MEDALLION FINANCIAL CORP, 10-Q filed on 13 Nov 18
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Nov. 09, 2018
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Trading Symbol MFIN  
Entity Registrant Name MEDALLION FINANCIAL CORP  
Entity Central Index Key 0001000209  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   24,440,052
Entity Emerging Growth Company false  
Entity Small Business false  
v3.10.0.1
Consolidated Balance Sheet - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Assets    
Cash   $ 110,233
Investment securities   908,297
Loans   864,819
Loans, at fair value $ 26,558 338,867
Allowance for losses (29,484)  
Net loans receivable 1,060,061  
Other assets   58,827
Total assets 1,571,407 1,077,357
Liabilities    
Total liabilities   913,127
Stockholders' equity    
Total stockholders' equity [1]   164,230
Total equity 280,415 287,159
Total liabilities and equity   1,077,357
Medallion Bank and Other Controlled Subsidiaries [Member]    
Assets    
Investment in affiliates   302,147
Bank Holding Company Accounting [Member]    
Assets    
Cash [2] 10,678  
Federal funds sold 132,882  
Equity investments 10,752  
Investment securities 45,757  
Loans 1,089,545  
Allowance for losses [3] (29,484)  
Net loans receivable [2] 1,060,061  
Accrued interest receivable [2] 7,005  
Property and equipment, net 1,093  
Loan collateral in process of foreclosure [2] 59,761  
Goodwill and intangible assets 210,761  
Other assets 32,657  
Total assets 1,571,407  
Liabilities    
Accounts payable and accrued expenses [2] 17,789  
Accrued interest payable [2] 6,118  
Deposits 946,975  
Short-term borrowings [2] 160,218  
Deferred tax liabilities and other tax payables 2,011  
Long-term debt 157,881  
Total liabilities 1,290,992  
Commitments and contingencies  
Stockholders' equity    
Preferred stock (1,000,000 shares of $0.01 par value stock authorized - none outstanding)  
Common stock (50,000,000 shares of $0.01 par value stock authorized - 27,391,295 shares at September 30, 2018 and 27,294,327 shares at December 31, 2017 issued) 274  
Additional paid in capital 274,163  
Treasury stock (2,951,243 shares at September 30, 2018 and December 31, 2017) (24,919)  
Accumulated other comprehensive loss (469)  
Retained earnings 3,871  
Total stockholders' equity 252,920  
Non-controlling interest in consolidated subsidiaries 27,495  
Total equity 280,415  
Total liabilities and equity $ 1,571,407  
Number of shares outstanding 24,440,052  
Book value per share/net asset value per share $ 10.35  
Investment Company Accounting [Member]    
Assets    
Cash [2]   12,690
Equity investments, at fair value   5,213
Net investments [2]   610,135
Accrued interest receivable [2]   547
Property and equipment, net   235
Investments other than securities   7,450
Other assets   4,465
Total assets   635,522
Liabilities    
Accounts payable and accrued expenses [2]   4,373
Accrued interest payable [2]   3,831
Deferred tax liabilities and other tax payables   12,536
Funds borrowed [2]   327,623
Total liabilities   348,363
Commitments and contingencies  
Stockholders' equity    
Preferred stock (1,000,000 shares of $0.01 par value stock authorized - none outstanding)  
Common stock (50,000,000 shares of $0.01 par value stock authorized - 27,391,295 shares at September 30, 2018 and 27,294,327 shares at December 31, 2017 issued)   273
Additional paid in capital   273,716
Treasury stock (2,951,243 shares at September 30, 2018 and December 31, 2017)   (24,919)
Accumulated undistributed net investment loss   (65,592)
Net unrealized appreciation on investments, net of tax   103,681
Total stockholders' equity   287,159
Total equity   287,159
Total liabilities and equity   $ 635,522
Number of shares outstanding   24,343,084
Book value per share/net asset value per share   $ 11.80
Investment Company Accounting [Member] | Affiliated Entity [Member]    
Assets    
Investment in affiliates   $ 4,308
Investment Company Accounting [Member] | Medallion Bank and Other Controlled Subsidiaries [Member]    
Assets    
Investment in affiliates   302,147
Investment Company Accounting [Member] | Parent Loan [Member]    
Assets    
Loans, at fair value   208,279
Investment Company Accounting [Member] | Commercial Loans [Member]    
Assets    
Loans, at fair value   53,737
Investment Company Accounting [Member] | Commercial Loans to Affiliated Entities [Member]    
Assets    
Loans, at fair value   999
Investment Company Accounting [Member] | Commercial Loans To Controlled Subsidiaries [Member]    
Assets    
Loans, at fair value   $ 35,452
[1] Includes $152,267 of unrealized appreciation on Medallion Bank, in excess of Medallion Bank's book value as of December 31, 2017.
