreation andlending segment, as well as a small increase in the commercial lending segment, but a small decline in the home improvement segments.lending segment, as compared to the prior year, as we intentionally managed origination volumes to align portfolio growth with capital. The following tables below present the activity of the total loan portfolio, inclusive of loans held for sale and loans held for investment.
The following table presents the approximate maturities and sensitivity to change in interest rates for our loans as of December 31, 2024.2025.
Excludes strategic partnership loans.
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, 20242025 and 2023,2024, the allowance totaled $97.4$114.8 million and $84.2$97.4 million, which represented 4.12%4.50% and 3.80%4.12% of total loans held for investment, respectively. The increase in allowanceprovision for credit losses aswas of$89.8 million for the year ended December 31, 2025 compared to $76.5 million for the year ended December 31, 2024 wasas primarilya drivenresult byof rising loss rates, elevatedfluctuation in delinquencies, and higher expected losses in our recreation loans,loan partiallyportfolio offsetand bylower arecoveries decreaseon intaxi expected losses in our home improvementmedallion 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.
Does not include loans held for sale which are carried at the lower of amortized cost or fair value for which an allowance for credit loss is not established.
As of December 31, 2025, total allowance for credit losses as a percentage of nonaccrual loans was 281%.
(*) Less than 0.1%.
Does not include loans held for sale which are carried at the lower of amortized cost or fair value for which an allowance for credit loss is not established.
As of December 31, 2024, total allowance for credit losses as a percentage of nonaccrual loans was 292%.
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.
The following tables present the activity of loan collateral in process of foreclosure for the December 31, 2024 and 2023.
Collateral valuation adjustments for recreation loans are generally the result of the liquidation of collateral through a repossession process. Due to the short-term nature of the liquidation process, collateral valuation adjustments on recreation loans are recorded as charge-offs to the allowance for credit losses on loans as this is an adjustment to the initial estimate on the fair value, less estimated costs to sell that was initially estimated in the preliminary charge off and amount transferred to collateral in process of foreclosure.
Collateral valuation adjustments for recreation loans are generally the result of the liquidation of collateral through a repossession process. Due to the short-term nature of the liquidation process, collateral valuation adjustments on recreation loans are recorded as charge-offs to the allowance for credit losses on loans as this is an adjustment to the initial estimate on the fair value, less estimated costs to sell that was initially estimated in the preliminary charge off and amount transferred to collateral in process of foreclosure.
We manage our financial results under four operating segments; recreation lending, home improvement lending, commercial lending, and taxi medallion lending. We also showpresent results for a non-operating segment, corporate and other investments.
We maintain relationships with approximately 3,3003,400 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 dealer and FSP relationships were responsible for 38%39% of recreation lending’s new loan originations for the year ended December 31, 2024.2025. The percentage of new loan originations by the top ten dealerdealers 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 $20,000$22,000 as of December 31, 2024.2025, with an average loan size originated in 2025 of approximately $29,000. The loans are fixed rate with an average term at origination of 14approximately 15 years. The weighted average maturity of our loans outstanding as of December 31, 20242025 is 11 years.
The loans are secured primarily by RVs, boats, collector cars, and trailers, with RV loans making up 55%54% of the portfolio, boat loans making up 20%,21%, and collector cars making up 11%13% of the portfolio as of December 31, 2024,2025, compared to 54%,55%, 19%,20%, and 10%11% as of December 31, 2023.2024. Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, at 16%17% and 10% of loans outstanding with no other states at or above 10%. As of December 31, 2025, 2024, 2023, and 2022,2023, the weighted average FICO, measured at origination, scores of all recreation loans outstanding were 686, 685 (683 exclusive of loans held for sale), 683, and 671.683. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, 2023, and 20222023 were 685,688, 686,685 (686 exclusive of loans held for sale), and 676.686.
