10q10k10q10k.net

What changed in MEDALLION FINANCIAL CORP's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of MEDALLION FINANCIAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+440 added−433 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-07)

Top changes in MEDALLION FINANCIAL CORP's 2024 10-K

440 paragraphs added · 433 removed · 352 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

103 edited+13 added−18 removed113 unchanged
Biggest changeAs a condition to receipt of FDIC insurance, the Bank entered into a capital maintenance agreement with the FDIC, or the 2003 Capital Maintenance Agreement, requiring it to maintain a 15% leverage ratio (Tier 1 capital to average assets) and an adequate allowance for credit losses and restricting the amount of taxi medallion loans that the Bank may finance to three times the Bank’s Tier 1 capital. 11 Prompt Corrective Action The Bank is subject to FDIC regulations which apply to every FDIC-insured depository institution, setting out a system of mandatory and discretionary supervisory actions that generally become more severe as the capital levels of an individual institution decline.
Biggest changePrompt Corrective Action The Bank is subject to FDIC regulations which apply to every FDIC-insured depository institution, setting out a system of mandatory and discretionary supervisory actions that generally become more severe as the capital levels of an individual institution decline.
Basel III capital rules, range from 0% to 1,250%, depending on the nature of the asset. Most of the Bank’s loans are assigned a 100% risk weight, with loans that are 90 days or more past due or on nonaccrual assigned a 150% risk weight. In addition, direct obligations of the U.S. Department of the Treasury (U.S.
Basel III capital rules, range from 0% to 1,250%, depending on the nature of the asset. Most of the Bank’s loans are assigned a 100% risk weight, with loans that are 90 days or more past due or on nonaccrual assigned a 150% risk weight. In addition, direct obligations of the U.S. Department of the Treasury, or U.S.
These federal and state laws, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive practices and subject the Bank to substantial regulatory oversight.
These federal and state laws, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair and deceptive practices and subject the Bank to substantial regulatory oversight.
In addition, pursuant to requirements applicable to FDIC-supervised banking organizations, such as us, we are required to notify the FDIC within 36 hours of incidents that have materially disrupted, degraded, or are reasonably likely to materially disrupt or degrade the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or pose a threat to the financial stability of the United States.
In addition, pursuant to requirements applicable to FDIC-supervised banking organizations, such as us, we are required to notify the FDIC within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or pose a threat to the financial stability of the United States.
Treasury’s Office of the Financial Crimes Enforcement Network, or FinCEN, issued a final rule, applicable as of May 2018, to clarify and enhance customer due diligence requirements for financial institutions. The rule (among other things) imposes certain obligations on covered financial institutions with respect to their “legal entity customers,” including corporations, limited liability companies and other similar entities.
Treasury’s Office of Financial Crimes Enforcement Network, or FinCEN, issued a final rule, applicable as of May 2018, to clarify and enhance customer due diligence requirements for financial institutions. The rule (among other things) imposes certain obligations on covered financial institutions with respect to their “legal entity customers,” including corporations, limited liability companies and other similar entities.
Valid When Made and True Lender The FDIC has adopted a rule clarifying that a loan made by a state-chartered bank is considered “valid when made” pursuant to the preemptive authority in Section 27 of the FDIA, and therefore the loan’s original terms, including, among others, its interest rate, are valid and enforceable by any subsequent assignee, transferee, or buyer, regardless of the usury laws of other states, or the “Valid-When-Made Rule”.
Valid When Made and True Lender The FDIC has adopted a rule clarifying that a loan made by a state-chartered bank is considered “valid when made” pursuant to the preemptive authority in Section 27 of the FDIA, and therefore the loan’s original terms, including, among others, its interest rate, are valid and enforceable by any subsequent assignee, transferee, or buyer, regardless of the usury laws of other states, or the Valid-When-Made Rule.
The Bank is also subject to limits under federal law on its ability to extend credit to its directors, executive officers and principal shareholders (persons that beneficially own or control more than 10% of any class of our voting stock), as well as to entities owned or controlled by such persons.
The Bank is also subject to limits under federal law on its ability to extend credit to its directors, executive officers and principal shareholders (persons that beneficially own or control more than 10% of any class of our voting stock), as well as to entities owned or 13 controlled by such persons.
Department of the Treasury to periodically promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards by the Treasury Department for testing technology and internal processes for BSA compliance; expands enforcement- and investigations-related authority, including a significant expansion in the available sanctions for certain BSA violations and expands BSA whistleblower incentives and protections.
Department of the Treasury to periodically promulgate priorities for anti-money laundering and countering the financing of terrorism; requires the development of standards by the Treasury Department for testing technology and internal processes for BSA compliance; expands enforcement- and investigations-related authority, including a significant expansion in the available sanctions for certain BSA violations and expands BSA whistleblower incentives and protections.
In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through or in concert with one or more persons, to vote more than 10% but not less than 25% of any class of voting securities of a financial institution.
In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through or in concert with one or more persons, to vote more than 10% but less than 25% of any class of voting securities of a financial institution.
There are no such restrictions under the FDIC on a bank that is well-capitalized. Pursuant to the 2003 Capital Maintenance Agreement, the Bank has agreed that our capital levels will at all times meet or exceed the level required for the Bank to be considered well-capitalized under FDIC rules.
There are no such restrictions under the FDIA on a bank that is well-capitalized. Pursuant to the 2003 Capital Maintenance Agreement, the Bank has agreed that our capital levels will at all times meet or exceed the level required for the Bank to be considered well-capitalized under FDIC rules.
The final rule will be effective on April 1, 2024, but most provisions of the rule, including the new tests, the need to define retail lending assessment areas and the data collection requirements, will become applicable on January 1, 2026. Reporting of the collected data will not be required until April 1, 2027.
The final rule became effective on April 1, 2024, but most provisions of the rule, including the new tests, the need to define retail lending assessment areas and the data collection requirements, will become applicable on January 1, 2026. Reporting of the collected data will not be required until April 1, 2027.
The Bank is subject to extensive federal and state banking laws, regulations, and policies that are intended primarily for the protection of depositors, the Deposit Insurance Fund, and the banking system as a whole, not for the protection of our other creditors and stockholders.
The Bank is subject to extensive federal and state banking laws, regulations, and policies that are intended primarily for the protection of depositors, the Deposit Insurance Fund, customers, and the banking system as a whole, and not for the protection of our other creditors and stockholders.
These guidelines also prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder.
These guidelines also prohibit excessive compensation as an unsafe and unsound practice, and describe compensation 12 as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder.
We have typically originated commercial loans in principal amounts generally ranging from $2.5 million to $6.0 million, and occasionally have originated loans under or in excess of those amounts.
We have typically originated commercial loans in principal amounts ranging from $2.5 million to $6.0 million, and occasionally have originated loans under or in excess of those amounts.
The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate. 17 Incentive Compensation The FDIC has issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk taking.
The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate. 16 Incentive Compensation The FDIC has issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk taking.
Under the banking charter, the Bank is authorized to make consumer and commercial loans and may accept all FDIC-insured deposits other than demand deposits (checking accounts). As a state-charted non-member bank with FDIC-insured deposits, the Bank is examined, supervised and regulated by the FDIC and the Utah Department of Financial Institutions, or the Utah DFI.
Under the banking charter, the Bank is authorized to make consumer and commercial loans, and may accept all FDIC-insured deposits other than demand deposits (checking accounts). As a state-charted, Federal Reserve non-member bank with FDIC-insured deposits, the Bank is examined, supervised and regulated by the FDIC and the Utah Department of Financial Institutions, or the Utah DFI.
We maintain relationships with approximately 3,200 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.
We maintain relationships with approximately 3,300 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.
Home improvement lending operates in a manner similar to recreation lending, with a few key differences. We currently maintain a smaller number of relationships, with approximately 800 contractors and FSPs. Management monitors the number of contractors and FSPs and their relative contributions as a means of assessing market share and segment growth.
Home improvement lending operates in a manner similar to recreation lending, with a few key differences. We currently maintain a smaller number of relationships, with approximately 900 contractors and FSPs. Management monitors the number of contractors and FSPs and their relative contributions as a means of assessing market share and segment growth.
Loans that conform to such criteria may be processed by a loan officer with the proper credit authority, and non-conforming loans (other than those by the Bank) must be approved by the Company’s Chief Executive Officer, President, and/or the Chief Credit Officer and the Investment Oversight Committee of the Company’s board of directors.
Loans that conform to such criteria may be processed by a loan officer with the proper credit authority, and non-conforming loans (other than those by the Bank) must be approved by our Chief Executive Officer, President, and/or the Chief Credit Officer and the Investment Oversight Committee of our board of directors.
We monitor our continued compliance with this exception and were compliant as of December 31, 2023. Regulation of Medallion Bank as an Industrial Bank In May 2002, we formed the Bank, which received approval from the FDIC for federal deposit insurance in October 2003.
We monitor our continued compliance with this exception and were compliant as of December 31, 2024. Regulation of Medallion Bank as an Industrial Bank In May 2002, we formed the Bank, which received approval from the FDIC for federal deposit insurance in October 2003.
We have a 401(k) Investment Plan and other generally available benefit programs like health insurance, paid and unpaid leaves, life insurance, disability coverage, accident insurance and critical illness insurance; we believe that the availability of these benefit programs generally enhance employee productivity and loyalty to the Company.
We have a 401(k) Investment Plan and other generally available benefit programs like health insurance, paid and unpaid leaves, life insurance, disability coverage, accident insurance and critical illness insurance; we believe that the availability of these benefit programs generally enhance employee productivity and loyalty.
The segment is a significant source of income, accounting for 67% of our interest income for the year ended December 31, 2023. All of our recreation loans are serviced by a third-party loan servicer that we have used since the business’s inception.
The segment is a significant source of income, accounting for 67% of our interest income for the year ended December 31, 2024. All of our recreation loans are serviced by a third-party loan servicer that we have used since the business’s inception.
Strategic Partnerships In 2019, the Bank launched a strategic partnership program to provide lending and other services to financial technology, or fintech, companies to offer loans and other financial services to customers. The Bank entered into an initial partnership in 2020 and began issuing its first loans.
Strategic Partnerships In 2019, the Bank launched a strategic partnership program to provide lending and other services to financial technology, or fintech, companies. The Bank entered into an initial partnership in 2020 and began issuing its first loans.
A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to several specified “control factors” as set forth in the applicable regulations.
A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to a number of specified “control factors” as set forth in the applicable regulations.
The percentage of new loan originations by the top ten contractor and FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration. We offer home improvement loans with only fixed rates, with an average term at origination of 13.6 years.
The percentage of new loan originations by the top ten contractor and FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration. We offer home improvement loans with only fixed rates, with an average term at origination of 15 years.
The final rule introduced major changes in four key areas: (1) the delineation of assessment areas, (2) the overall evaluation framework and performance standards and metrics, (3) the definition of community development activities and (4) data collection and reporting.
The final rule introduces major changes in four key areas: (1) the delineation of assessment areas, (2) the overall evaluation framework and performance standards and metrics, (3) the definition of community development activities and (4) data collection and reporting.
We also offer a variety of promotional loan options to help contractors close a challenging sale. Promotional loan options include same-as-cash, no interest, and deferred payment features, which allow borrowers to reduce the total cost of financing or start repayments when it is most convenient. Home improvement loans comprised 34% of our loans receivable as of December 31, 2023.
We also offer a variety of promotional loan options to help contractors close a challenging sale. Promotional loan options include same-as-cash, no interest, and deferred payment features, which allow borrowers to reduce the total cost of financing or start repayments when it is most convenient. Home improvement loans comprised 33% of our loans receivable as of December 31, 2024.
The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2023, 2022, and 2021 were 771, 758, and 759. 5 Commercial Lending We originate both senior and subordinated loans nationwide to businesses to finance either the purchase of the equipment and related assets necessary to open a new business or the purchase or improvement of an existing business.
The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2024, 2023, and 2022 were 781, 771, and 758. 5 Commercial Lending We originate both senior and subordinated loans nationwide to businesses to finance either the purchase of the equipment and related assets necessary to open a new business or the purchase or improvement of an existing business.
Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means. State regulators have been increasingly active in enacting or promulgating privacy and cybersecurity standards and regulations.
Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means. State regulators have been increasingly active in implementing privacy and cybersecurity standards and regulations.
These documents, as well as our SEC filings, are available in print free of charge to any stockholder who requests a copy from our Secretary. 18
These documents, as well as our SEC filings, are available in print free of charge to any stockholder who requests a copy from our Secretary. 17
We believe that relationships with dealers and brokers provide us with, in addition to loan origination opportunities, significant benefits, including an additional layer of due diligence and additional monitoring capabilities. We have assembled a management team that has developed an extensive network of dealer and broker relationships in our target markets over the last 50 years.
We believe that relationships with dealers and brokers provide us with, in addition to loan origination opportunities, significant benefits, including an additional layer of due diligence and additional monitoring capabilities. We have assembled a management team that has developed an extensive network of dealers, contractors, and FSP relationships in our target markets over the last 50 years.
The ability of FSPs to aggregate the financing and relationship management for many small dealers makes them valuable to us. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten dealer and FSP relationships were responsible for 43% of recreation lending’s new loan originations for the year ended December 31, 2023.
The ability of FSPs to aggregate the financing and relationship management for many small dealers makes them valuable to us. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten dealer and FSP relationships were responsible for 38% of recreation lending’s new loan originations for the year ended December 31, 2024.
The capital conservation buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it effectively increases the required minimum risk-based capital ratios. 10 The table below shows the capital requirements the Bank is required to maintain: Minimum U.S.
The capital conservation buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it effectively increases the required minimum risk-based capital ratios. The table below presents the capital requirements the Bank is required to maintain: Minimum U.S.
ITEM 1. OUR BUSINESS We, Medallion Financial Corp., or the Company, are a specialty finance company organized as a Delaware corporation. Our strategic focus is growing our consumer finance and commercial lending businesses. Our total assets were $2.6 billion as of December 31, 2023 and $2.3 billion as of December 31, 2022.
ITEM 1. OUR BUSINESS We, Medallion Financial Corp., or the Company, are a specialty finance company organized as a Delaware corporation. Our strategic focus is growing our consumer finance and commercial lending businesses. Our total assets were $2.9 billion as of December 31, 2024 and $2.6 billion as of December 31, 2023.