[2] See Note 18 for details of balances related to a consolidated variable interest entity.
[3] Includes $15,587 of a general reserve for current and performing medallion loans under 90 days past due, as an additional buffer against future losses, representing 53% of the total allowance, and 7% of the loans in question.
v3.10.0.1
Consolidated Balance Sheet (Parenthetical) - $ / shares
Sep. 30, 2018
Dec. 31, 2017
Bank Holding Company Accounting [Member]    
Preferred stock, shares authorized 1,000,000  
Preferred stock, par value $ 0.01  
Preferred stock, shares outstanding 0  
Common stock, shares authorized 50,000,000  
Common stock, par value $ 0.01  
Common stock, shares issued 27,391,295  
Treasury stock,shares 2,951,243  
Investment Company Accounting [Member]    
Preferred stock, shares authorized   1,000,000
Preferred stock, par value   $ 0.01
Preferred stock, shares outstanding   0
Common stock, shares authorized   50,000,000
Common stock, par value   $ 0.01
Common stock, shares issued   27,294,327
Treasury stock,shares   2,951,243
v3.10.0.1
Consolidated Statement of Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Interest and fees on loans   $ 124 $ 64,718 [1] $ 1,383
Interest income $ 33,152   3,287 [1]  
Medallion lease income [1]     100  
Interest and dividends on investment securities [1]     1,032  
Total interest income/total investment income [1],[2]     69,829  
Interest on deposits [1]     9,264  
Interest on short term borrowings [1]     3,557  
Interest on long term debt [1]     3,991  
Interest expense [1]     3,551  
Total interest expense 8,887   20,363 [1],[3]  
Net interest income 24,265   49,466 [1]  
Provision for loan losses 18,205   48,781 [1]  
Net interest loss after provision for loan losses 6,060   685 [1]  
Other income (loss)        
Sponsorship and race winnings 5,371   10,599 [1]  
Gain on sale of loans [1]     5,488  
Impairment of equity investments [1]     (862)  
Writedown of loan collateral in process of foreclosure [1]     (1,361)  
Other income [1]     515  
Total other income [1]     14,379  
Other expenses        
Salaries and employee benefits [1]     13,987  
Race team related expenses (2,876)   5,416 [1]  
Professional fees [1]     6,920  
Loan servicing fees [1]     2,313  
Collection costs [1]     2,218  
Travel, meals and entertainment [1]     1,122  
Rent expense [1]     1,449  
Regulatory fees [1]     1,145  
Amortization of intangible assets [1]     722  
Other expenses [1],[4]     5,206  
Total other expenses [1]     40,498  
Loss before income taxes/net investment loss before taxes (3,963)   (25,434) [1],[5]  
Income tax benefit (provision) [1]     4,474  
Net loss after taxes/net investment loss after taxes [1]     (20,960)  
Net realized gains (losses) on investments [1],[6]     (34,745)  
Income tax benefit [1]     8,426  
Total net realized gains (losses) on investments [1]     (26,319)  
Net change in unrealized appreciation on Medallion Bank and other controlled subsidiaries [1]     29,115  
Net change in unrealized depreciation on investments other than securities [1]     (1,915)  
Net change in unrealized depreciation on investments [1]     (4,403)  
Income tax (provision) benefit [1]     (8,122)  
Net unrealized appreciation (depreciation) on investments [1]     14,675  
Net realized/unrealized gains (losses) on investments [1]     (11,644)  
Net loss after taxes/net increase (decrease) on net assets resulting from operations $ (3,846)   (32,604) [1]  
Less: income attributable to the noncontrolling interest [1]     1,614  
Total net income (loss) attributable to Medallion Financial Corp./net increase (decrease) on net assets resulting from operations [1]     $ (34,218)  
Basic net loss per share $ (0.19) $ 0.03 $ (1.41) [1] $ (0.13)
Diluted net loss per share $ (0.19) $ 0.03 (1.41) [1] $ (0.13)
Distributions declared per share [1]     $ 0  
Weighted average common shares outstanding        
Basic 24,235,242 23,930,086 24,207,273 [1] 23,916,334
Diluted 24,235,242 24,083,919 24,207,273 [1] 23,916,334
Controlled Subsidiary Investment [Member]        
Interest income [1]     $ 10  
Dividend income from controlled subsidiaries [1]     28  
Affiliate Investment [Member]        
Interest income [1]     654  
Bank Holding Company Accounting [Member]        