During the year ended December 31, 2024,2025, the recreation portfolio grew 15%5% from $1.3$1.5 billion to $1.5$1.6 billion, with the average interestcoupon rate at origination increasing 289 basis points to 15.07%15.16% from a year ago. Additionally, during the year ended December 31, 2024,2025, the allowance for credit losses increased 24%21% from December 31, 2023,2024, with the increase reflecting the 15%5% growth in the portfolio we experienced as well as rising loss rates and various economic factors.factors resulting in a higher allowance.
During the year ended December 31, 2024,2025, we originated $526.6$468.5 million in recreation loans, ana increasedecrease of $79.6 million compared tofrom the $447.0$526.6 million originated in 2023.2024. OriginationsThe increasedlower despiteorigination morevolumes restrictiveduring underwritingthe standardsyear andreflects management'sour focus on originating loans that we believe will perform better during economic downturns, as well as our efforts to mitigatemaintain concentrationorigination risks.volumes that align with our capital levels. The following table presents quarterly originations for the years ended December 31, 2025, 2024, 2023, and 2022.2023.
Net charge-offs as a percent of annual average gross loans. Charge-off ratio for the year ended December 31, 2025 was 3.95% when excluding loans held for sale.
(4)
The home improvement lending segment works with contractors and financial service providers to finance home improvements and is concentrated in roofs, swimming pools, roofs, and windows at 36%,32%, 27%,28%, and 13%11% of total loans outstanding as of December 31, 2024,2025, as compared to 41%,27%, 20%,36%, and 13% as of December 31, 2023,2024, 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 12%14% and 11%12% of loans outstanding December 31, 2024,2025, with no other states at or above 10%. As of December 31, 2025, 2024, 2023, and 2022,2023, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 767, 764,767, and 753.764. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, 2023, and 20222023 were 779, 781, 771, and 758.771.
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 900700 contractors and FSPs. Our top ten contractors and/or FSP relationships were responsible for 48%61% of home improvement lending’s new loan originations for the yearsyear ended December 31, 2024 and 2023.2025. The percentage of new loan originations by the top ten contractorcontractors 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 $20,000$22,000 as of December 31, 2024.2025, 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, 20242025 is 13 years.
DuringAs of the year ended December 31, 2024,2025, the home improvement portfolio grewtotaled 9% from $760.6 million to $827.2$810.2 million, with the allowance for credit losses increasingdecreasing 10%5% from a year ago reflecting the growth in our portfolio, offset byprimarily improvement in credit performance and various other economic factors. The average interest rate charged on our loans increased 306 basis points to 9.81%9.87% from the prior year.
During the year ended December 31, 2024,2025, we originated $298.6$224.5 million home improvement loans, compared to $357.4$298.6 million in the prior year. The decreaselower wasorigination drivenvolumes inreflect partour byfocus ongoingon restrictiveoriginating underwritingloans standardsthat andwe management'sbelieve continuedwill perform better during economic downturns, as well as our efforts to mitigatemaintain concentrationorigination risks.volumes that align with our capital levels. The following table presents quarterly originations for the years ended December 31, 2025, 2024, 2023, and 2022.2023.
(*) Less than 1%.
Net charge-offs as a percent of annual average gross loans.
We originate both senior and subordinated loans nationwide to businesses in a variety of industries, with California, Wisconsin, and TexasNew York having 28%,20%, 10%,12%, and 10%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, 2024,2025, net gains of $6.9$24.6 million were recognized with respect to these equity investments. The commercial lending business has concentrations in manufacturing, construction,wholesale trade, and wholesale tradeconstruction, that make up 57%,63%, 12%,11%, and 12%10% of total loans outstanding as of December 31, 2024,2025, as compared to 53%,57%, 13%,12%, and 11%12% as of December 31, 2023.2024. During the year ended December 31, 2024,2025, we originated $14.3$40.6 million of loans, compared to $34.9$14.3 million in originations in 2023.2024. As of December 31, 2024,2025, commercial loans totaled $111.3$123.1 million.
Net charge-offs as a percent of annual average gross loans.