Our Market We provide loans to individuals and small to mid-size businesses, through our subsidiaries, under four operating segments: • loans that finance consumer purchases of recreational vehicles, boats, and other consumer recreational equipment; • loans that finance consumer home improvements; • loans that finance commercial businesses; and • historically, loans that finance taxi medallions.
Our Market We provide loans to individuals and small to mid-size businesses, through our subsidiaries, under four operating segments: • loans that finance consumer purchases of recreational vehicles, or RVs, boats, collector cars, and other consumer recreational equipment; • loans that finance consumer home improvements; • loans that finance commercial businesses; and • historically, loans that finance taxi medallions.
We believe that our continued adherence to this disciplined process will permit us to continue to generate a stable, diversified and increasing revenue stream of current income from our earning assets to enable us to make distributions to our stockholders. Leverage the skills of our experienced management team .
We believe that our continued adherence to this disciplined process will permit us to continue to generate a stable, diversified and increasing revenue stream of current income from our earning assets. Leverage the skills of our experienced management team .
Each commercial and taxi medallion loan applicant is required to provide personal or corporate tax returns, premises leases, and/or property deeds. The Company’s senior management establishes loan origination criteria.
Each commercial and taxi medallion loan applicant is required to provide personal or corporate tax returns, premises leases, and/or property deeds. Our senior management establishes loan origination criteria.
Commercial loans are generally secured by equipment, accounts receivable, real estate, or other assets, and have interest rates averaging 437 basis points over the prevailing prime rate at the end of 2023, compared to 473 basis points over the prime rate at the end of 2022.
Commercial loans are generally secured by equipment, accounts receivable, real estate, or other assets, and have interest rates averaging 547 basis points over the prevailing prime rate at the end of 2024, compared to 437 basis points over the prime rate at the end of 2023.
Since the inception of the Bank, substantially all of the Bank’s borrowings have been provided by FDIC insured brokered certificates of deposit. The table below summarizes our sources of available funds and amounts outstanding under credit facilities, exclusive of deferred financing costs of $8.5 million, and their weighted average interest rates at December 31, 2023.
Since the inception of the Bank, substantially all of the Bank’s borrowings have been provided by FDIC insured brokered certificates of deposit. The table below presents our sources of available funds and amounts outstanding under credit facilities, exclusive of deferred financing costs of $8.2 million, and their weighted average interest rates at December 31, 2024.
Home Improvement Lending Working directly with contractors and FSPs, we offer flexible customer financing for window, siding, and roof replacement, swimming pool installations, and other home improvement projects. Our core product is a standard installment loan, which features affordable monthly payments and competitive interest rates for prime credit customers at no cost to the contractor.
Home Improvement Lending Working directly with contractors and FSPs, we offer flexible customer financing for window, siding, and roof replacement, swimming pool installations, and other home improvement projects. Our core product is a standard installment loan, which features affordable monthly payments and competitive interest rates for prime credit customers.
Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, at 15% and 10% of loans outstanding as of December 31, 2023 with no other states at or above 10%.
Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, at 16% and 10% of loans outstanding as of December 31, 2024 with no other states at or above 10%.
Also, the terms of such extensions of credit may not involve more than the normal risk of non-repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons individually and in the aggregate.
Also, the terms of such extensions of credit may not involve more than the normal risk of non-repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons individually and in the aggregate. Certain extensions of credit also require the approval of the Bank’s board of directors.
Revenues are derived primarily from contracted program fees paid to us by our partners, and interest income earned while the loans or receivables are on our books, offset by transaction fees paid to our partners for processing loan applications. Our partners are non-banks offering loans and other financial services to their customers. We continue to evaluate and launch additional partnerships.
Revenues are derived primarily from contracted program fees paid to us by our partners, and interest income earned while the loans or receivables are on our books, offset by transaction fees paid to our partners for processing loan applications. Our partners are non-banks offering loans and other financial services to their customers.
Our recreation loans are secured primarily by RVs, boats and other consumer recreational equipment with a small proportion of loans secured by other collateral such as autos, motorcycles and boat motors. These loans, which together make up our largest and most profitable loan portfolio, have a weighted average yield of 13.07% at December 31, 2023.
Our recreation loans are secured primarily by RVs, boats, collector cars, and other consumer recreational equipment with a small proportion of loans secured by other collateral such as motorcycles and boat motors. These loans, which together make up our largest and most profitable loan portfolio, have a weighted average yield of 13.30% at December 31, 2024.
Our home improvement loans are secured by the personal property installed on real property, and the security interest for some of these loans is perfected with a UCC fixture filing. As of December 31, 2023, these loans had a weighted average yield of 8.86%. Commercial Loans.
Our home improvement loans are secured by the personal property installed on real property, and the security interest for some of these loans is perfected with a UCC fixture filing. As of December 31, 2024, these loans had a weighted average yield of 9.45%. Commercial Loans.
As of December 31, 2023, 2022, and 2021, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 764, 753, and 754.
As of December 31, 2024, 2023, and 2022, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 767, 764, and 753.
Our top ten contractors and FSP relationships were responsible for 57% of home improvement lending’s new loan originations for the year ended December 31, 2023.
Our top ten contractors and FSP relationships were responsible for 48% of home improvement lending’s new loan originations for the year ended December 31, 2024.
We believe that our management team’s relationships with these dealers and brokers have provided and will continue to provide us with loan origination opportunities. In 2023, all of our consumer loans were generated by brokers, dealers, contractors, and FSPs. Focus on niche industries and our expertise in these niche fields.
We believe that our management team’s relationships with these dealers, contractors , and FSPs have provided and will continue to provide us with loan origination opportunities. In 2024, all of our consumer loans retained in the portfolio were generated by dealers, contractors, and FSPs. 6 Focus on niche industries and our expertise in these niche fields.
Our marketing efforts are focused on building relationships in the consumer markets as we work directly with dealerships, contractors and FSPs to offer quality financing for their customers, including those with past credit challenges.
We are committed to establishing, building, and maintaining relationships with our dealers, contractors, and FSPs. Our marketing efforts are focused on building relationships in consumer markets as we work directly with dealers, contractors and FSPs to offer quality financing for their customers, including those with past credit challenges.
No such incidents occurred during 2023. Anti-Money Laundering and the USA PATRIOT Act The Bank is subject to the anti-money laundering (AML) provisions of the Bank Secrecy Act, or the BSA, as amended by the USA PATRIOT Act, or the PATRIOT Act, and implementing regulations issued by the FDIC and the U.S. Treasury.
Anti-Money Laundering and the USA PATRIOT Act The Bank is subject to the anti-money laundering, or AML, provisions of the Bank Secrecy Act, or the BSA, as amended by the USA PATRIOT Act, or the PATRIOT Act, and implementing regulations issued by the FDIC and the U.S. Treasury.
In July 2023, the U.S. federal bank regulatory agencies proposed a rule implementing the Basel Committee's finalization of the post-crisis regulatory capital reforms. The proposed rule would apply to large banks and banks with significant trading activity. Capital requirements would not change for community banks, which includes the Bank.
In July 2023, the U.S. federal bank regulatory agencies proposed a rule implementing the Basel Committee's finalization of the post-crisis regulatory capital reforms. The proposed rule would apply to large banks and banks with significant trading activity.
Seek strategic acquisitions. In addition to increasing market share in existing lending markets and identifying new niches, we seek to acquire other financing businesses and related portfolios, and specialty finance companies that make secured loans to small businesses and consumers which have experienced historically low credit losses similar to our own.
In addition to increasing market share in existing lending markets and identifying new niches, we seek to acquire other financing businesses and related portfolios, and specialty finance companies that make secured loans to small businesses and consumers which have mitigated credit risk similar to our own.
Under the risk-based capital standards, the Bank’s assets, exposures and certain off-balance sheet items are assigned to broad risk categories, each with designated weights, and the resulting capital ratios represent capital as a percentage of total risk-weighted assets.
Basel III capital rules adopted by the federal banking regulators. Under the risk-based capital standards, the Bank’s assets, exposures and certain off-balance sheet items are assigned to broad risk categories, each with designated weights, and the resulting capital ratios represent capital as a percentage of total risk-weighted assets.
Basel III capital rules, the Bank must also maintain the required capital conservation buffer of 2.5% to avoid becoming subject to restrictions on capital distributions (including dividends on the Bank’s preferred stock) and certain discretionary bonus payments to management.
In addition to meeting the minimum capital requirements, under the U.S. Basel III capital rules, the Bank must also maintain the required capital conservation buffer of 2.5% to avoid becoming subject to restrictions on capital distributions (including dividends on the Bank’s preferred stock) and certain discretionary bonus payments to management.
The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $20,000 as of December 31, 2023. The loans are fixed rate with an average term at origination of 12.9 years. The weighted average maturity of our loans outstanding is 10.0 years.
The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $20,000 as of December 31, 2024. The loans are fixed rate with an average term at origination of 14 years. The weighted average maturity of our loans outstanding is 11 years.
As of December 31, 2023, home improvement loans were concentrated in roofs, swimming pools, and windows at 41%, 20%, and 13%. Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida both at 10% of loans outstanding as of December 31, 2023, and with no other states at or above 10%.
As of December 31, 2024, home improvement loans were concentrated in roofs, swimming pools, and windows at 36%, 27%, and 13%. Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Florida and Texas at 12% and 11% of loans outstanding as of December 31, 2024, and with no other states at or above 10%.
A bank that is “adequately capitalized” and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate, at the time any such deposit is accepted, in excess of (i) 75 basis points over certain national rates described in the FDIC’s regulations or (ii) 90% of the highest interest rate paid on a particular deposit product in the bank’s local market area, if the bank provides notice to the FDIC and evidence of such local rate.
In particular, the FDIA and the FDIC’s regulations prohibit an insured depository institution from accepting brokered deposits unless it is well-capitalized or is adequately capitalized and receives a waiver from the FDIC. 11 Under FDIC regulations governing brokered deposits and interest rate restrictions, a bank that is “adequately capitalized” and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate, at the time any such deposit is accepted, in excess of (i) 75 basis points over certain national rates described in the FDIC’s regulations or (ii) 90% of the highest interest rate paid on a particular deposit product in the bank’s local market area, if the bank provides notice to the FDIC and evidence of such local rate.
The minimum capital ratios applicable to us are as follows: • CET1 Risk-Based Capital Ratio , equal to the ratio of Common Equity Tier 1 (CET1), capital to risk-weighted assets. CET1 capital primarily includes common shareholders’ equity subject to certain regulatory adjustments and deductions, including with respect to goodwill, intangible assets, certain deferred tax assets and accumulated other comprehensive income.
CET1 capital primarily includes common shareholders’ equity subject to certain regulatory adjustments and deductions, including with respect to goodwill, intangible assets, certain deferred tax assets and accumulated other comprehensive income. The minimum CET1 risk-based capital ratio requirement is 4.5%. • Tier 1 Risk-Based Capital Ratio , equal to the ratio of Tier 1 capital to risk-weighted assets.
If the Bank’s regulators were to determine that we have violated banking laws and regulations, including by engaging in unsafe and unsound practices, the Bank could be subject to enforcement and other regulatory actions, which could have an adverse effect on its business, results of operations and financial condition.
If the Bank’s regulators were to determine that we have violated banking laws and regulations, including by engaging in unsafe and unsound practices, the Bank could be subject to enforcement and other regulatory actions, which could have an adverse effect on its business, results of operations and financial condition. 9 Capital Standards The Bank is subject to risk-based and leverage-based capital ratio requirements under the U.S.
The weighted average maturity of our loans outstanding is 12.3 years as of December 31, 2023. The average size of the loans in our home improvement portfolio at December 31, 2023 was approximately $20,000. The geographic dispersion of the home improvement loan portfolio supplements credit quality in reducing risk to the Company.
The weighted average maturity of our loans outstanding is 13 years as of December 31, 2024. The average size of the loans in our home improvement portfolio at December 31, 2024 was approximately $21,000. The geographic dispersion of the home improvement loan portfolio supplements credit quality in reducing our risk.
The minimum CET1 risk-based capital ratio requirement is 4.5%. • Tier 1 Risk-Based Capital Ratio , equal to the ratio of Tier 1 capital to risk-weighted assets. Tier 1 capital primarily consists of CET1 capital and perpetual preferred stock.
Tier 1 capital primarily consists of CET1 capital and perpetual preferred stock. The minimum Tier 1 risk-based capital ratio requirement is 6%. • Total Risk-Based Capital Ratio , equal to the ratio of total capital, including CET1 capital, additional Tier 1 capital and Tier 2 capital, to risk-weighted assets.
Under SBA regulations, without prior SBA approval, loans and other investments by licensees with outstanding SBA leverage to any single small business concern may not exceed 30% of an SBIC’s “regulatory capital.” 16 SBICs may invest idle funds that are not being used to make loans or other long-term investments in certain short-term investments permitted under SBA regulations.
Under SBA regulations, without prior SBA approval, loans and other investments by licensees with outstanding SBA leverage to any single small business concern may not exceed 10% of the sum of an SBIC’s “private capital” and its total approved SBA leverage. 15 SBICs may invest idle funds that are not being used to make loans or other long-term investments in certain short-term investments permitted under SBA regulations.
The prompt corrective action framework, which generally applies to FDIC-insured depository institutions, including the Bank, also includes capital requirements the Bank must satisfy to, among other things, be able to accept brokered deposits without limitations. See “Prompt Corrective Action” and “Brokered Deposits” below. In addition to meeting the minimum capital requirements, under the U.S.
The minimum Tier 1 leverage ratio requirement is 4%. The prompt corrective action framework, which generally applies to FDIC-insured depository institutions, including the Bank, also includes capital requirements the Bank must satisfy to, among other things, be able to accept brokered deposits without limitations. See “Prompt Corrective Action” and “Brokered Deposits” below.
Our employee benefits also help protect the health, well-being and financial security of our employees. 9 SUPERVISION AND REGULATION Exemption from the 1940 Act In order to maintain our status as a non-investment company, we operate so as to fall outside the definition of an “investment company” or within an applicable exception.
SUPERVISION AND REGULATION Exemption from the 1940 Act In order to maintain our status as a non-investment company, we operate so as to fall outside the definition of an “investment company” or within an applicable exception.
Federal banking regulators published a final rule, effective in April 2019, permitting banking organizations to phase in any adverse day-one regulatory capital effects of the adoption of ASU 2016-13 (referred to as the current expected credit loss model, or CECL), over a period of three years. The Bank formally adopted CECL on January 1, 2023.