Interest and fees on loans $ 32,692      
Medallion lease income 30      
Interest and dividends on investment securities 430      
Total interest income/total investment income [2] 33,152      
Interest on deposits 5,064      
Interest on short term borrowings 1,698      
Interest on long term debt 2,125      
Total interest expense [3] 8,887      
Net interest income 24,265      
Provision for loan losses 18,205   48,781  
Net interest loss after provision for loan losses 6,060      
Other income (loss)        
Sponsorship and race winnings 5,371      
Gain on sale of loans 5,488      
Impairment of equity investments (388)      
Writedown of loan collateral in process of foreclosure (1,265)      
Other income 235      
Total other income 9,441      
Other expenses        
Salaries and employee benefits 5,999      
Race team related expenses 2,876      
Professional fees 3,951      
Loan servicing fees 1,185      
Collection costs 1,381      
Travel, meals and entertainment 313      
Rent expense 615      
Regulatory fees 563      
Amortization of intangible assets 361   $ 722  
Other expenses [4] 2,220      
Total other expenses 19,464      
Loss before income taxes/net investment loss before taxes [5] (3,963)      
Income tax benefit (provision) 117      
Net loss after taxes/net investment loss after taxes (3,846)      
Net loss after taxes/net increase (decrease) on net assets resulting from operations (3,846)      
Less: income attributable to the noncontrolling interest 851      
Total net income (loss) attributable to Medallion Financial Corp./net increase (decrease) on net assets resulting from operations $ (4,697)      
Basic net loss per share $ (0.19)      
Diluted net loss per share (0.19)      
Distributions declared per share $ 0      
Weighted average common shares outstanding        
Basic 24,235,242      
Diluted 24,235,242      
Investment Company Accounting [Member]        
Interest income   $ 3,768   $ 10,153
Medallion lease income   40   159
Dividends and interest income on short-term investments   11   27
Total interest income/total investment income [2]   5,567   13,604
Interest expense   3,543   10,285
Total interest expense [3]   3,543   10,285
Net interest income   2,024   3,319
Net interest loss after provision for loan losses   2,024   3,319
Other income (loss)        
Other income   8   22
Total other income   8   22
Other expenses        
Salaries and employee benefits   2,224   5,086
Professional fees   567   1,875
Collection costs   64   168
Travel, meals and entertainment   126   541
Rent expense   275   802
Other expenses [4]   420   1,111
Total other expenses   3,676   9,583
Loss before income taxes/net investment loss before taxes [5]   (1,644)   (6,242)
Income tax benefit (provision)   (846)   2,024
Net loss after taxes/net investment loss after taxes   (2,490)   (4,218)
Net realized gains (losses) on investments [6]   944   3,785
Total net realized gains (losses) on investments   944   3,785
Net change in unrealized appreciation on Medallion Bank and other controlled subsidiaries   2,035   11,089
Net change in unrealized depreciation on investments   (6,871)   (26,843)
Income tax (provision) benefit   7,001   13,120
Net unrealized appreciation (depreciation) on investments   2,165   (2,634)
Net realized/unrealized gains (losses) on investments   3,109   1,151
Net loss after taxes/net increase (decrease) on net assets resulting from operations   619   (3,067)
Total net income (loss) attributable to Medallion Financial Corp./net increase (decrease) on net assets resulting from operations   $ 619   $ (3,067)
Basic net loss per share   $ 0.03   $ (0.13)
Diluted net loss per share   0.03   (0.13)
Distributions declared per share   $ 0   $ 0
Weighted average common shares outstanding        
Basic   23,930,086   23,916,334
Diluted   24,083,919   23,916,334
Investment Company Accounting [Member] | Controlled Subsidiary Investment [Member]        
Interest income   $ 39   $ 165
Dividend income from controlled subsidiaries   1,256   1,256
Investment Company Accounting [Member] | Affiliate Investment [Member]        
Interest income   $ 453   $ 1,844
[1] Balance includes the six months ended September 30, 2018 under Bank Holding Company Accounting and three months ended March 31, 2018 under Investment Company Accounting.