The taxi medallion lending segment operates in the New York City metropolitan area. During the year ended December 31, 2024,2025, 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, despite fluctuating transfer prices that have exceeded that value.year. We continued to not recognize interest income with all loans being placed on nonaccrual as of the third quarter 2020 (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, 2024,2025, we collected $12.1$13.6 million related to taxi medallion assets, which resulted in net recoveries and gains of $6.9$7.9 millionmillion, and collected $45.2$12.1 million related to taxi medallion assets in the prior year, which resulted in net recoveries and gains of $29.6$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, futureit collectionsis unlikely that there will be lessfuture thancollections at levels experienced in therecent prior year.years.
AllowanceRecovery for credit losses as a percent of gross loans.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in our risk factors from those disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which was filed with the Securities and Exchange Commission on March 10, 2026.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
In 2025, the SBA informed Medallion Capital that it needs to have Medallion Capital’s management team reviewed through the SBA’s licensing division; until successful completion of that review, Medallion Capitalsee in full comparisoniswas not deemed by the SBA to have a qualified management team. Medallion Capital submitted a management team for review through the SBA’s licensing division on March 31, 2026 and on the same day, the SBA notified Medallion Capital that it has declared an event of default with respect to outstanding debentures and directed Medallion Capital, within 120 days, to identify and submit at least one qualified candidate for consideration as a full-time principal and investment committee member of Medallion Capital. In April 2026, Medallion Capital submitted two candidates to the SBA for its consideration. On June 3, 2026, the SBA notified Medallion Capital that Medallion Capital’s submission of two candidates cures the previously disclosed event of default, subject to the satisfactory completion of the candidates’ background checks. On June 11, 2026, the SBA notified Medallion Capital that there was a satisfactory completion of such background checks, which cured the previously disclosed event of default with respect to its outstanding SBA debentures. The SBA’s notice and event of defaultdodid not trigger any cross-default clauses in any ofthe parent'sour debt arrangements.In subsequent discussions with the SBA, the SBA has indicated that Medallion Capital must supplement its submission by identifying and submitting at least one qualified candidate for consideration.Medallion Capital iscurrentlyawaitinginconfirmation from theprocessSBA that it deems the management team qualified for purposes ofidentifyingobtaining new andsubmittingfutureatcommitmentsleastforonedebenturequalified candidate in response to the above notice and discussions.financing.
“For the three months ended June 30, 2026, our total loans yielded 12.28%, as compared to 12.27% for the three months ended June 30, 2025. For the six months ended June 30, 2026, our total loans yielded 12.21%, as compared to 12.16% for the six months ended June 30, 2025. The increase reflects, on average, a slightly higher interest rate charged on our loan portfolios, as rates charged on new consumer originations starting in 2023 exceeded rates charged on consumer loans in the years immediately prior. …”see in full comparison
“For the three months ended March 31, 2026, our total loans yielded 12.15%, as compared to 12.04% for the three months ended March 31, 2025. The 11 basis point increase reflects, on average, a higher interest rate charged on our loan portfolios, as we have increased the rates charged on new consumer originations over the past years. …”see in full comparison
“Interest expense was $27.1 million and $52.1 million for the three and six months ended June 30, 2026, compared to $24.1 million and $48.1 million for the three and six months ended June 30, 2025, reflecting both higher average borrowings and higher average borrowing costs during the three and six months ended June 30, 2026, with borrowing costs expected to remain elevated in the current interest rate environment. The average cost of borrowed funds was 4.32% and 4.29% for the three and six months ended June 30, 2026, compared to 4.20% and 4.19% for the three and six months ended June 30, 2025. …”see in full comparison
“Interest expense was $25.0 million for the three months ended March 31, 2026, compared to $24.0 million for the three months ended March 31, 2025, reflecting both higher average borrowings and higher average borrowing costs during the three months ended March 31, 2026, with borrowing costs expected to remain elevated in the current interest rate environment. The average cost of borrowed funds was 4.28% for the three months ended March 31, 2026, compared to 4.16% for the three months ended March 31, 2025. …”see in full comparison
“Our interest rate sensitive assets were $2.8 billion and interest rate sensitive liabilities were $2.4 billion at March 31, 2026. The one-year cumulative interest rate gap was a negative $584.5 million, or 21% 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.”see in full comparison
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The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the three and six months ended MarchJune 31,30, 2026 and the year ended December 31, 2025. 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 in our Annual Report on Form 10-K.