Capital requirements would not change for community banks, which includes the Bank. 10 Federal banking regulators published a final rule, effective in April 2019, permitting banking organizations to phase in any adverse day-one regulatory capital effects of the adoption of ASU 2016-13 (referred to as the current expected credit loss model, or CECL), over a period of three years.
These activities include originating loans or other receivables marketed by our partners and selling those loans or receivables to our partners or others, within a specified time after origination, such as three business days.
Expand our strategic partnership program . We launched an initial fintech partnership during 2020. These activities include originating loans or other receivables marketed by our partners and selling those loans or receivables to our partners or others, within a specified time after origination, such as three business days.
We believe the impact to the Bank of the Valid-When-Made Rule will be minimal. Future Legislation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
Future Legislation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
The following table shows our loans receivable as of December 31, 2023.
The following table presents our loans receivable as of December 31, 2024.
In general, the Bank has established relationships with dealers, FSPs, and contractors, which are the sources for consumer loan volumes. The loans are made up of recreation loans and home improvement loans which were 64% and 36% of total consumer loans at December 31, 2023.
Borrowers may prepay consumer loans without any prepayment penalty. In general, the Bank has established relationships with dealers, contractors, and FSPs, which are the sources for consumer loan volumes. The loans are made up of recreation loans and home improvement loans which were 65% and 35% of total consumer loans at December 31, 2024.
The FDIC, as required under the FDIA, established a plan in September 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35 percent within eight years.
The FDIC, as required under the FDIA, established a plan in September 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35 percent within eight years. The increased assessment is intended to improve the likelihood that the DIF reserve ratio would reach the required minimum by the statutory deadline of September 30, 2028.
Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied.
Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. These legislative and regulatory changes are likely to accelerate under, and in response to, the new U.S. administration.
Among other things, in addition to the restrictions on brokered deposits discussed above, the FDIA limits the interest rates paid on deposits by undercapitalized institutions and limits the aggregate extensions of credit by a depository institution to an executive officer, director, principal shareholder or related interest. 13 Consumer Financial Protection The Bank is subject to a number of federal and state consumer protection laws that extensively govern the Bank’s consumer lending businesses.
Among other things, in addition to the restrictions on brokered deposits discussed above, the FDIA limits the interest rates paid on deposits by undercapitalized institutions and limits the aggregate extensions of credit by a depository institution to an executive officer, director, principal shareholder or related interest.
The minimum total risk-based capital ratio requirement is 8%. • Tier 1 Leverage Ratio , equal to the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions). The minimum Tier 1 leverage ratio requirement is 4%.
The Bank’s Tier 2 capital primarily includes allowance for credit losses up to 1.25% of the Bank’s risk-weighted assets. The minimum total risk-based capital ratio requirement is 8%. • Tier 1 Leverage Ratio , equal to the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions).
The Gramm-Leach-Bliley Act requires financial institutions to periodically disclose their privacy policies and practices relating to their collection, sharing and protection of nonpublic personal information and enables retail customers to opt out of their information being shared by financial institutions with unaffiliated third parties under certain circumstances.
Financial Privacy and Cybersecurity Federal and state law contains extensive consumer privacy protection provisions. The Gramm-Leach-Bliley Act requires financial institutions to periodically disclose their privacy policies and practices relating to sharing information and enables retail customers to opt out of institutions' ability to share information with unaffiliated third parties under certain circumstances.
The Valid-When-Made Rule does not address when a state-chartered bank is the “true lender” of a loan, and the ultimate effect of the FDIC rule remains uncertain in light of the overturning of the OCC's analogous rule pursuant to a Congressional Review Act resolution signed by President Biden, and other pending legal challenges to bank-fintech partnerships on the ground that the bank is not the “true lender.” In 2020, the state attorneys general of seven states and the District of Columbia filed suit against the FDIC, alleging that the Valid-When-Made Rule conflicts with the FDIA, exceeds the FDIC’s statutory authority, and violates the Administrative Procedure Act.
The Valid-When-Made Rule does not address when a state-chartered bank is the “true lender” of a loan, and the ultimate effect of the FDIC rule remains uncertain in light of the overturning of the OCC's analogous rule pursuant to a Congressional Review Act resolution signed by President Biden, and other pending legal challenges to bank-fintech partnerships on the ground that the bank is not the “true lender.” We believe the impact to the Bank of the Valid-When-Made Rule will be minimal.
We value employee development and training and are committed to identifying and developing the talents of our next-generation leaders.
We value employee development and training and are committed to identifying and developing the talents of our next-generation leaders. Our employee benefits also help protect the health, well-being and financial security of our employees.
Deposit Insurance The Bank’s deposits have the benefit of FDIC insurance up to the applicable limits. The FDIC’s Deposit Insurance Fund, or DIF, is funded by assessments on insured depository institutions, such as us.
The FDIC’s Deposit Insurance Fund, or DIF, is funded by assessments on insured depository institutions, such as us.
Taxi Medallion Lending Taxi medallion loans of $3.7 million comprised less than 1% of our loans receivable as of December 31, 2023. Taxi medallion loans collateralized by taxi medallions in the New York City metropolitan area and related assets comprised 100% of the taxi medallion loan portfolio as of December 31, 2023.
Taxi Medallion Lending Taxi medallion loans and assets of $7.7 million comprised less than 1% of our assets as of December 31, 2024. All taxi medallion loans and assets were located in the New York City metropolitan area.
As of December 31, 2023, 2022, and 2021, the weighted average FICO scores, measured at origination, of our recreation loans outstanding were 683, 671, and 668. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2023, 2022, and 2021 were 686, 676, and 684.
The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2024, 2023, and 2022 were 685 (686 exclusive of loans held for sale), 686, and 676.
Examination and Supervision Federal and state banking agencies require the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures. We must undergo regular on-site examinations by the FDIC and the Utah DFI, which examine for adherence to a range of legal and regulatory compliance responsibilities.
Examination and Supervision Federal and state banking agencies require the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures.

… 54 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+27 added−29 removed157 unchanged
Biggest changeAny of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures or other controls. 29 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.
Biggest changeAdditionally, 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.
Other changes in the laws or regulations applicable to us more generally, may negatively impact the profitability of our business activities, require us to change certain of our business practices, materially affect our business model, limit the activities in which we may engage, affect retention of key personnel, require us to raise additional regulatory capital, increase the amount of liquid assets that we hold, or otherwise affect our funding profile or expose us to additional costs (including increased compliance costs).
Other changes in the laws or regulations applicable to us more generally, may negatively impact the profitability of our business activities, require us to change certain of our business practices, materially affect our business model, limit the activities in which we may engage, affect retention of key personnel, require us to raise additional regulatory capital, increase the amount of liquid assets that 22 we hold, or otherwise affect our funding profile or expose us to additional costs (including increased compliance costs).
Generative AI, if used to perpetrate fraud or launch cyberattacks, could create panic at a particular financial institution or exchange, which could pose a threat to financial stability. Terrorist attacks, other acts of violence or war, and natural disasters may affect any market for our securities, impact the businesses in which we invest, and harm our operations and profitability.
Generative AI, if used to perpetrate fraud or launch cyberattacks, could create panic at a particular financial institution or exchange, which could pose a threat to financial stability. Acts of violence or war, natural disasters, and terrorist attacks may affect any market for our securities, impact the businesses in which we invest, and harm our operations and profitability.
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. 25 Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
See “Supervision and Regulation—Deposit Insurance.” Future increases of FDIC insurance premiums or special assessments could have a material adverse effect on our business, financial condition or results of operations. Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
ITEM 1A. RI SK FACTORS Risks Related to Our Loan Portfolios and Business Our business is heavily concentrated in consumer lending, which carries a high risk of loss that is different from and typically higher than the risk of loss associated with commercial lending, and which could be adversely affected by an economic downturn.
ITEM 1A. RI SK FACTORS Risks Related to Our Loan Portfolios and Business Our business is heavily concentrated in consumer lending, which carries a risk of loss that is different from and typically higher than the risk of loss associated with commercial lending and which could be adversely affected by an economic downturn.
As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations. 24 The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.
As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations. The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations. Increases in FDIC insurance premiums may adversely affect our earnings.
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. 23 Increases in FDIC insurance premiums may adversely affect our earnings.
We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization, or public offering, which would allow us to sell the underlying equity interests. 33 ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization, or public offering, which would allow us to sell the underlying equity interests. ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through concern with one or more persons, to vote more than 10% but not less than 25% of any class of voting securities of a financial institution.
In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through concern with one or more persons, to vote more than 10% but less than 25% of any class of voting securities of a financial institution.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the current global economic and political environment, our work-from home arrangements, the outsourcing of some of our business operations, the ongoing shortage of qualified cybersecurity professionals, and the interdependence of third parties to our systems.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the current global economic and political environment, our work-from home arrangements, 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.
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 in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.
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.
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.
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.
Additionally, a downturn in any particular industry or sector in which we are invested could also negatively impact the aggregate returns we realize. The lack of liquidity in our investments may adversely affect our business. We generally make investments in private companies.
Additionally, a downturn in any particular industry or sector in which we are invested could also negatively impact the aggregate returns we realize. 29 The lack of liquidity in our investments may adversely affect our business. We generally make investments in private companies.
The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets. 19 Our financial condition, liquidity and results of operations depend on the credit performance of our loans.
The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets. Our financial condition, liquidity and results of operations depend on the credit performance of our loans.
Historically, the cost of remediation has not been material to our business, but it could be in the future. Our SBIC subsidiaries are licensed by the SBA and are therefore subject to SBA regulations. Our SBIC subsidiaries are licensed to operate as SBICs and are regulated by the SBA.
Historically, the cost of remediation has not been material to our business, but it could be in the future. 24 Our SBIC subsidiaries are licensed by the SBA and are therefore subject to SBA regulations. Our SBIC subsidiaries are licensed to operate as SBICs and are regulated by the SBA.
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.
In the event of a default on a 18 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.
Further, if we need to raise capital in the future, we may have to do so when other financial institutions are seeking to raise capital and would then have to compete with those institutions for investors.
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.
In addition, the Company has and expects to 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.
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.
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 or FSPs.
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.
We are subject to various privacy, information security, and data protection laws, including requirements concerning cybersecurity and security breach notification, and we could be negatively affected by these laws.
We are subject to various privacy, information security, and data protection laws, including requirements concerning security breach notification, and we could be negatively affected by these laws.
Our ability to maintain relationships with dealerships, contractors and FSPs is significantly dependent on our ability to effectively evaluate a borrower's credit profile and likelihood of default in a timely fashion. To conduct this evaluation, we utilize credit, pricing, loss forecasting and scoring models that allow us to automate elements of our underwriting processes.
Our ability to maintain relationships with dealers, contractors and FSPs is significantly dependent on our ability to effectively evaluate a borrower's credit profile and likelihood of default in a timely fashion. To conduct this evaluation, we utilize credit, pricing, loss forecasting and scoring models that allow us to automate elements of our underwriting processes.
By its nature, lending to consumers carries with it different risks and typically a higher risk of loss than commercial lending.
By its nature, lending to consumers carries with it different risks and typically a higher risk of consistent loss than commercial lending.
If our underwriting processes do not adequately assess risk, contain errors or are otherwise ineffective, whether due to automation or otherwise, our reputation and relationships with dealerships, contractors and FSPs could be harmed, our market share could decline and our financial condition, liquidity and result of operations could be adversely affected.
If our underwriting processes do not adequately assess risk, contain errors or are otherwise ineffective, whether due to automation or otherwise, our reputation and relationships with dealers, contractors and FSPs could be harmed, our market share could decline and our financial condition, liquidity and result of operations could be adversely affected.
As a result, our ability to originate consumer loans depends on relationships with a limited number of dealerships, contractors, and FSPs. Although we have relationships with various dealerships, contractors, and FSPs, none of relationships are exclusive and each may be terminated at any time.
As a result, our ability to originate consumer loans depends on our relationships with a limited number of dealers, contractors, and FSPs. Although we have relationships with various dealers, contractors, and FSPs, none of our relationships are exclusive and each may be terminated at any time.
A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to several specified “control factors” as set forth in the applicable regulations.
A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to a number of specified “control factors” as set forth in the applicable regulations.
Various state and federal banking regulators and state legislatures have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory and/or law enforcement notification requirements in certain circumstances in the event of a security breach.
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 security breach.
If inflationary pressures persist, 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.
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.
Such attacks or natural disasters in the U.S. or elsewhere may impact the businesses in which we directly or indirectly invest by undermining economic conditions in the United States. In addition, a portion of our business is focused on the New York City metropolitan area, which suffered a terrorist attack in 2001 and has faced continued threats.
Such events in the U.S. or elsewhere may impact the businesses in which we directly or indirectly invest by undermining economic conditions in the United States. In addition, a portion of our business is focused on the New York City metropolitan area, which suffered a terrorist attack in 2001 and has faced continued threats.
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 any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing physical, technical, and administrative safeguards appropriate based on our size and complexity, the nature and scope of our activities, and the sensitivity of the customer information we process, as well as plans for responding to data security breaches.
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 any 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 of safeguards appropriately 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.
Compliance with current or future privacy, data protection, and information security laws (including those regarding security breach notification) could result in higher compliance technology, and other operational costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations.
Compliance with current or future privacy, data protection, and information security laws (including those regarding 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.
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 is comprised of fixed-rate loans.
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.
Although the dealerships, contractors and FSPs 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 consumer might allege that they did not. This, in turn, can result in claims against us or in loans being uncollectible.
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 consumer might allege that they did not. This, in turn, can result in claims against us or in loans being uncollectible.
Any such breach or disruption could compromise our networks and the information stored there could be accessed, publicly disclosed, destroyed, lost, or stolen.
Any such breach or disruption could compromise our systems and the information stored there could be accessed, publicly disclosed, destroyed, lost, or stolen.
In those cases, we may decide that it is beneficial to remediate the situation, either by assisting the consumers to get a refund, working with the dealerships, contractors or FSPs to modify the terms of the loans or reducing the amount due by making a concession to the consumer or otherwise.
In those cases, we may decide that it is beneficial to remediate the situation, either by assisting the consumers 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.