[2] Included in interest and investment income is $450 and $1,428 of paid in kind interest for the three and nine months ended September 30, 2018 and $939 and $1,650 for the comparable 2017 periods.
[3] Average borrowings outstanding were $1,255,945 and $1,226,896, and the related average borrowing costs were 2.81% and 2.22% for the three and nine months ended September 30, 2018, and were $330,885 and $335,907 and 4.25% and 4.09% for the comparable 2017 periods.
[4] See Note 11 for the components of other operating expenses.
[5] Includes $256 of net revenues received from Medallion Bank for the nine months ended September 30, 2018 and $184 and $641 for the three and nine months ended September 30, 2017, primarily for expense reimbursements. See Notes 6 and 13 for additional information.
[6] There were no net losses on investment securities of affiliated issuers for the nine months ended September 30, 2018 and for the three and nine months ended September 30, 2017.
v3.10.0.1
Consolidated Statement of Income (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Interest paid in kind $ 450 $ 939 $ 1,428 $ 1,650
Average borrowings outstanding $ 1,255,945 $ 330,885 $ 1,226,896 $ 335,907
Average borrowing costs rate 2.81% 4.25% 2.22% 4.09%
Net Gain/losses on investment securities of affiliated [1],[2]     $ (34,745)  
Affiliated Entity [Member]        
Net Gain/losses on investment securities of affiliated   $ 0 0 $ 0
Medallion Bank [Member]        
Revenue   $ 184 $ 256 $ 641
[1] Balance includes the six months ended September 30, 2018 under Bank Holding Company Accounting and three months ended March 31, 2018 under Investment Company Accounting.
[2] There were no net losses on investment securities of affiliated issuers for the nine months ended September 30, 2018 and for the three and nine months ended September 30, 2017.
v3.10.0.1
Consolidated Statements of Other Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Net loss after taxes/net increase (decrease) on net assets resulting from operations $ (3,846)   $ (32,604) [1]  
Other comprehensive loss, net of tax [1]     (469)  
Total comprehensive loss [1]     (33,073)  
Less: comprehensive income attributable to the noncontrolling interest [1]     1,614  
Total comprehensive loss attributable to Medallion Financial Corp. [1]     $ (34,687)  
Bank Holding Company Accounting [Member]        
Net loss after taxes/net increase (decrease) on net assets resulting from operations (3,846)      
Other comprehensive loss, net of tax (214)      
Total comprehensive loss (4,060)      
Less: comprehensive income attributable to the noncontrolling interest 851      
Total comprehensive loss attributable to Medallion Financial Corp. $ (4,911)      
Investment Company Accounting [Member]        
Net loss after taxes/net increase (decrease) on net assets resulting from operations   $ 619   $ (3,067)
Total comprehensive loss   619   (3,067)
Total comprehensive loss attributable to Medallion Financial Corp.   $ 619   $ (3,067)
[1] Balance includes the six months ended September 30, 2018 under Bank Holding Company Accounting and three months ended March 31, 2018 under Investment Company Accounting.