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 financial technology, or fintech, partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business. As of MarchJune 31,30, 2026, our consumer loans represented 95% of our gross loan portfolio and commercial loans represented 5%. Total assets were $2.95$3.19 billion and $2.96 billion as of MarchJune 31,30, 2026 and December 31, 2025.
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, the impact of geopolitical events, including the conflict with Iran, 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,been seeking, and continue to,to seekseek, borrowers with strong credit ratings and moderate the paceability ofto ourrepay recenttheir growthobligations in the event of a potential economic downturn and in light of the current uncertainties and inflationary environment.
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.deposit and savings deposits. 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. 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 in the fourth quarter of 2025 sold its remaining taxi medallion portfolio to oneanother of our subsidiaries.
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 has five active partnerships, including one partnership launched in the second quarter of 2026, and continues to evaluate and launch additional partnership programs with fintech companies.
Our accounting policies are fundamental to understanding management's discussion and analysis of its financial condition and results of operations. At MarchJune 31,30, 2026, we identified our policies for the allowance for credit losses and goodwill and intangible assets to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Our critical accounting policies are described in detail in Part I, Item 7 in Medallion Financial Corp.'s Annual Report on Form 10-K for the year ended December 31, 2025, and there have been no material changes in such policies and estimates since the date of such report.
The following table presents our consolidated average balance sheets, interest income and expense, and the average interest earning/bearing assets and liabilities, and which reflectreflects the average yield on assets and average costs on liabilities as of and for the three months ended MarchJune 31,30, 2026 and 2025.
Includes deferred financing costs of $8.2$10.2 million and $8.1$8.5 million as of MarchJune 31,30, 2026 and 2025.
For the three months ended March 31, 2026, our total loans yielded 12.15%, as compared to 12.04% for the three months ended March 31, 2025. The 11 basis point increase reflects, on average, a higher interest rate charged on our loan portfolios, as we have increased the rates charged on new consumer originations over the past years. In recent years, 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 to increase 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 as of March 31, 2026, compared to 685 (683 exclusive of loans held for sale) as of March 31, 2025. We use weighted average FICO scores as an indicator of portfolio risk. In the first quarter of 2026, we reduced the rate charged on our recreation loans to improve our loss adjusted yield, writing new recreation loans at an average rate of 14.74% compared to 16.06% in the prior year quarter, and bringing our origination rate more in line with the market and our competition.
The following table presents our consolidated average balance sheets, interest income and expense, and the average interest earning/bearing assets and liabilities, and reflects the average yield on assets and average costs on liabilities as of and for the six months ended June 30, 2026 and 2025.
Includes deferred financing costs of $10.2 million and $8.5 million as of June 30, 2026 and 2025.
For the three months ended June 30, 2026, our total loans yielded 12.28%, as compared to 12.27% for the three months ended June 30, 2025. For the six months ended June 30, 2026, our total loans yielded 12.21%, as compared to 12.16% for the six months ended June 30, 2025. The increase reflects, on average, a slightly higher interest rate charged on our loan portfolios, as rates charged on new consumer originations starting in 2023 exceeded rates charged on consumer loans in the years immediately prior. The weighted average FICO score, measured at origination, of our consumer loans outstanding was 714 as of June 30, 2026, compared to 715 as of June 30, 2025. We use weighted average FICO scores as an indicator of portfolio risk. In the first half of 2026, we reduced the rate charged on our recreation loans to improve our loss adjusted yield. During the three months ended June 30, 2026, we wrote new recreation loans at an average rate of 14.86% compared to 15.96% in the prior year period, bringing our origination rate more in line with our competition. We also reduced the rate charged on certain home improvement loans during the three months ended June 30, 2026, seeking to be more competitive in specific segments of the market and generate an improved risk-adjusted return.