In addition, our increasing interconnectivity with service providers, dealerships, contractors and FSPs, including through application programming interfaces, increases the risk that a security breach or other disruption affecting a third party materially affects our ability to conduct business.
In addition, our increasing interconnectivity with service providers, dealers, contractors, FSPs, and Strategic Partners including through application programming interfaces, increases the risk that a security breach or other disruption affecting a third party materially affects our ability to conduct business.
We may not control many of Medallion Capital’s portfolio companies. We do not control Medallion Capital’s portfolio companies, even though we may have board representation or board observation rights.
We do not control Medallion Capital’s portfolio companies, even though we may have board representation or board observation rights.
Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2023 by $1.6 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $1.9 million at December 31, 2023.
Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2024 by $2.2 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $2.7 million at December 31, 2024.
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, or otherwise, in the future.
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.
Additionally, higher gasoline prices, volatile real estate values and market conditions, resets of adjustable rate mortgages to higher interest rates, increases in inflation, general availability of consumer credit, or other factors that impact consumer confidence or disposable income, could increase loss frequency and decrease consumer demand for RVs, boats, trailers and other consumer products (including in connection with home improvement projects), as well as weaken collateral values on certain types of consumer products.
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, 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, and other consumer recreational equipment (including in connection with home improvement projects), as well as weaken collateral values on certain types of consumer products.
If any of the various dealerships, contractors or FSPs through which we originate loans fails to fulfill their obligations to consumers or comply with applicable law, we may incur remediation costs.
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.
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, 2023, Medallion Bank’s Tier 1 leverage ratio was 16.2%.
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, Medallion Bank’s Tier 1 leverage ratio was 15.7%.
Terrorist attacks and natural disasters may harm our results of operations and your investment. We cannot assure you that there will not be further terrorist attacks against the U.S. or U.S. businesses or major natural disasters hitting the United States.
Acts of violence or war, natural disasters, and terrorist attacks may harm our results of operations and your investment. We cannot assure you that there will not be further acts of violence or war globally or domestically, major natural disasters hitting the United States or terrorist attacks against the U.S. or U.S. businesses.
As of December 31, 2023, 38% of our recreation loans 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.
As of December 31, 2024, 37% 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.
Our business, financial condition and results of operations could be negatively impacted if we are unsuccessful in developing and maintaining relationships with dealerships, contractors, and FSPs. We originate loans by working with third-party sellers of consumer products and not by working directly with consumers.
Our business, financial condition and results of operations could be negatively impacted if we are unsuccessful in developing and maintaining relationships with dealers, contractors, and FSPs. We originate loans for retention in our loan portfolios by working with third-party sellers of consumer products and not by working directly with consumers.
Any such access, disclosure, destruction or other impact to the confidentiality, integrity or availability of such 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.
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.
The demand for the products we offer may be reduced due to a variety of factors, such as demographic patterns, changes in 20 customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products or the availability of competing products.
The demand for the products we offer may be reduced due to a variety of factors, such as the risk of recession and other economic conditions, demographic patterns, changes in customer preferences or financial conditions, regulatory restrictions that decrease customer access to particular products or the availability of competing products.
AI models, particularly generative AI models, may produce output or take action that is incorrect, that result in the release of private, confidential or proprietary information, that reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others, or that is otherwise harmful or which produce outcomes contrary to the expectations of consumers.
AI models, notably generative 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.
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, or malfeasance, or other disruptions as a result of systems failures, operational events, employee error, or incidents affecting our third-party service providers (or providers to those third-party service providers).
Despite our security and business continuity measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions, or vulnerable to disruptions, including those resulting from systems failures, operational events, employee error, or incidents affecting our third-party service providers (or providers to those third-party service providers).
Further, we may rely on AI models developed by third parties, and, to that extent, 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 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.
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.
In addition, during an economic slow-down 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.
In addition, during an economic slow-down 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.
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-attack 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.
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-attack 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. 28 Misconduct by current or former employees could expose us to significant legal liability and reputational harm.
In addition, a large proportion of our new loan originations are concentrated in our top ten relationships (57% in our home improvement portfolio and 43% in our recreation portfolio), and the loss of a significant relationship could have a negative effect on demand for our products and our new loan originations.
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), and the loss of a significant relationship could have a negative effect on demand for our products and our new loan originations.
Such a decline could reduce the amount available for distribution payments. As of December 31, 2023, we had $2.1 billion of outstanding indebtedness with a weighted average borrowing cost of 3.50%. 30 Approximately $0.7 billion of our borrowing relationships have maturity dates during 2024, a vast majority of which are brokered certificates of deposit.
Such a decline could reduce the amount available for distribution payments. As of December 31, 2024, we had $2.4 billion of outstanding indebtedness with a weighted average borrowing cost of 4.03%. Approximately $0.9 billion of our borrowing relationships have maturity dates during 2025, a vast majority of which are brokered certificates of deposit.
As a result, our results of operations could be materially adversely affected if a substantial number of our portfolio companies elect to prepay amounts owed to us and we are not able to reinvest the proceeds for comparable yields in a timely fashion.
As a result, our results of operations could be materially adversely affected if a substantial number of our portfolio companies elect to prepay amounts owed to us and we are not able to reinvest the proceeds for comparable yields in a timely fashion. Our profitability may be directly affected by interest rate levels and fluctuations in interest rates.
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.
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.
For example, if we sell loans with less favorable credit characteristics, the net interest income and net interest margin for our loan portfolio could be adversely affected because loans with less favorable credit characteristics typically generate more net interest income and higher net interest margin. We depend on the accuracy and completeness of information about customers.
For example, if we sell loans with less favorable credit characteristics, the net interest income and net interest margin for our loan portfolio could be adversely affected because loans with less favorable credit characteristics typically generate more net interest income and higher net interest margin.
Although the net interest margins are intended to be higher to compensate us for this increased risk, an economic downturn could result in higher loss rates and lower returns than expected and could affect the profitability of our consumer loan portfolios. For example, in 2023 our net interest margin on gross loans decreased to 8.38% from 8.73%.
Although the net interest margins are intended to be higher to compensate us for this increased risk, an economic downturn could result in higher loss rates and lower returns than expected and could affect the profitability of our consumer loan portfolios.
The loss of any of these relationships, our failure to develop additional relationships, and circumstances in which our existing dealership, 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.
The loss of any of these relationships, our failure to develop additional relationships, and circumstances in which our existing dealership, 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. 19 A reduction in demand for our products and failure by us to adapt to such reduction could adversely affect our business, financial condition and results of operations.
Nevertheless, depending on the outcome of the litigation, 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.
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.
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. 28 Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
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.
We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer. The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted in 2010.
We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.
In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of the relevant portfolio company. 32 There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of the relevant portfolio company.
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 change that might affect the availability of brokered deposits.
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 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.
Regulatory agencies have also become increasingly focused on cybersecurity, including as a result of the increasing number of cybersecurity incidents; given this regulatory and cyber threat environment, we may incur additional expenses in order to comply with new obligations. We are dependent upon our senior management team for our future success.
Regulatory agencies have also become increasingly focused on cybersecurity incidents, and we may incur additional expenses in order to comply with new obligations. We are dependent upon our senior management team for our future success.
Any such disruptions could adversely affect our business, results of operations and ability to originate new loans. Climate change and the transition to a less carbon-dependent economy could also have a negative impact on origination volumes in our Recreation Lending segment if demand for recreational vehicles decreases due to climate-related concerns.
Climate change and the transition to a less carbon-dependent economy could also have a negative impact on origination volumes in our Recreation Lending segment if demand for recreational vehicles decreases due to climate-related concerns.
For example, in 2023, as interest rates increased, our net interest margin decreased by 64 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.
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.
Our ability to meet these financial covenants and restrictions could be affected by events beyond our control. A breach of these covenants could result in an event of default under the applicable debt instrument.
Certain privately placed notes contain financial covenants and other restrictions relating to financial ratios and minimum tangible net worth. Our ability to meet these financial covenants and restrictions could be affected by events beyond our control. A breach of these covenants could result in an event of default under the applicable debt instrument.
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 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.
Our business is particularly sensitive to macroeconomic conditions that affect the U.S. economy, consumer spending and consumer credit, including for example, the impacts of inflation, which has had and could continue to have an adverse effect on consumer spending, a rising interest rate environment, 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.
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, 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.
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.
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.
If the capital levels at Medallion Bank fall below the “well-capitalized” level as defined by the FDIC, or we otherwise fail to maintain “well capitalized” status, Medallion Bank’s ability to raise brokered deposits would be materially impaired. If Medallion Bank’s capital levels fall below the “adequately-capitalized” level as defined by the FDIC, it would be unable to raise brokered deposits.
See "Our Business - Supervision and Regulation" for additional information. 21 If the capital levels at Medallion Bank fall below the “well-capitalized” level as defined by the FDIC, or if it otherwise fails to maintain “well capitalized” status, Medallion Bank’s ability to raise brokered deposits would be materially impaired.
To date, cyber-attacks have not had a material impact on our financial condition, results or business; however, we could suffer material financial or other losses in the future and we are not able to predict the severity of these attacks.
However, we could suffer material financial or other losses in the future and we are not able to predict the severity of these attacks.
Misconduct by current or former employees could expose us to significant legal liability and reputational harm. We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of the dealerships, contractors, and FSPs that sell our consumer products are of critical importance.
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 consumer 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.
Risk Relating to Our Growth and Operations Competition with other lenders could adversely affect us. The consumer lending market is very competitive and is served by a variety of entities, including banks, savings and loan associations, credit unions, independent finance companies, and financial technology companies.
The 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.
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.
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, or 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.
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.
In order to grow, we will need to hire, train, supervise, and manage new employees. However, we cannot assure you that any such employees will contribute to the success of our business. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and results of operations.
In order to grow, we will need to hire, train, supervise, and manage new employees. However, we cannot assure you that any such employees will contribute to the success of our business.
We received dividends from Medallion Bank of $20.0 million for each of the years ended December 31, 2023 and 2022 and received dividends from Medallion Capital of $4.8 million and $5.1 million for the years ended December 31, 2023 and 2022, all of which was reinvested in Medallion Capital. 23 Legal and Regulatory Risks We are subject to pending litigation with the SEC 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.
Legal and Regulatory Risks 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.
Our profitability has and may further 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, restricting our ability to pass on increased interest costs to the consumer.
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.
The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries.
The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the SBIC subsidiaries to forego attractive investment opportunities that are not permitted under SBA regulations.

… 80 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−1 removed13 unchanged
Biggest changeWe continue to integrate our cybersecurity programs into our enterprise risk management program, which is led by various senior representatives of the Company and overseen by the Audit Committee of the Company’s Board of Directors.
Biggest changeWe continue to integrate our cybersecurity programs into our enterprise risk management program, which is led by various senior representatives of the Company and overseen by the Audit Committee of the Company’s Board of Directors. 32 Medallion Financial Corp., the Bank and Medallion Capital are each responsible for developing cybersecurity programs appropriate for their respective entities, including as may be required by applicable law or regulation.
As noted above, the Audit Committee regularly receives reports on cybersecurity matters from our Information Security Director and third parties as well as part of our enterprise risk management program. 34
As noted above, the Audit Committee regularly receives reports on cybersecurity matters from our Information Security Director and third parties as well as part of our enterprise risk management program .
Our business strategy, results of operations and financial condition have not been materially affected by risks from cybersecurity threats, and we currently do not expect that risks from cybersecurity threats are reasonably likely to materially affect us, but we cannot provide assurance that we will not be materially affected in the future by such risks or any future material incidents.
Our busine ss strategy, results of operations and financial condition have not been materially affected by risks from cybersecurity threats, and we currently do not expect that risks from cybersecurity threats are reasonably likely to materially affect us, but we cannot provide assurance that we will not be materially affected in the future by such risks or any future material incidents.
Removed
Medallion Financial Corp., the Bank and Medallion Capital are each responsible for developing cybersecurity programs appropriate for their respective entities, including as may be required by applicable law or regulation.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed0 unchanged
Biggest changeITEM 2. PR OPERTIES We lease office space in New York City for our corporate headquarters under a lease expiring in April 2027.
Biggest changeITEM 2. PR OPERTIES We lease office space in New York City for our corporate headquarters under a lease expiring in April 2027. Our New York City office space also handles loan origination and subsidiary operations and our taxi medallion lending segment.
We believe that our leased properties, taken as a whole, are in good operating condition and are suitable for our current business operations.
We do not own any real property, other than foreclosed properties obtained as a result of lending relationships. We believe that our leased properties, taken as a whole, are in good operating condition and are suitable for our current business operations.
Medallion Bank leases office space in Salt Lake City, Utah under a lease expiring in November 2030, which handles the recreation and home improvement lending segments. We do not own any real property, other than foreclosed properties obtained as a result of lending relationships.
Medallion Bank leases office space in Salt Lake City, Utah under a lease expiring in November 2030, which handles the recreation and home improvement lending segments. We also lease office space in Excelsior, Minnesota under a lease expiring February 2031, which handles our commercial lending segment.
Removed
We also lease office space for loan origination offices and subsidiary operations in Newark, New Jersey, which, along with our New York City office, handles our taxi medallion loan segment, and in Excelsior, Minnesota, which handles our commercial lending segment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 10 “Commitments and Contingencies” subsections (c) and (d) to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for details of the Company’s legal proceedings, including the pending SEC litigation. ITEM 4. MINE SAFE TY DISCLOSURES Not applicable. 35 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 10 “Commitments and Contingencies” subsections (c) and (d) to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for details of the Company’s legal proceedings, including the pending SEC litigation. ITEM 4. MINE SAFE TY DISCLOSURES Not applicable. 33 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−0 removed7 unchanged
Biggest changeStockholders may obtain additional information about the dividend reinvestment plan by contacting Equiniti Trust Company, LLC at PO Box 10027, Newark, NJ, 07101. 36 PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS On April 29, 2022, our board of directors authorized a new stock repurchase program with no expiration date, pursuant to which we were authorized to repurchase up to $35 million of our shares, which was increased to $40 million on August 10, 2022, also with no expiration date.