v3.10.0.1
Consolidated Statement of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Preferred Stock [Member]
Capital in Excess of Par [Member]
Treasury Stock [Member]
Noncontrolling Interest [Member]
Investment Company Accounting [Member]
Investment Company Accounting [Member]
Accumulated Undistributed Net Investment Loss [Member]
Investment Company Accounting [Member]
Accumulated Undistributed Net Realized Gains on Investments [Member]
Investment Company Accounting [Member]
Net Unrealized Appreciation on Investment Net of Tax [Member]
Bank Holding Company Accounting [Member]
Bank Holding Company Accounting [Member]
Retained Earnings [Member]
Bank Holding Company Accounting [Member]
Accumulated Other Comprehensive Income [Member]
Bank Holding Company Accounting [Member]
Parent [Member]
Beginning balance at Dec. 31, 2017 $ 287,159 $ 273   $ 273,716 $ (24,919)   $ 287,159 $ (65,592)   $ 103,681       $ 287,159
Beginning balance, shares at Dec. 31, 2017   27,294,327     (2,951,243)   24,343,084              
Net decrease in net assets resulting from operations (14,874)             (38,299)   23,425       (14,874)
Stock based compensation 152 $ 1   151                   152
Issuance of restricted stock, net 0 $ 0 $ 0 0 $ 0 $ 0   0 $ 0 0   $ 0 $ 0 0
Issuance of restricted stock, net, shares   95,726                        
Ending balance at Mar. 31, 2018 272,437 $ 274   273,867 $ (24,919)     (103,891)   127,106       272,437
Ending balance, shares at Mar. 31, 2018   27,390,053     (2,951,243)                  
Beginning balance at Dec. 31, 2017 287,159 $ 273   273,716 $ (24,919)   $ 287,159 (65,592)   103,681       287,159
Beginning balance, shares at Dec. 31, 2017   27,294,327     (2,951,243)   24,343,084              
Net loss [1] (32,604)                          
Ending balance at Sep. 30, 2018 280,415 $ 274   274,163 $ (24,919) 27,495         $ 280,415 3,871 (469) 252,920
Ending balance, shares at Sep. 30, 2018   27,391,295     (2,951,243)           24,440,052      
Beginning balance at Mar. 31, 2018 272,437 $ 274   273,867 $ (24,919)     (103,891)   127,106       272,437
Beginning balance, shares at Mar. 31, 2018   27,390,053     (2,951,243)                  
Net loss (17,730)         1,614           (19,344)   (19,344)
Distributions on noncontrolling interest (1,184)         (1,184)                
Stock based compensation 296     296                   296
Issuance of restricted stock, net 0 $ 0 $ 0 0 $ 0 0   0 $ 0 0   0 0 0
Issuance of restricted stock, net, shares   1,242,000                        
Net change in unrealized losses on investments, net of tax (469)                       (469) (469)
Ending balance at Sep. 30, 2018 280,415 $ 274   274,163 $ (24,919) 27,495         $ 280,415 3,871 $ (469) 252,920
Ending balance, shares at Sep. 30, 2018   27,391,295     (2,951,243)           24,440,052      
Adoption of Bank Holding Company Accounting               $ 103,891   $ (127,106)   23,215    
Balance after adoption of Bank Holding Company Accounting $ 299,502 $ 274   $ 273,867 $ (24,919) $ 27,065           $ 23,215   $ 272,437
[1] Balance includes the six months ended September 30, 2018 under Bank Holding Company Accounting and three months ended March 31, 2018 under Investment Company Accounting.
v3.10.0.1
Consolidated Statements of Changes In Net Assets - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Mar. 31, 2018
Sep. 30, 2017
Sep. 30, 2017
Dec. 31, 2017
Net increase (decrease) in net assets resulting from operations   $ 619,000 $ (3,067,000)  
Capital share activity        
Exercise of stock options [1] 0     0
Investment Company Accounting [Member]        
Net investment loss after income taxes   (2,490,000) (4,218,000)  
Net realized gains on investments, net of tax   944,000 3,785,000  
Net unrealized depreciation on investments, net of tax   2,165,000 (2,634,000)  
Net increase (decrease) in net assets resulting from operations   619 (3,067)  
Investment income, net   0    
Return of capital   0 0  
Realized gains from investment transactions, net   0    
Distributions to shareholders [2]   0 0  
Stock-based compensation expense   222,000 551,000  
Exercise of stock options   0 0  
Capital share transactions   222,000 551,000  
Total increase (decrease) in net assets   841,000 (2,516,000)  
Net assets at the beginning of the period   282,739,000 286,096,000 $ 286,096,000
Net assets at the end of the period [3]   $ 283,580,000 $ 283,580,000  
Capital share activity        
Capital share activity Common stock issued, beginning of period 27,294,327 27,227,291 26,976,064 26,976,064
Exercise of stock options   0 0  
Issuance of restricted stock, net   (492) 250,735  
Common stock issued, end of period   27,226,799 27,226,799 27,294,327
Treasury stock, beginning of period (2,951,243) (2,951,243) (2,951,243) (2,951,243)
Treasury stock acquired   0 0  
Treasury stock, end of period   (2,951,243) (2,951,243) (2,951,243)
Common stock outstanding   24,275,556 24,275,556 24,343,084
[1] The aggregate intrinsic value, which represents the difference between the price of the Company's common stock at the exercise date and the related exercise price of the underlying options, was $0 and $0 for the 2018 and 2017 third quarter and nine months.