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Our debt, with certificates of deposit being our largest source, funds our growing lending business. Our average interest cost for the three and six months ended MarchJune 31,30, 2026 of 4.28%4.32% and 4.29% and increased 12 and 10 basis points from the three and six months ended MarchJune 31,30, 2025, attributable to the higher interest rate environment experienced over the past several years, particularly the higher cost associated with issuing brokered 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 three months ended MarchJune 31,30, 2026, we issued certificates of deposit for 36 months at rates as high as 4.20% and for 60 months at rates as high as 3.90% (3.97% inclusive of broker fees).4.25%. Over the past several years we have taken 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.
The following tabletables presentspresent the change in interest income and expense due to changes in the average balances (volume) and average rates, calculated for the periods indicated.
During the three and six months ended MarchJune 31,30, 2026, the increase in interest income over the prior year period 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 increase in deposits as older deposits mature and are replaced at current market rates, as well as an overall increase in borrowings.
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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 three and six months ended MarchJune 31,30, 2026 and 2025. We expect our borrowing costs to further increase as we take deposits and borrow other funds, including the private placement completed in April 2026, at the 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 MarchJune 31,30, 2026, SBA borrowings were approximatelyless than 3% 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 MarchJune 31,30, 2026. We do not currently have any commitments available from the SBA.SBA and are awaiting confirmation from the SBA that it deems our management team qualified for purposes of obtaining new and future commitments for debenture financing.
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In 2025, the SBA informed Medallion Capital that it needs to have Medallion Capital’s management team reviewed through the SBA’s licensing division; until successful completion of that review, Medallion Capital iswas not deemed by the SBA to have a qualified management team. Medallion Capital submitted a management team for review through the SBA’s licensing division on March 31, 2026 and on the same day, the SBA notified Medallion Capital that it has declared an event of default with respect to outstanding debentures and directed Medallion Capital, within 120 days, to identify and submit at least one qualified candidate for consideration as a full-time principal and investment committee member of Medallion Capital. In April 2026, Medallion Capital submitted two candidates to the SBA for its consideration. On June 3, 2026, the SBA notified Medallion Capital that Medallion Capital’s submission of two candidates cures the previously disclosed event of default, subject to the satisfactory completion of the candidates’ background checks. On June 11, 2026, the SBA notified Medallion Capital that there was a satisfactory completion of such background checks, which cured the previously disclosed event of default with respect to its outstanding SBA debentures. The SBA’s notice and event of default dodid not trigger any cross-default clauses in any of the parent'sour debt arrangements. In subsequent discussions with the SBA, the SBA has indicated that Medallion Capital must supplement its submission by identifying and submitting at least one qualified candidate for consideration. Medallion Capital is currentlyawaiting inconfirmation from the processSBA that it deems the management team qualified for purposes of identifyingobtaining new and submittingfuture atcommitments leastfor onedebenture qualified candidate in response to the above notice and discussions.financing.
At MarchJune 31,30, 2026 and 2025, adjustable rate debt constituted less than 2% of total debt and was comprised solely of our trust preferred securities borrowings.
Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includesconsisting of deferred fees paid to loan originators, which are amortized to interest income over the life of the loan. For the three and six months ended MarchJune 31,30, 2026, there was continuedsignificant growth in the recreation lending and home improvement lending segments, as compared to the prior year.
The following table presents the activity of gross loans, including loans held for sale for the three months ended March 31, 2026.
The following table presents the activity of gross loans, including loans held for sale for the three months ended March 31, 2025.
The following tabletables presentspresent the maturitiesactivity of the gross loans and sensitivityloans to change in interest ratesheld for oursale loansfor asthe ofthree Marchand 31,six months ended June 30, 2026.