Biggest changeStockholders may obtain additional information about the dividend reinvestment plan by contacting Equiniti Trust Company, LLC at PO Box 10027, Newark, NJ, 07101. 34 Securities Authorized for Issuance Under Equity Compensation Plans Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 30, 2025 for our 2025 Annual Meeting of Shareholders under the caption “Equity Compensation Plan Information.” PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS On April 29, 2022, our board of directors authorized a new stock repurchase program with no expiration date, pursuant to which we were authorized to repurchase up to $35 million of our shares, which was increased to $40 million on August 10, 2022, also with no expiration date.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES STOCK PERFORMANCE GRAPH The following graph commences as of December 31, 2018 and compares the Company’s common stock with the cumulative total return for the NASDAQ Composite Index and the Russell 2000 Index.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES STOCK PERFORMANCE GRAPH The following graph commences as of December 31, 2019 and compares the Company’s common stock with the cumulative total return for the NASDAQ Composite Index and the Russell 2000 Index.
Furthermore, the following graph assumes the investment of $100 on December 31, 2018 in each of the Company’s common stock, the stocks comprising the NASDAQ Composite Index and the Russell 2000 Index and assumes dividends are reinvested.
Furthermore, the following graph assumes the investment of $100 on December 31, 2019 in each of the Company’s common stock, the stocks comprising the NASDAQ Composite Index and the Russell 2000 Index and assumes dividends are reinvested.
On March 6, 2024, the last reported sale price of our common stock was $8.37 per share. We are subject to federal and applicable state corporate income taxes on our taxable ordinary income and capital gains. Beginning in March 2022, the Company's board of directors reinstated our quarterly dividend.
On March 12, 2025, the last reported sale price of our common stock was $8.72 per share. We are subject to federal and applicable state corporate income taxes on our taxable ordinary income and capital gains. Beginning in March 2022, the Company's board of directors reinstated our quarterly dividend.
Cumulative Total Return Based on Initial Investment of $100 on December 31, 2018, with dividends reinvested Our common stock is quoted on NASDAQ under the symbol “MFIN.” Our common stock commenced trading on May 23, 1996. As of March 6, 2024, there were approximately 172 holders of record of our common stock.
Cumulative Total Return Based on Initial Investment of $100 on December 31, 2019, with dividends reinvested Our common stock is quoted on NASDAQ under the symbol “MFIN.” Our common stock commenced trading on May 23, 1996. As of March 12, 2025, there were approximately 170 holders of record of our common stock.
A dividend of $0.08 per share was paid in March, May, and August 2023. On October 24, 2023, the Company’s board of directors authorized and increased the quarterly dividend to $0.10 per share, and a dividend of $0.10 per share was paid in November 2023.
A dividend of $0.10 per share was paid in March, May, and August 2024. On October 25, 2024, the Company’s board of directors authorized and increased the quarterly dividend to $0.11 per share, and a dividend of $0.11 per share was paid in November 2024.
Such new repurchase program replaced the previous one, which was terminated. As of December 31, 2023, up to $19,998,012 of shares remain authorized for repurchase under our stock repurchase program. The Company did not repurchase shares of common stock during the quarter ended December 31, 2023. ITEM 6. [ Reserved]
Such new repurchase program replaced the previous one, which was terminated. During the year ended December 31, 2024 we repurchased 570,404 shares of our common stock at an aggregate cost of $4.6 million. Accordingly, as of December 31, 2024, up to $15,392,299 of shares remain authorized for repurchase under our stock repurchase program.
Added
The following table presents our purchases for the year ended December 31, 2024.
Added
Total Numbers of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Total Amount Paid Maximum Approximate Dollar Value of Shares that May Yet to Be Purchased under the Plans or Programs January 1 - January 31 — $ — — $ — $ 19,998,012 February 1 - February 29 88,840 7.92 703,587 703,587 19,294,424 March 1 - March 31 175,320 8.11 1,421,942 1,421,942 17,872,483 April 1 - April 30 — — — — 17,872,483 May 1 - May 31 107,000 8.15 872,413 872,413 17,000,070 June 1 - June 30 76,900 8.35 642,241 642,241 16,357,829 July 1 - July 31 — — — — 16,357,829 August 1 - August 31 122,344 7.89 122,344 965,530 15,392,299 September 1 - September 30 — — — — 15,392,299 October 1 - October 31 — — — — 15,392,299 November 1 - November 30 — — — — 15,392,299 December 1 - December 31 — — — — 15,392,299 Total 570,404 $ 8.07 3,762,527 $ 4,605,713 $ 15,392,299 ITEM 6. [ Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

130 edited+46 added−32 removed68 unchanged
Biggest change(Dollars in thousands) 2023 2022 2021 2020 2019 Prior Total Recreation $ 3,136 $ 18,836 $ 10,857 $ 5,115 $ 5,001 $ 7,567 $ 50,512 Home improvement 2,196 5,686 2,662 702 435 627 12,308 Commercial — — 119 — 900 — 1,019 Taxi medallion — — — — — 3,829 3,829 Total $ 5,332 $ 24,522 $ 13,638 $ 5,817 $ 6,336 $ 12,023 $ 67,668 43 The following tables set forth the allowance for credit losses, by type, as of December 31, 2023 and 2022 follows: December 31, 2023 (Dollars in thousands) Amount Percentage of Allowance Allowance as a Percent of Loan Category Allowance as a Percent of Nonaccrual Recreation $ 57,532 68 % 4.31 % 221.50 % Home improvement 21,019 25 2.76 80.92 Commercial 4,148 5 3.61 15.97 Taxi medallion 1,536 2 41.93 5.91 Total $ 84,235 100 % 3.80 % 324.31 % December 31, 2022 (Dollars in thousands) Amount Percentage of Allowance Allowance as a Percent of Loan Category Allowance as a Percent of Nonaccrual Recreation $ 41,966 66 % 3.55 % 130.60 % Home improvement 11,340 18 1.81 35.29 Commercial 1,049 1 1.13 3.26 Taxi medallion 9,490 15 69.93 29.53 Total $ 63,845 100 % 3.33 % 198.69 % As of December 31, 2023, the total allowance rate for credit losses increased 47 basis points from December 31, 2022, due to the adoption of CECL and rising loss rates which resulted in higher allowances for recreation, home improvement, and commercial loans, offset by a reduction in the allowance for taxi medallion loans due to recoveries and structured settlements entered into during the year.
Biggest changeThe following tables present the gross charge-offs for the years ended December 31, 2024 and 2023, by the year of origination: December 31, 2024 (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Total Recreation $ 3,203 $ 18,540 $ 22,883 $ 10,789 $ 4,222 $ 9,712 $ 69,349 Home improvement 841 5,766 6,412 3,131 815 1,070 18,035 Commercial — 71 — — — — 71 Taxi medallion — — — — — 124 124 Total $ 4,044 $ 24,377 $ 29,295 $ 13,920 $ 5,037 $ 10,906 $ 87,579 December 31, 2023 (Dollars in thousands) 2023 2022 2021 2020 2019 Prior Total Recreation $ 3,136 $ 18,836 $ 10,857 $ 5,115 $ 5,001 $ 7,567 $ 50,512 Home improvement 2,196 5,686 2,662 702 435 627 12,308 Commercial — — 119 — 900 — 1,019 Taxi medallion — — — — — 3,829 3,829 Total $ 5,332 $ 24,522 $ 13,638 $ 5,817 $ 6,336 $ 12,023 $ 67,668 41 The following tables present the allowance for credit losses for loans held for investment, by type, as of December 31, 2024 and 2023: December 31, 2024 (Dollars in thousands) Amount Percentage of Allowance Allowance as a Percent of Loan Category Allowance as a Percent of Nonaccrual Recreation $ 71,102 73 % 5.00 % 440.07 % Home improvement 20,536 21 2.48 127.11 Commercial 5,190 5 4.66 32.12 Taxi medallion 540 1 28.29 3.34 Total $ 97,368 100 % December 31, 2023 (Dollars in thousands) Amount Percentage of Allowance Allowance as a Percent of Loan Category Allowance as a Percent of Nonaccrual Recreation $ 57,532 68 % 4.31 % 221.50 % Home improvement 21,019 25 2.76 80.92 Commercial 4,148 5 3.61 15.97 Taxi medallion 1,536 2 41.93 5.91 Total $ 84,235 100 % The following table presents the trend in loans 90 days or more past due as of the dates indicated.
We do not have a deadline for its consideration of these alternatives, and there can be no assurance that this process will result in any transaction being announced or consummated. CRITICAL ACCOUNTING POLICIES AND ESTIMATES We follow financial accounting and reporting policies that are in accordance with GAAP.
We do not have a deadline for its consideration of these alternatives, and there can be no assurance that this process will result in any transaction being announced or consummated. CRITICAL ACCOUNTING ESTIMATES We follow financial accounting and reporting policies that are in accordance with GAAP.
We did not have any loans tied to LIBOR. Our trust preferred securities bore a variable rate of interest of 90 day LIBOR plus 2.13% until June 30, 2023. For these borrowings, the 90-day Secured Overnight Financing Rate (SOFR) adjusted by a relevant spread adjustment of approximately 26 basis points has replaced the previous LIBOR-based rate.
We did not have any loans tied to LIBOR. Our trust preferred securities bore a variable rate of interest of 90 day LIBOR plus 2.13% until June 30, 2023. For these borrowings, the 90-day Secured Overnight Financing Rate, or SOFR, adjusted by a relevant spread adjustment of approximately 26 basis points has replaced the previous LIBOR-based rate.
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.
This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. 36 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.
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, and trust preferred securities.
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.
In addition, we may choose to participate a greater portion of our loan portfolio to third parties. We regularly seek additional sources of liquidity; however, given current market conditions, there can be no assurance that we will be able to secure additional liquidity on terms favorable to us or at all.
In addition, we may choose to participate out a greater portion of our loan portfolio to third parties. We regularly seek additional sources of liquidity; however, given current market conditions, there can be no assurance that we will be able to secure additional liquidity on terms favorable to us or at all.
If that occurs, we may decline to underwrite lower yielding loans in order to conserve capital until credit conditions in the market become more favorable; or we may be required to dispose of assets when we would not otherwise do so, and at prices which may be below the net book value of such assets in order for us to repay indebtedness on a timely basis. 56 Recently Issued Accounting Standards 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.
If that occurs, we may decline to underwrite lower yielding loans in order to conserve capital until credit conditions in the market become more favorable; or we may be required to dispose of assets when we would not otherwise do so, and at prices which may be below the net book value of such assets in order for us to repay indebtedness on a timely basis. 53 Recently Adopted Accounting Standards 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.
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 FSPs.
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 900 contractors and FSPs.
LOANS Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, which are amortized to interest income over the life of the loan. For the years ended December 31, 2023 and 2022, there was continued growth in the recreation and home improvement segments.
LOANS Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, which are amortized to interest income over the life of the loan. For the years ended December 31, 2024 and 2023, there was continued growth in the recreation and home improvement segments.
We maintain relationships with approximately 3,200 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.
We maintain relationships with approximately 3,300 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 Bank is a wholly-owned subsidiary that originates consumer loans for the purchase of recreational vehicles, boats, and home improvements, and provides loan origination and other services to fintech partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business.
The Bank is a wholly-owned subsidiary that originates consumer loans for the purchase of recreational vehicles, boats, collector cars, and home improvements, and provides loan origination and other services to fintech partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OBJECTIVE The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the years ended December 31, 2023, 2022, and 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OBJECTIVE The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the years ended December 31, 2024, 2023, and 2022.
RATE/VOLUME ANALYSIS The following table presents the change in interest income and expense due to changes in the average balances (volume) and average rates, calculated for the years ended December 31, 2023, 2022, and 2021.
RATE/VOLUME ANALYSIS The following table presents the change in interest income and expense due to changes in the average balances (volume) and average rates, calculated for the years ended December 31, 2024, 2023, and 2022.
For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 For a comparison of the Company’s results of operations for the year ended December 31, 2022 to the year ended December 31, 2021, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on March 10, 2023.
For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 For a comparison of the Company’s results of operations for the year ended December 31, 2023 to the year ended December 31, 2022, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on March 9, 2024.
The transition to the CECL methodology on January 1, 2023 resulted in an increase of $13.7 million to our allowance for credit losses on loans (“ACL”) and a net-of-tax cumulative-effect adjustment of $9.9 million to the beginning balance of retained earnings.
The transition to the CECL methodology on January 1, 2023 resulted in an increase of $13.7 million to our allowance for credit losses on loans, or ACL, and a net-of-tax cumulative-effect adjustment of $9.9 million to the beginning balance of retained earnings.
We are assessing the impact of the update on the accompanying financial statements.
We are assessing the impact of the update on the accompanying financial statements. 54
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 43% of recreation lending’s new loan originations for the year ended December 31, 2023.
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% of recreation lending’s new loan originations for the year ended December 31, 2024.
The following table presents non-prime originations in comparison to total originations for the years ended December 31, 2023, 2022, and 2021.
The following table presents non-prime originations in comparison to total originations for the years ended December 31, 2024, 2023, and 2022.
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 is expected to continue to increase the yield on these portfolios over time, as well as increase the credit quality of our new issuances, particularly in our recreation segment, with the average FICO scores, measured at origination, of our recreation loans outstanding being 683 as of December 31, 2023 compared to 671 as of December 31, 2022.
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 is expected to continue to increase the yield on these portfolios over time, as well as increase the credit quality of our new issuances, particularly in our recreation segment, with the average FICO scores, measured at origination, of our total recreation loans outstanding being 685 and 683 as of December 31, 2024 and 2023.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2023, 2022, and 2021.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2024, 2023, and 2022.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2023, 2022, and 2021.
The following table presents selected financial data and ratios as of and for the years ended December 31, 2024, 2023, and 2022.
In April 2023, the Bank began to originate retail savings deposits through a third-party service provider and, as of December 31, 2023, the Bank had $18.0 million in retail savings deposit balances. In March 2023, the Bank established a discount window line of credit at the Federal Reserve.
In April 2023, the Bank began to originate retail savings deposits through a third-party service provider and, as of December 31, 2024, the Bank had $6.0 million in retail savings deposit balances. 51 In March 2023, the Bank established a discount window line of credit at the Federal Reserve.
A relative measure of interest rate sensitivity is provided by the cumulative difference between interest sensitive assets and interest sensitive liabilities for a given time interval expressed as a percentage of total assets. 53 The following table presents our interest rate sensitivity gap at December 31, 2023.
A relative measure of interest rate sensitivity is provided by the cumulative difference between interest sensitive assets and interest sensitive liabilities for a given time interval expressed as a percentage of total assets. 50 The following table presents our interest rate sensitivity gap at December 31, 2024.