[2] Distributions declared were $0.00 and $0.00 per share for the three and nine months ended September 30, 2017.
[3] Includes $0 of undistributed net investment income, $0 of undistributed net realized gains on investments, and $0 of capital loss carryforwards at September 30, 2017.
v3.10.0.1
Consolidated Statements of Changes In Net Assets (Parenthetical)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2017
USD ($)
$ / shares
Sep. 30, 2017
USD ($)
$ / shares
Distributions declared Per share | $ / shares $ 0 $ 0
Investment Company Accounting [Member]    
Distributions declared Per share | $ / shares $ 0 $ 0
Undistributed net investment income $ 0  
Undistributed net realized gains on investments 0  
Capital Loss carryforwards $ 0 $ 0
v3.10.0.1
Consolidated Statements of Cash Flows
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2017
USD ($)
Sep. 30, 2018
USD ($)
Sep. 30, 2017
USD ($)
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss   $ (32,604) [1]  
Adjustments to reconcile net loss to net cash provided by operating activities:      
Provision for loan losses   48,781 [1]  
Loans originated   (8,193) [1]  
Proceeds from principal receipts, sales, and maturities of loans   13,279 [1]  
Paid-in-kind interest   (1,428) [1]  
Depreciation and amortization   2,995 [1]  
Change in deferred and other tax assets/liabilities, net   8,676 [1]  
Amortization of origination fees, net $ 17 2,192 [1] $ 55
Net change in loan collateral in process of foreclosure   3,258 [1]  
Capital returned by Medallion Bank and other controlled subsidiaries, net   93 [1]  
Net realized gains on sale of loans and investments   (4,726) [1]  
Net change in unrealized depreciation on investments   5,380 [1]  
Net change in unrealized depreciation on investment other than securities   1,915 [1]  
Increase in unrealized appreciation on Medallion Bank and other controlled subsidiaries   (29,115) [1]  
Net realized (gains) losses on investments   34,745 [1],[2]  
Stock-based compensation expense   446 [1]  
Decrease in accrued interest receivable   486 [1]  
Increase in other liabilities   3,159 [1]  
(Increase) decrease in other assets   (7,173) [1]  
Decrease in accounts payable and accrued expenses   (675) [1]  
Increase (decrease) in accrued interest payable   41 [1]  
Net cash provided by operating activities   41,532 [1]  
CASH FLOWS FROM INVESTING ACTIVITIES      
Loans originated   (256,933) [1]  
Proceeds from principal receipts, sales, and maturities of loans   240,915 [1]  
Purchases of investments   (8,304) [1]  
Proceeds from principal receipts, sales, and maturities of investments   2,475 [1]  
Net cash (used for) investing activities   (21,847) [1]  
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from time deposits and funds borrowed   336,108 [1]  
Repayments of time deposits and funds borrowed   (253,497) [1]  
Purchase of federal funds   8,000 [1]  
Repayments of federal funds   (8,000) [1]  
Distributions to noncontrolling interests   (1,184) [1]  
Payments of declared distributions   (65) [1]  
Net cash provided by (used for) financing activities   81,362 [1]  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   101,047 [1]  
Cash and cash equivalents, beginning of period   42,513 [1],[3]  
Cash and cash equivalents, end of period   143,560 [1],[4]  
SUPPLEMENTAL INFORMATION      
Cash paid during the period for interest   17,381 [1]  
Cash paid during the period for income taxes   52 [1]  
Investment Company Accounting [Member]      
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss 619   (3,067)
Adjustments to reconcile net loss to net cash provided by operating activities:      
Loans originated     (16,775)
Proceeds from principal receipts, sales, and maturities of loans     36,922
Paid-in-kind interest     (1,650)
Depreciation and amortization     410
Change in deferred and other tax assets/liabilities, net     (12,268)
Amortization of origination fees, net     55
Capital returned by Medallion Bank and other controlled subsidiaries, net     588
Net change in unrealized depreciation on investments     26,843