The following tables present the activity of the gross loans and loans held for sale for the three and six months ended June 30, 2025.
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The following table presents the maturities and sensitivity to change in interest rates for our loans as of June 30, 2026.
The allowance for credit losses is maintained at a level estimated by management to absorb expected future losses in the portfolios. As of MarchJune 31,30, 2026 and December 31, 2025, the allowance totaled $116.7$122.7 million and $114.8 million, which represented 4.48%4.42% and 4.50% of total loans held for investment. The provision for credit losses was $22.5$22.3 million and $44.7 million for the three and six months ended MarchJune 31,30, 2026 compared to $22.0$21.6 million and $43.6 million for the three and six months ended MarchJune 31,30, 2025 as a result of growth in our recreationconsumer portfolio,loan lossportfolios, rates,loan losses, fluctuation in delinquencies, and expectedadjustments lossesto forecasts in our recreationconsumer loan portfolioportfolios andalong with lower recoveries on taxi medallion loans.
During the three and six months ended MarchJune 31,30, 2026, we recognized provisions of $0.5$0.8 million and $1.3 million related to specific commercial loans. 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 the three and six months ended MarchJune 31,30, 2026.
As of MarchJune 31,30, 2026, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $170.1$168.1 million, including $105.5$103.8 million related to loans secured by New York taxi medallions, some of which may represent collection opportunities for us.
The following table presents the activity in the allowance for credit losses for the three and six months ended MarchJune 31,30, 2025.
As of MarchJune 31,30, 2025 cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $161.7$161.5 million, including $95.2 million related to loans secured by New York taxi medallions, some of which may represent recovery opportunities for the Company.
The following tabletables presentspresent the gross charge-offs for the three and six months ended MarchJune 31,30, 2026, by the year of origination:
The following tabletables presentspresent the gross charge-offs for the three and six months ended MarchJune 31,30, 2025, by the year of origination:
The following table presents the allowance for credit losses for loans held for investment, by type, as of MarchJune 31,30, 2026.
As of MarchJune 31,30, 2026, total allowance for credit losses as a percentage of nonaccrual loans was 316%.284%.
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(*) Less than 0.1%
As of MarchJune 31,30, 2026, taxi medallion loans in the process of foreclosure included 276246 taxi medallions in the New York City market, 186 taxi medallions in the Chicago market, 2219 taxi medallions in the Newark market, and 31 taxi medallions in various other markets.
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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 68% of our interest income for both the three and six months ended MarchJune 31,30, 2026 and 67%66% for both the three and six months ended MarchJune 31,30, 2025.
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 38%37% and 39%40% of recreation lending’s new loan originations for the threesix months ended MarchJune 31,30, 2026 and 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 $22,600$22,300 as of MarchJune 31,30, 2026. 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 MarchJune 31,30, 2026 is approximately 1112 years.
The loans are secured primarily by RVs, boats, and collector cars, and trailers, with RV loans making up 54%53% of the portfolio, boat loans making up 21%,22%, and collector car loans making up 13%, and trailers making up 11%13% of the portfolio as of MarchJune 31,30, 2026, compared to 55%,54%, 19%, 11%,21%, and 9%12% as of MarchJune 31,30, 2025. Recreation loans are made to borrowers residing nationwide, with the highest concentrations as of MarchJune 31,30, 2026 in Texas and Florida at 17% and 10%9% of loans outstanding, compared to 16% and 10% at MarchJune 31,30, 2025, and with no other states at or above 10%. As of MarchJune 31,30, 2026 and MarchJune 31,30, 2025, the weighted average FICO scores, measured at origination, of our recreation loans outstanding were 686.686 and 685. The weighted average FICO scores at the time of origination for the loans funded in the threesix months ended MarchJune 31,30, 2026 and 2025 were 686687 andin 683.both periods.