We also show results for a non-operating segment, corporate and other investments. Recreation Lending Recreation lending is a growth oriented business focused on originating prime and non-prime recreation loans which is a significant source of income for us, accounting for 67%, 71%, and 74% of our interest income for the years ended December 31, 2023, 2022, and 2021.
We also show results for a non-operating segment, corporate and other investments. Recreation Lending Recreation lending is a return-oriented business focused on originating prime and non-prime recreation loans which is a significant source of income for us, accounting for 67%, 67%, and 71% of our interest income for the years ended December 31, 2024, 2023, and 2022.
Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2023 by $1.6 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $1.9 million at December 31, 2023.
Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2024 by $2.2 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $2.7 million at December 31, 2024.
The table below presents the components of our debt were as of December 31, 2023, exclusive of deferred financing costs of $8.5 million. See Note 5 to the consolidated financial statements for details of the contractual terms of our borrowings.
The table below presents the components of our debt as of December 31, 2024, exclusive of deferred financing costs of $8.2 million. See Note 5 to the consolidated financial statements for details of the contractual terms of our borrowings.
The following table presents quarterly originations for the years ended December 31, 2023, 2022, and 2021.
The following table presents quarterly originations for the years ended December 31, 2024, 2023, and 2022.
The 35 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 increased.
The 32 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.
MSC earns referral and servicing fees for these activities. In 2019, the Bank launched a strategic partnership program to provide lending and other services to financial technology, or fintech, companies. The Bank entered into an initial partnership in 2020 and began issuing its first loans.
MSC earns referral and servicing fees for these activities. In 2019, the Bank launched a strategic partnership program to provide lending and other services to financial technology, or 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.
The average cost of the certificates of deposit was 2.71% during the current year, 114 basis points higher than the 1.57% average cost in the prior year, reflecting a higher rate on newly issued deposits when compared to the maturing deposits which were issued at lower rates in previous years.
The average cost of the certificates of deposit was 3.54% during the current year, 83 basis points higher than the 2.71% average cost in the prior year, reflecting a higher rate on newly issued deposits when compared to the maturing deposits which were issued at lower rates in previous years.
In December 2023, we completed a private placement to certain institutional investors of $12.5 million aggregate principal amount of 9.00% unsecured senior notes due December 2033, with interest payable semiannually. In September 2023, we completed a private placement to certain institutional investors of $39.0 million aggregate principal amount of 9.25% unsecured senior notes due September 2028, with interest payable semiannually.
In September 2023, we completed a private placement to certain institutional investors of $39.0 million aggregate principal amount of 9.25% unsecured senior notes due September 2028, with interest payable semiannually.
The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2023, 2022, and 2021 were 686, 676, and 684.
The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2024, 2023, and 2022 were 685, 686, and 676.
Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida each at 10% of loans outstanding December 31, 2023, with no other states at or above 10%.
Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Florida and Texas at 12% and 11% of loans outstanding December 31, 2024, with no other states at or above 10%.
As of December 31, 2023, 2022, and 2021, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 764, 753, and 754. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2023, 2022, and 2021 were 771, 758, and 759.
As of December 31, 2024, 2023, and 2022, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 767, 764, and 753. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2024, 2023, and 2022 were 781, 771, and 758.
If our qualitative loss factor rates were to increase 50 basis points, our recreation and home improvement general reserve would increase by $6.7 million and $3.8 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 $6.7 million and $3.8 million, respectively.
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 commercial lending business has concentrations in manufacturing, construction, and wholesale trade that make up 53%, 13%, and 11% of total loans outstanding as of December 31, 2023, as compared to 50%, 11%, and 14% as of December 31, 2022.
The commercial lending business has concentrations in manufacturing, construction, and wholesale trade that make up 57%, 12%, and 12% of total loans outstanding as of December 31, 2024, as compared to 53%, 13%, and 11% as of December 31, 2023.
Our top ten contractors and FSP relationships were responsible for over 50% of home improvement lending’s new loan originations for the years ended December 31, 2023 and 2022.
Our top ten contractors and FSP relationships were responsible for 48% of home improvement lending’s new loan originations for the years ended December 31, 2024 and 2023.
We had an allowance for credit losses as of December 31, 2023 of $84.2 million, which was attributable to the recreation (68%), home improvement (25%), commercial (5%), and taxi medallion (2%) loan portfolios.
We had an allowance for credit losses as of December 31, 2023 of $84.2 million, which was attributable to recreation (68%), home improvement (25%), and taxi medallion (2%) loans.
Our average interest cost for the year ended December 31, 2023 of 3.16% increased 99 basis points from 2.17% for the year ended December 31, 2022, attributable to the current higher interest rate environment, particularly the higher cost associated with our deposits.
Our average interest cost for the year ended December 31, 2024 of 3.93% increased 77 basis points from 3.16% for the year ended December 31, 2023, attributable to the current higher interest rate environment, particularly the higher cost associated with our deposits.
The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $20,000 as of December 31, 2023. The loans are fixed rate with an average term at origination of 12.9 years. The weighted average maturity of our loans outstanding as of December 31, 2023 is 10.0 years.
The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $20,000 as of December 31, 2024. The loans are fixed rate with an average term at origination of 14 years. The weighted average maturity of our loans outstanding as of December 31, 2024 is 11 years.
Salaries and benefits were $37.6 million for the year ended December 31, 2023, up from $31.1 million for the year ended December 31, 2022, with the increase attributable to a higher head count, annual cost of living increases, and higher performance based compensation.
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.
These financing options would also provide additional sources of funds for both external expansion and continuation of internal growth. The following table illustrates sources of available funds for us and each of our subsidiaries, and amounts outstanding under credit facilities and their respective end of period weighted average interest rates at December 31, 2023.
These financing options would also provide additional sources of funds for both external expansion and continuation of internal growth. The following table presents sources of available funds for us and each of our subsidiaries and amounts outstanding under trust preferred securities and borrowings and their respective end of period weighted average interest rates at December 31, 2024.
(2) Excludes federal funds sold and investment securities. Our interest rate sensitive assets were $2.4 billion and interest rate sensitive liabilities were $2.1 billion at December 31, 2023. The one-year cumulative interest rate gap was a negative $0.5 billion or 21% of interest rate sensitive assets.
(2) Excludes federal funds sold and investment securities. Our interest rate sensitive assets were $2.7 billion and interest rate sensitive liabilities were $2.4 billion at December 31, 2024. The one-year cumulative interest rate gap was a negative $0.6 billion or 22% of interest rate sensitive assets.
Year Ended December 31, 2023 2022 2021 (Dollars in thousands) Amount % (1) Amount % (1) Amount % (1) Recreation $ 9,095 0.4 % $ 7,365 0.4 % $ 3,818 0.3 % Home improvement 1,502 0.1 % 579 * 132 * Commercial 6,240 0.3 % 74 * 74 * Taxi medallion — * 885 * — * Total loans 90 days or more past due $ 16,837 0.8 % $ 8,903 0.5 % $ 6,878 0.6 % (1) Percentages are calculated against the total or managed loan portfolio, as appropriate.
Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Amount % (1) Amount % (1) Amount % (1) Recreation $ 10,018 0.4 % $ 9,095 0.4 % $ 7,365 0.4 % Home improvement 1,386 * 1,502 0.1 579 * Commercial 16,337 0.7 6,240 0.3 74 * Taxi medallion — — — — 885 * Total loans 90 days or more past due $ 27,741 1.1 % $ 16,837 0.8 % $ 8,903 0.5 % (1) Percentages are calculated against the total loan portfolio.
During the year ended December 31, 2023, we originated $34.9 million of loans, compared to $28.2 million in originations in 2022. As of December 31, 2023, commercial loans totaled $114.8 million. The following table presents selected financial data and ratios as of and for the years ended December 31, 2023, 2022, and 2021.
During the year ended December 31, 2024, we originated $14.3 million of loans, compared to $34.9 million in originations in 2023. As of December 31, 2024, commercial loans totaled $111.3 million. The following table presents selected financial data and ratios as of and for the years ended December 31, 2024, 2023, and 2022.
The average cost of borrowed funds was 3.16% for the year ended December 31, 2023, compared to 2.17% for the year ended December 31, 2022.
The average cost of borrowed funds was 3.93% for the year ended December 31, 2024, compared to 3.16% for the year ended December 31, 2023.
The amount of cash collected as well as recoveries recorded vary greatly from period to period due to a wide variety of circumstances surrounding each of the underlying assets, and while we continue to focus on collection and recovery efforts, it is unlikely that there will be future collections at the levels experienced in the current year.
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, future collections will be less than in the prior year.
Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Return on average assets 2.51 % 2.40 % 3.33 % Return on average stockholder's equity 17.33 14.92 21.24 Return on average equity 15.79 13.74 17.64 Net interest margin, gross 8.38 8.73 8.91 Equity to assets (1) 15.91 16.40 19.00 Debt to equity (2) 5.1x 4.9x 4.2x Net loans receivable to assets 82 % 82 % 77 % Net charge-offs 31,132 16,380 12,004 Net charge-offs as a % of average loans receivable 1.48 % 0.99 % 0.93 % Reserve coverage 3.80 3.33 3.37 (1) Includes $68.8 million, related to non-controlling interests in consolidated subsidiaries as of December 31, 2023, 2022, and 2021.
Year Ended December 31, (Dollars in thousands) 2024 2023 2022 Return on average assets 1.54 % 2.51 % 2.40 % Return on average stockholder's equity 10.12 17.33 14.92 Return on average equity 9.89 15.79 13.74 Net interest margin, gross 8.05 8.38 8.73 Equity to assets (1) 15.30 15.91 16.40 Debt to equity (2) 5.4x 5.1x 4.9x Net loans to assets 83 % 82 % 82 % Net charge-offs 63,369 31,132 16,380 Net charge-offs as a % of average loans receivable (3) 2.69 % 1.48 % 0.99 % Reserve coverage (4) 4.12 3.80 3.33 (1) Includes $68.8 million, related to non-controlling interests in consolidated subsidiaries as of December 31, 2024, 2023, and 2022.
As of December 31, 2022, loans before allowance for credit losses were $1.9 billion, comprised of recreation ($1.2 billion), home improvement ($0.6 billion), commercial ($92.9 million), taxi medallion ($13.6 million), and strategic partnership ($0.6 million) loans.
As of December 31, 2023, loans before allowance for credit losses were $2.2 billion, comprised of recreation ($1.3 billion), home improvement ($0.8 billion), commercial ($114.8 million), taxi medallion ($3.7 million), and strategic partnership ($0.6 million) loans.
The net proceeds from the December 2020, February 2021, March 2021, April 2021, September 2023, and December 2023 private placements were used for general corporate purposes, including repayment of our 9.00% retail notes at maturity in April 2021 and to pay down other borrowings, including some borrowings at a discount, and to repurchase and cancel $33.0 million of our 8.25% notes due in March 2024.
The net proceeds from the various private placements were used for general corporate purposes, including repayment of outstanding debt, including repayment of our 9.00% retail notes at maturity in April 2021 and to pay down other borrowings, including some borrowings at a discount, and to repurchase, repay, and cancel $36.0 million of our 8.25% notes which matured in March 2024.
(Dollars in thousands) Total Originations Non-prime Originations Non-prime Originations (%) 2023 $ 447,039 $ 152,045 34 % 2022 $ 513,062 $ 180,697 35 % 2021 $ 441,921 $ 130,296 29 % The following table presents selected financial data and ratios as of and for the years ended December 31, 2023, 2022, and 2021.
(Dollars in thousands) Total Originations Non-prime Originations Non-prime Originations (%) 2024 $ 526,634 $ 185,334 35 % 2023 $ 447,039 $ 152,045 34 % 2022 $ 513,062 $ 180,697 35 % 43 The following table presents selected financial data and ratios as of and for the years ended December 31, 2024, 2023, and 2022.
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 regarding the terms of our outstanding debt.
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.
The loans are secured primarily by RVs, boats, and trailers, with RV loans making up 54% of the portfolio and boat loans making up 19% of the portfolio as of December 31, 2023, compared to 58% and 19% as of December 31, 2022.
The loans are secured primarily by RVs, boats, collector cars, and trailers, with RV loans making up 55% of the portfolio, boat loans making up 20%, and collector cars making up 11% of the portfolio as of December 31, 2024, compared to 54%, 19%, and 10% as of December 31, 2023.
As of December 31, 2023, our consumer loans represented 95% of our gross loan portfolio and commercial loans represented 5%. Total assets were $2.6 billion as of December 31, 2023 and $2.3 billion as of December 31, 2022. Our loan-related earnings depend primarily on our level of net interest income.
As of December 31, 2024, our consumer loans represented 95% of our gross loan portfolio, inclusive of loans held for sale, and commercial loans represented 4%. Total assets were $2.9 billion as of December 31, 2024 and $2.6 billion as of December 31, 2023. 35 Our loan-related earnings depend primarily on our level of net interest income.
The Bank continues to evaluate and launch additional partnership programs with fintech companies. 37 We continue to consider various alternatives for the Bank, which may include an initial public offering of its common stock, the sale of all or part of the Bank, a spin-off or other potential transaction.
We continue to consider various alternatives for the Bank, which may include an initial public offering of its common stock, the sale of all or part of the Bank, a spin-off or other potential transaction.
The Bank has borrowing arrangements with several commercial banks. These agreements are accommodations that can be terminated at any time, for any reason and allow the Bank to borrow up to $75.0 million.
The Bank has borrowing arrangements with several commercial banks. These agreements are accommodations that can be terminated at any time, for any reason and allow the Bank to borrow up to $75.0 million. As of December 31, 2024, there were no outstanding amounts with respect to these arrangements.
The yield on interest earning assets was 11.19% for the year ended December 31, 2023, compared to 10.70% for the year ended December 31, 2022, reflecting new originations being priced at higher rates given the current interest rate environment.
The yield on interest earning assets was 11.56% for the year ended December 31, 2024, compared to 11.19% for the year ended December 31, 2023, reflecting new originations being priced at higher rates than those rates charged on originations in prior years, given the current interest rate environment.
Year Ended December 31, (Dollars in thousands) 2023 2022 2021 First Quarter $ 101,681 $ 114,406 $ 93,850 Second Quarter 190,007 170,207 134,467 Third Quarter 92,603 149,151 118,407 Fourth Quarter 62,748 79,298 95,197 Year Ended $ 447,039 $ 513,062 $ 441,921 45 As of December 31, 2023, 38% 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.
Year Ended December 31, (Dollars in thousands) 2024 2023 2022 First Quarter $ 105,765 $ 101,681 $ 114,406 Second Quarter 209,563 190,007 170,207 Third Quarter 139,105 92,603 149,151 Fourth Quarter 72,201 62,748 79,298 Year Ended $ 526,634 $ 447,039 $ 513,062 As of December 31, 2024, 37% 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.
Year Ended December 31, (Dollars in thousands) 2023 2022 2021 First Quarter $ 94,981 $ 89,820 $ 48,059 Second Quarter 117,035 105,172 62,992 Third Quarter 79,333 100,451 68,692 Fourth Quarter 66,045 97,100 78,295 Year Ended $ 357,394 $ 392,543 $ 258,038 47 As of December 31, 2023, 1% of the home improvement loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history.
Year Ended December 31, (Dollars in thousands) 2024 2023 2022 First Quarter $ 51,576 $ 94,981 $ 89,820 Second Quarter 67,990 117,035 105,172 Third Quarter 96,545 79,333 100,451 Fourth Quarter 82,531 66,045 97,100 Year Ended $ 298,642 $ 357,394 $ 392,543 As of December 31, 2024, less than 1% of the home improvement loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history.
Year Ended December 31, 2023 (Dollars in thousands) Recreation Taxi Medallion (1) Total Loan collateral in process of foreclosure – December 31, 2022 $ 1,376 $ 20,443 $ 21,819 Transfer from loans, net 18,875 2,306 21,181 Sales (7,890 ) (700 ) (8,590 ) Cash payments received (730 ) (11,311 ) (12,041 ) Collateral valuation adjustments (9,852 ) (745 ) (10,597 ) Loan collateral in process of foreclosure – December 31, 2023 $ 1,779 $ 9,993 $ 11,772 (1) As of December 31, 2023, taxi medallion loans in the process of foreclosure included 333 taxi medallions in the New York market, 206 taxi medallions in the Chicago market, 31 taxi medallions in the Newark market, and 31 taxi medallions in various other markets.
Year Ended December 31, 2023 (Dollars in thousands) Recreation Commercial Taxi Medallion Total Loan collateral in process of foreclosure – December 31, 2022 $ 1,376 $ — $ 20,443 $ 21,819 Transfer from loans, net 18,875 — 2,306 21,181 Sales (7,890 ) — (700 ) (8,590 ) Cash payments received (730 ) — (11,311 ) (12,041 ) Collateral valuation adjustments (1) (9,852 ) — (745 ) (10,597 ) Loan collateral in process of foreclosure – December 31, 2023 $ 1,779 $ — $ 9,993 $ 11,772 (1) Collateral valuation adjustments for recreation loans are generally the result of the liquidation of collateral through a repossession process.
Goodwill and Intangible Assets Goodwill and intangible assets arose as a result of the excess of the fair value that was determined by an independent third party expert over the book value of several of our previously unconsolidated portfolio investment companies as of April 2, 2018.
Goodwill and Intangible Assets Goodwill assets arose as a result of the excess of fair value over book value for several of our previously unconsolidated portfolio investment companies as of April 2, 2018.
In connection with the commitment, Medallion Capital paid the SBA a leverage fee of $0.2 million, with the remaining $0.4 million of the fee to be paid pro rata as Medallion Capital draws under the commitment.
Medallion Capital can draw funds under the commitment, in whole or in part, until September 30, 2028. In connection with the commitment, Medallion Capital paid the SBA a leverage fee of $0.2 million, with the remaining $0.4 million of the fee to be paid pro rata as Medallion Capital draws under the commitment.
(2) Balance includes $1.5 million of strategic partner reserve deposits as of December 31, 2023. Our contractual obligations expire on or mature at various dates through September 2037. The following table shows our contractual obligations at December 31, 2023.
(2) Balance excludes $3.0 million of strategic partner reserve deposits. Our contractual obligations expire on or mature at various dates through September 2037. The following table presents our contractual obligations at December 31, 2024.
The home improvement loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $20,000 as of December 31, 2023. The loans are fixed rate with an average term at origination of 13.6 years. The weighted average maturity of our loans outstanding as of December 31, 2023 is 12.3 years.
The home improvement loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $20,000 as of December 31, 2024. The loans are fixed rate with an average term at origination of 15 years.
As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income.
As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net interest income.
The average interest rate increased 86 basis points to 9.51% from the prior year. During the year ended December 31, 2023, we originated $357.4 million home improvement loans, compared to $392.5 million in the prior year. The decrease was driven by more restrictive underwriting standards in 2023 compared to 2022 and management's efforts to mitigate concentration risks.
The average interest rate charged on our loans increased 30 basis points to 9.81% from the prior year. During the year ended December 31, 2024, we originated $298.6 million home improvement loans, compared to $357.4 million in the prior year. The decrease was driven in part by ongoing restrictive underwriting standards and management's continued efforts to mitigate concentration risks.
During the year ended December 31, 2023, the recreation portfolio grew 13% from $1.2 billion to $1.3 billion, with the average interest rate increasing 51 basis points to 14.79% from a year ago.
During the year ended December 31, 2024, the recreation portfolio grew 15% from $1.3 billion to $1.5 billion, with the average interest rate increasing 28 basis points to 15.07% from a year ago.
As of December 31, 2023 2022 Geographic Concentrations (Dollars in thousands) Total Gross Loans % of Market Total Gross Loans % of Market California $ 31,225 27 % $ 21,585 23 % Minnesota 13,879 12 12,048 13 Wisconsin 11,393 10 5,054 5 Texas 10,725 9 9,853 11 Illinois 8,474 7 12,873 14 Other (1) 39,131 35 30,690 34 Total $ 114,827 100 % $ 92,103 100 % (1) Includes 13 other states, which were all under 10% as of December 31, 2023 and 9 other states, which were all under 10% as of December 31, 2022. 49 Taxi Medallion Lending The taxi medallion lending segment operates in the New York City metropolitan area.
As of December 31, 2024 2023 Geographic Concentrations (Dollars in thousands) Gross Commercial Loans % of Market Gross Commercial Loans % of Market California $ 31,049 28 % $ 31,225 27 % Texas 10,676 10 10,725 9 Wisconsin 10,662 10 11,393 10 Illinois 7,081 6 8,474 7 Minnesota 5,337 5 13,879 12 Other (1) 46,468 41 39,131 35 Total $ 111,273 100 % $ 114,827 100 % (1) Includes 11 other states, which were all under 10% as of December 31, 2024 and 13 other states, which were all under 10% as of December 31, 2023. 46 Taxi Medallion Lending The taxi medallion lending segment operates in the New York City metropolitan area.
See Note 5 to the consolidated financial statements for additional information about each credit facility. (Dollars in thousands) Medallion Financial Corp.
See Note 5 to the consolidated financial statements for additional information about each borrowing. (Dollars in thousands) Medallion Financial Corp. Medallion Funding LLC Medallion Capital, Inc. Freshstart Venture Capital Corp.
Year Ended December 31, 2023 2022 2021 (Dollars in thousands) Increase (Decrease) In Volume Increase (Decrease) In Rate Net Change Increase (Decrease) In Volume Increase (Decrease) In Rate Net Change Increase (Decrease) In Volume Increase (Decrease) In Rate Net Change Interest-earning assets Interest earning cash and cash equivalents $ 755 $ 2,147 $ 2,902 $ 174 $ 223 $ 397 $ (31 ) $ (55 ) $ (86 ) Investment securities 174 378 552 41 366 407 (24 ) (205 ) (229 ) Loans Recreation 25,911 2,709 28,620 26,435 (5,595 ) 20,840 14,749 (7,150 ) 7,599 Home improvement 16,087 1,913 18,000 12,912 (2,413 ) 10,499 7,961 (1,030 ) 6,931 Commercial 1,487 1,711 3,198 2,382 818 3,200 (287 ) 23 (264 ) Taxi medallion (2,062 ) 2,985 923 (526 ) 2,704 2,178 11,994 (11,959 ) 35 Strategic partnerships 233 (9 ) 224 136 (2 ) 134 19 (1 ) 18 Total loans $ 41,656 $ 9,309 $ 50,965 $ 41,339 $ (4,488 ) $ 36,851 $ 34,436 $ (20,117 ) $ 14,319 Total interest-earning assets $ 42,585 $ 11,834 $ 54,419 $ 41,554 $ (3,899 ) $ 37,655 $ 34,381 $ (20,377 ) $ 14,004 Interest-bearing liabilities Deposits $ 8,774 $ 16,344 $ 25,118 $ 4,812 $ 311 $ 5,123 $ 1,302 $ (6,089 ) $ (4,787 ) Retail and privately placed notes 233 45 278 24 (242 ) (218 ) 4,263 (850 ) 3,413 SBA debentures and borrowings (23 ) 182 159 143 (31 ) 112 (223 ) (294 ) (517 ) Trust preferred securities — 1,206 1,206 — 302 302 — 14 14 Notes payable to banks — — — (134 ) 0 (134 ) (261 ) (850 ) (1,111 ) Other borrowings — — — (140 ) 0 (140 ) (31 ) 8 (23 ) Total interest-bearing liabilities $ 8,984 $ 17,777 $ 26,761 $ 4,705 $ 340 $ 5,045 $ 5,050 $ (8,061 ) $ (3,011 ) Net $ 33,601 $ (5,943 ) $ 27,658 $ 36,849 $ (4,239 ) $ 32,610 $ 29,331 $ (12,316 ) $ 17,015 For the year ended December 31, 2023, the increase in interest income was mainly driven by the increase in volume of consumer loans, with a large portion of that increase occurring in the first half of the year, as well as an increase in overall yield on interest-earning assets as we issue new loans at interest rates higher than the weighted average rates of our then current portfolio.
Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Increase (Decrease) In Volume Increase (Decrease) In Rate Net Change Increase (Decrease) In Volume Increase (Decrease) In Rate Net Change Increase (Decrease) In Volume Increase (Decrease) In Rate Net Change Interest-earning assets Interest earning cash and cash equivalents $ 125 $ 1,177 $ 1,302 $ 755 $ 2,147 $ 2,902 $ 174 $ 223 $ 397 Investment securities 111 235 346 174 378 552 41 366 407 Loans Recreation 23,478 2,888 26,366 25,911 2,709 28,620 26,435 (5,595 ) 20,840 Home improvement 7,166 4,167 11,333 16,087 1,913 18,000 12,912 (2,413 ) 10,499 Commercial 1,380 (250 ) 1,130 1,487 1,711 3,198 2,382 818 3,200 Taxi medallion (504 ) (423 ) (927 ) (2,062 ) 2,985 923 (526 ) 2,704 2,178 Strategic partnerships 233 (121 ) 112 233 (9 ) 224 136 (2 ) 134 Total interest income from loans $ 31,753 $ 6,261 $ 38,014 $ 41,656 $ 9,309 $ 50,965 $ 41,339 $ (4,488 ) $ 36,851 Total interest income from interest-earning assets $ 31,989 $ 7,673 $ 39,662 $ 42,585 $ 11,834 $ 54,419 $ 41,554 $ (3,899 ) $ 37,655 Interest-bearing liabilities Deposits $ 8,159 $ 14,566 $ 22,725 $ 8,774 $ 16,344 $ 25,118 $ 4,812 $ 311 $ 5,123 Privately placed notes 1,560 409 1,969 233 45 278 24 (242 ) (218 ) SBA debentures and borrowings 145 318 463 (23 ) 182 159 143 (31 ) 112 Trust preferred securities — 64 64 — 1,206 1,206 — 302 302 Notes payable to banks — — — — — — (134 ) — (134 ) Other borrowings — — — — — — (140 ) — (140 ) Total interest expense from interest-bearing liabilities $ 9,864 $ 15,357 $ 25,221 $ 8,984 $ 17,777 $ 26,761 $ 4,705 $ 340 $ 5,045 Net $ 22,125 $ (7,684 ) $ 14,441 $ 33,601 $ (5,943 ) $ 27,658 $ 36,849 $ (4,239 ) $ 32,610 For the year ended December 31, 2024, the increase in interest income was mainly driven by the increase in the size of the consumer loan portfolios, as well as an increase in overall yield on interest-earning assets as we issue new loans at interest rates greater than the weighted average rates of our current portfolio.
As of December 31, 2023, the Bank had approximately $38.0 million in investment securities pledged as collateral to the Federal Reserve. The current advance rate on the pledged securities is 100% of fair value, for a total of approximately $38.0 million in secured borrowing capacity, of which none was utilized as of December 31, 2023.
As of December 31, 2024, the Bank had $225.2 million in home improvement loans pledged as collateral to the Federal Reserve. The current advance rate on the pledged securities is approximately 45% of book value, for a total of approximately $101.4 million in secured borrowing capacity, of which $35.0 million was utilized as of December 31, 2024.
The determination of taxi medallion collateral fair value is derived quarterly for each jurisdiction. For taxi medallion loans, delinquent nonperforming loans are valued at collateral value for the most recent quarter.
For taxi medallion loans, delinquent nonperforming loans are valued at collateral value for the most recent quarter.