As of MarchJune 31,30, 2026, the recreation loan portfolio was $1.7$1.8 billion, with the average interest rate increasingdecreasing 106 basis points to 15.11%15.06% from a year ago. Additionally, the allowance for credit losses increased 21% from MarchJune 31,30, 2025, reflecting rising loss rates, various economic factors, and overall growth in the portfolio.portfolio as well as rising loss rates and adjustments to economic factor forecasts.
During the three and six months ended MarchJune 31,30, 2026, we originated $142.6$228.5 million and $371.0 million in recreation loans, compared to $86.8$142.8 million and $229.6 million for the three and six months ended MarchJune 31,30, 2025. Increased origination volumes reflect strong consumer demand and investmentincreased inmarketing technologyefforts, andalong employeeswith whilepricing maintainingchanges ourintended focusto ongenerate originatingstronger loanscredit, thatwhich we believe will perform better during all phases of the economic downturns and align with our capital levels.cycle. The following table presents quarterly originations for 2026, 2025, and 2024.
As of March 31, 2026, 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 three months ended March 31, 2026 and years ended December 31, 2025 and 2024.
As of June 30, 2026, 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 six months ended June 30, 2026 and years ended December 31, 2025 and 2024.
The following table presents selected financial data and ratios as of and for the three and six months ended MarchJune 31,30, 2026 and 2025.
Allowance for credit loss as a percent of gross loans held for investment and excludes loans held for sale.
The charge-off ratio in the recreation lending segment was 4.67%3.25% and 3.94% for the three and six months ended MarchJune 31,30, 2025 when excluding loans held for sale.
The home improvement lending segment works with contractors and FSPs to finance home improvements and is concentrated in swimming pools, roofs, and windows at 35%,40%, 27%,25%, and 11%10% of total home improvement loans outstanding as of MarchJune 31,30, 2026, as compared to 29%,30%, 35%,30%, and 13%11% as of MarchJune 31,30, 2025, 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 representing 14%15% and 13%14% of loans outstanding as of MarchJune 31,30, 2026, with each such state representing 13% and 11%12% as of MarchJune 31,30, 2025 and no other states at or above 10%. As of MarchJune 31,30, 2026 and 2025, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding, measured at origination, were 768 and 767.769. The weighted average FICO scores at the time of origination for the loans funded in the threesix months ended MarchJune 31,30, 2026 and 2025 were 781775 and 783.781.
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/or FSPs. Our top ten contractors and FSP relationships were responsible for 72% of home improvement lending’s new loan originations for the three months ended March 31, 2026. The percentage of new loan originations by the top ten contractor 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 tens of thousands of geographically distributed loans with an average loan size of approximately $22,900 as of March 31, 2026. The loans are fixed rate with an average term at origination, for loans originated in the current year of approximately 16 years. The weighted average maturity of our loans outstanding as of March 31, 2026 was approximately 13 years.
As of March 31, 2026, the home improvement portfolio totaled $814.9 million, with an allowance for credit losses of $20.3 million. The average interest rate charged on our loans decreased 1 basis point to 9.82% at March 31, 2026 from a year ago.
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 800 contractors and/or FSPs. Our top ten contractors and FSP relationships were responsible for 79% of home improvement lending’s new loan originations for the six months ended June 30, 2026. The percentage of new loan originations by the top ten contractor 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 tens of thousands of geographically distributed loans with an average loan size of approximately $24,500 as of June 30, 2026. The loans are fixed rate with an average term at origination, for loans originated in the current year of approximately 17 years. The weighted average maturity of our loans outstanding as of June 30, 2026 was approximately 13 years.
MFIN insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-25 | Poulton Donald S. |
Shares withheld for tax | 40,770 | $9.97 | $406.5K |
Well-known investors holding MFIN (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Two Sigma Investments | 2026-06-30 | 39,889 | $407.3K | 0.0% | Reduced 60% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 27,659 | $282.4K | 0.0% | New position |
| Millennium Management (Israel Englander) | 2026-06-30 | 22,139 | $189.5K | — | Sold out |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 17,522 | $178.9K | 0.0% | New position |