Year Ended December 31, 2023 2022 2021 (Dollars in thousands) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost Interest-earning assets Interest earning cash equivalents $ 23,773 $ 881 3.71 % $ 4,288 $ 153 3.57 % $ 3,149 $ 56 1.78 % Federal funds sold 70,021 3,130 4.47 71,847 956 1.33 45,096 23 0.05 Investment securities 52,065 1,728 3.32 46,832 1,176 2.51 45,195 769 1.70 Loans Recreation 1,283,434 167,765 13.07 1,085,211 139,145 12.82 879,625 118,305 13.45 Home improvement 708,031 62,703 8.86 526,377 44,703 8.49 374,083 34,204 9.14 Commercial 99,394 12,903 12.98 87,936 9,705 11.04 66,874 7,070 10.57 Taxi medallion 5,924 1,550 26.16 13,803 627 4.54 21,266 (1,483 ) (6.97 ) Strategic partnerships 1,387 380 27.40 537 156 29.05 70 22 31.43 Total loans 2,098,170 245,301 11.69 1,713,864 194,336 11.34 1,341,918 158,118 11.78 Total interest-earning assets, before allowance 2,244,029 11.19 1,836,831 10.70 1,435,358 11.08 Allowance for credit losses (76,596 ) (56,866 ) (50,592 ) Total interest-earning assets, net of allowance 2,167,433 251,040 11.58 % 1,779,965 196,621 11.06 1,384,766 158,966 11.51 Non-interest-earning assets Cash 16,704 39,535 47,050 Equity investments 11,036 10,570 9,830 Loan collateral in process of foreclosure (1) 18,230 28,823 47,764 Goodwill and intangible assets 172,118 173,563 199,160 Other assets 52,680 46,794 44,129 Total non-interest-earning assets 270,768 299,285 347,933 Total assets $ 2,438,201 $ 2,079,250 $ 1,732,699 Interest-bearing liabilities Deposits $ 1,764,262 $ 47,784 2.71 % $ 1,440,328 $ 22,666 1.57 % $ 1,134,531 $ 17,543 1.55 % Retail and privately placed notes 123,808 10,286 8.31 121,000 10,008 8.27 120,704 10,226 8.47 SBA debentures and borrowings 68,519 2,387 3.48 69,188 2,228 3.22 64,733 2,116 3.27 Trust preferred securities 33,000 2,489 7.54 33,000 1,283 3.89 33,000 981 2.97 Notes payable to banks — — — — — — 10,960 134 1.22 Other borrowings — — — — — — 6,782 140 2.06 Total interest-bearing liabilities 1,989,589 62,946 3.16 1,663,516 36,185 2.17 1,370,710 31,140 2.28 Non-interest-bearing liabilities Deferred tax liability 23,747 22,187 7,444 Other liabilities (2) 37,749 30,574 27,634 Total non-interest-bearing liabilities 61,496 52,761 35,078 Total liabilities 2,051,085 1,716,277 1,405,788 Non-controlling interest 69,253 69,253 72,162 Total stockholders’ equity 317,863 293,720 254,749 Total liabilities and stockholders’ equity $ 2,438,201 $ 2,079,250 $ 1,732,699 Net interest income $ 188,094 $ 160,436 $ 127,826 Net interest margin, gross 8.38 8.73 8.91 Net interest margin, net of allowance 8.68 % 9.05 % 9.25 % (1) Includes financed sales of this collateral to third parties reported separately from the loan portfolio, and that are conducted by the Bank of $6.2 million, $7.5 million, and $7.4 million as of December 31, 2023, 2022, and 2021.
Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost Interest-earning assets Interest earning cash equivalents $ 34,074 $ 1,523 4.47 % $ 23,773 $ 881 3.71 % $ 4,288 $ 153 3.57 % Federal funds sold 61,975 3,789 6.11 70,021 3,130 4.47 71,847 956 1.33 Investment securities 55,004 2,074 3.77 52,065 1,728 3.32 46,832 1,176 2.51 Loans Recreation 1,459,456 194,131 13.30 1,283,434 167,765 13.07 1,085,211 139,145 12.82 Home improvement 783,677 74,036 9.45 708,031 62,703 8.86 526,377 44,703 8.49 Commercial 110,202 14,033 12.73 99,394 12,903 12.98 87,936 9,705 11.04 Taxi medallion 3,278 623 19.01 5,924 1,550 26.16 13,803 627 4.54 Strategic partnerships 2,624 493 18.75 1,387 380 27.40 537 156 29.05 Total loans 2,359,237 283,316 12.01 2,098,170 245,301 11.69 1,713,864 194,336 11.34 Total interest-earning assets, before allowance 2,510,290 11.56 2,244,029 11.19 1,836,831 10.70 Allowance for credit losses (84,471 ) (76,596 ) (56,866 ) Total interest-earning assets, net of allowance 2,425,819 290,702 11.99 % 2,167,433 251,040 11.58 % 1,779,965 196,621 11.06 % Non-interest-earning assets Cash 46,647 16,704 39,535 Equity investments 11,175 11,036 10,570 Loan collateral in process of foreclosure 9,692 18,230 28,823 Goodwill and intangible assets 170,673 172,118 173,563 Other assets 56,270 52,680 46,794 Total non-interest-earning assets 294,457 270,768 299,285 Total assets $ 2,720,276 $ 2,438,201 $ 2,079,250 Interest-bearing liabilities Deposits $ 1,994,406 $ 70,509 3.54 % $ 1,764,262 $ 47,784 2.71 % $ 1,440,328 $ 22,666 1.57 % Privately placed notes 141,808 12,255 8.64 123,808 10,286 8.31 121,000 10,008 8.27 SBA debentures and borrowings 72,173 2,850 3.95 68,519 2,387 3.48 69,188 2,228 3.22 Trust preferred securities 33,000 2,553 7.74 33,000 2,489 7.54 33,000 1,283 3.89 Total interest-bearing liabilities 2,241,387 88,167 3.93 1,989,589 62,946 3.16 1,663,516 36,185 2.17 Non-interest-bearing liabilities Deferred tax liability 21,048 23,747 22,187 Other liabilities (1) 34,010 37,749 30,574 Total non-interest-bearing liabilities 55,058 61,496 52,761 Total liabilities 2,296,445 2,051,085 1,716,277 Non-controlling interest 69,253 69,253 69,253 Total stockholders’ equity 354,578 317,863 293,720 Total liabilities and equity $ 2,720,276 $ 2,438,201 $ 2,079,250 Net interest income $ 202,535 $ 188,094 $ 160,436 Net interest margin, gross 8.05 8.38 8.73 Net interest margin, net of allowance 8.35 % 8.68 % 9.05 % (1) Includes deferred financing costs of $8.2 million, $8.5 million, and $7.0 million as of December 31, 2024, 2023, and 2022. 38 For the year ended December 31, 2024, our total loans yielded 12.01% as compared to 11.69% for the year ended December 31, 2023.
As of December 31, 2023 the allowance for credit loss was 4.31% and 2.76% for recreation and home improvement loans, compared to 3.55% and 1.81% a year ago and 4.39% and 2.05% at January 1, 2023 after the adoption of CECL. See Note 4 of the accompanying consolidated financial statements for additional information on loans and allowance for credit losses.
As of December 31, 2024, the allowance for credit loss on loans held for investment was 5.00% and 2.48% for recreation and home improvement loans, compared to 4.31% and 2.76% a year ago. See Note 4 of the accompanying consolidated financial statements for additional information on loans and allowance for credit losses.
Year Ended December 31, 2023 (Dollars in thousands) Recreation Home Improvement Commercial Taxi Medallion Strategic Partnership Total Gross loans – December 31, 2022 $ 1,183,512 $ 626,399 $ 92,899 $ 13,571 $ 572 $ 1,916,953 Loan originations 447,039 357,394 34,850 2,426 118,338 960,047 Principal payments, sales, maturities, and recoveries (231,158 ) (209,894 ) (13,389 ) (6,859 ) (118,357 ) (579,657 ) Charge-offs (50,512 ) (12,308 ) (1,019 ) (3,829 ) — (67,668 ) Transfer to loan collateral in process of foreclosure, net (18,875 ) — — (2,306 ) — (21,181 ) Amortization of origination costs (12,270 ) 2,668 14 — — (9,588 ) FASB origination costs, net 18,490 (3,642 ) (164 ) 660 — 15,344 Paid-in-kind interest — — 1,636 — — 1,636 Gross loans – December 31, 2023 $ 1,336,226 $ 760,617 $ 114,827 $ 3,663 $ 553 $ 2,215,886 Year Ended December 31, 2022 (Dollars in thousands) Recreation Home Improvement Commercial Taxi Medallion Strategic Partnership Total Gross loans – December 31, 2021 $ 961,320 $ 436,772 $ 76,696 $ 14,046 $ 90 $ 1,488,924 Loan originations 513,062 392,543 28,172 605 49,526 983,908 Principal payments, sales, maturities, and recoveries (259,326 ) (196,203 ) (6,610 ) (419 ) (49,044 ) (511,602 ) Charge-offs (27,055 ) (6,393 ) (6,083 ) (314 ) — (39,845 ) Transfer to loan collateral in process of foreclosure, net (12,444 ) — — (347 ) — (12,791 ) Amortization of origination costs (10,470 ) 1,763 — — — (8,707 ) Amortization of loan premium (213 ) (322 ) — — — (535 ) FASB origination costs, net 18,638 (1,761 ) — — — 16,877 Paid-in-kind interest — — 724 — — 724 Gross loans – December 31, 2022 $ 1,183,512 $ 626,399 $ 92,899 $ 13,571 $ 572 $ 1,916,953 42 The following table presents the approximate maturities and sensitivity to change in interest rates for our loans as of December 31, 2023.
December 31, 2023 (Dollars in thousands) Recreation Home Improvement Commercial Taxi Medallion Strategic Partnership Total Gross loans – December 31, 2022 $ 1,183,512 $ 626,399 $ 92,899 $ 13,571 $ 572 $ 1,916,953 Loan originations 447,039 357,394 34,850 2,426 118,338 960,047 Principal receipts, sales, and maturities (231,158 ) (209,894 ) (13,389 ) (6,859 ) (118,357 ) (579,657 ) Charge-offs (50,512 ) (12,308 ) (1,019 ) (3,829 ) — (67,668 ) Transfer to loan collateral in process of foreclosure, net (18,875 ) — — (2,306 ) — (21,181 ) Amortization of origination fees and costs, net (12,270 ) 2,668 14 — — (9,588 ) Origination fees and costs, net 18,490 (3,642 ) (164 ) 660 — 15,344 Paid-in-kind interest — — 1,636 — — 1,636 Gross loans – December 31, 2023 $ 1,336,226 $ 760,617 $ 114,827 $ 3,663 $ 553 $ 2,215,886 40 The following table presents the approximate maturities and sensitivity to change in interest rates for our loans as of December 31, 2024.
Average debt outstanding was $2.0 billion for the year ended December 31, 2023, up from $1.7 billion for the year ended December 31, 2022, as we issued additional certificates of deposit to fund our loan growth. See page 40 for tables that show average balances and cost of funds for our funding sources.
Average debt outstanding was $2.2 billion for the year ended December 31, 2024, up from $2.0 billion for the year ended December 31, 2023, as we issued additional certificates of deposit to fund our loan growth.
As of December 31, 2023 and 2022, the allowance totaled $84.2 million and $63.8 million, which represented 3.80% and 3.33% of total loans, respectively.
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.
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, and 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 increase in interest expense was driven by an increase in borrowing costs, primarily due to the increases in deposits as older deposits mature and are replaced at current market rates, as well as an overall increase in borrowings. 39 Our interest expense is driven by the interest rates payable on our bank certificates of deposit, privately placed notes, fixed-rate, long-term debentures issued to the SBA, trust preferred securities, and has historically included credit facilities with banks and other short-term notes payable.
In July 2023, we obtained a $20.0 million commitment from the SBA, $9.8 million of which has been utilized as of December 31, 2023, with $5.2 million currently drawable, and the balance of $5.5 million drawable upon the infusion of $2.4 million of capital.
We use 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 as of December 31, 2024, with $10.2 million currently drawable.
Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Selected Earnings Data Total interest income (loss) $ 1,596 $ 632 $ (1,483 ) Total interest expense 72 508 5,914 Net interest income 1,524 124 (7,397 ) Benefit for credit losses (26,318 ) (6,474 ) (7,752 ) Net interest income after loss provision 27,842 6,598 355 Other income (loss) 3,358 4,341 (641 ) Other expenses (7,256 ) (10,520 ) (1,350 ) Net income (loss) before taxes 23,944 419 (1,636 ) Income tax (provision) benefit (6,933 ) (111 ) 433 Net income (loss) after taxes $ 17,011 $ 308 $ (1,203 ) Balance Sheet Data Total loans, gross $ 3,663 $ 13,571 $ 14,046 Total credit allowance 1,536 9,490 9,234 Total loans, net 2,127 4,081 4,812 Total assets 12,247 25,496 86,526 Total borrowings 10,027 20,685 68,276 Selected Financial Ratios Return on average assets 91.25 % 1.18 % (0.13 )% Return on average equity 574.86 6.97 (0.64 ) Interest yield 26.94 4.58 (6.97 ) Net interest margin, gross 25.73 0.90 (34.78 ) Net interest margin, net of allowance 61.60 2.76 (93.60 ) Reserve coverage 41.93 69.93 65.74 Delinquency status (1) — 6.52 0.00 Charge-off ratio (309.96 ) (47.51 ) 41.72 (1) Loans 90 days or more past due.
Year Ended December 31, (Dollars in thousands) 2024 2023 2022 Selected Earnings Data Total interest income $ 659 $ 1,596 $ 632 Total interest expense 102 72 508 Net interest income 557 1,524 124 Benefit for credit losses (6,035 ) (26,318 ) (6,474 ) Net interest income after credit loss benefit 6,592 27,842 6,598 Other income 910 3,358 4,341 Operating expenses: Salaries (2,947 ) (4,849 ) (4,308 ) Loan servicing fees and collection costs (724 ) (1,006 ) (1,315 ) Other costs (902 ) (1,401 ) (4,897 ) Net income (loss) before taxes 2,929 23,944 419 Income tax provision (933 ) (6,933 ) (111 ) Net income after taxes $ 1,996 $ 17,011 $ 308 Balance Sheet Data Total loans, gross $ 1,909 $ 3,663 $ 13,571 Allowance for credit losses 540 1,536 9,490 Total loans, net 1,369 2,127 4,081 Total assets 6,573 12,247 25,496 Total segment borrowings 5,452 10,027 20,685 Selected Financial Ratios Return on average assets 24.25 % 91.25 % 1.18 % Return on average equity 151.76 574.86 6.97 Interest yield 23.39 26.94 4.58 Net interest margin, gross 16.99 25.73 0.90 Net interest margin, net of allowance 28.15 61.60 2.76 Reserve coverage (1) 28.29 41.93 69.93 Delinquency status (2) — — 6.52 Charge-off (recovery) ratio (3) (153.72 ) (309.96 ) (47.51 ) (1) Allowance for credit losses as a percent of gross loans.

… 128 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed10 unchanged
Biggest changeAssuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2023 by $1.6 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $1.9 million at December 31, 2023.
Biggest changeAssuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity a hypothetical immediate 1% increase in interest rates would result in an increase to net income as of December 31, 2024 by $2.2 million on an annualized basis, and the impact of such an immediate increase of 1% over a one year period would have been a reduction in net income by $2.7 million at December 31, 2024.

Other MBNKO 10-K year-over-year comparisons