Increase in unrealized appreciation on Medallion Bank and other controlled subsidiaries     (11,089)
Net realized (gains) losses on investments (944) [2]   (3,785) [2]
Stock-based compensation expense 222   551
Decrease in accrued interest receivable     209
(Increase) decrease in other assets     548
Decrease in accounts payable and accrued expenses     (354)
Increase (decrease) in accrued interest payable     255
Net cash provided by operating activities     17,393
CASH FLOWS FROM FINANCING ACTIVITIES      
Repayments of time deposits and funds borrowed     (18,935)
Payments of declared distributions     (139)
Net cash provided by (used for) financing activities     (19,074)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (1,681)
Cash and cash equivalents, beginning of period     20,962 [3]
Cash and cash equivalents, end of period 19,281 [4]   19,281 [4]
SUPPLEMENTAL INFORMATION      
Cash paid during the period for interest     9,692
Cash paid during the period for income taxes     48
Previously Unconsolidated Subsidiaries [Member]      
SUPPLEMENTAL INFORMATION      
Cash, cash equivalents and federal funds sold   29,923  
Medallion Bank [Member]      
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss 16,019   45,991
Adjustments to reconcile net loss to net cash provided by operating activities:      
Amortization of origination fees, net $ (901) (3,065) $ (2,526)
SUPPLEMENTAL INFORMATION      
Deposit   $ 100  
[1] Balance includes the six months ended September 30, 2018 under Bank Holding Company Accounting and three months ended March 31, 2018 under Investment Company Accounting.
[2] There were no net losses on investment securities of affiliated issuers for the nine months ended September 30, 2018 and for the three and nine months ended September 30, 2017.
[3] Included in the beginning balance for the nine months ended September 30, 2018 was $29,923 of cash, cash equivalents, and federal funds sold as a result of the consolidation of previously unconsolidated subsidiaries and excludes $100 of cash held by the Company on deposit with Medallion Bank.
[4] Includes federal funds sold for the nine months ended September 30, 2018.
v3.10.0.1
Organization of Medallion Financial Corp. and its Subsidiaries
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization of Medallion Financial Corp. and its Subsidiaries

(1) ORGANIZATION OF MEDALLION FINANCIAL CORP. AND ITS SUBSIDIARIES

Medallion Financial Corp. (the Company) is a commercial finance company organized as a Delaware corporation that reports as a bank holding company (but is not a bank holding company for regulatory purposes). The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Bank, a Federal Deposit Insurance Corporation (FDIC) insured industrial bank, that originates consumer loans, raises deposits, and conducts other banking activities. Medallion Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies, and undergoes examinations by those agencies. Medallion Bank was initially formed for the primary purpose of originating commercial loans in three categories: 1) loans to finance the purchase of taxicab medallions, 2) asset-based commercial loans, and 3) SBA 7(a) loans. The loans are marketed and serviced by Medallion Bank’s affiliates that have extensive prior experience in these asset groups. Subsequent to its formation, Medallion Bank began originating consumer loans to finance the purchases of RVs, boats, and other related items, and to finance small scale home improvements. The Company also conducts business through Medallion Funding LLC (MFC), a Small Business Investment Company (SBIC) which originates and services taxicab medallion and commercial loans.

The Company also conducts business through its subsidiaries, Medallion Capital, Inc. (MCI), an SBIC which conducts a mezzanine financing business, and Freshstart Venture Capital Corp. (FSVC), an SBIC which originates and services taxicab medallion and commercial loans. MFC, MCI, and FSVC, as SBICs, are regulated by the Small Business Administration (SBA). MCI and FSVC are financed in part by the SBA.

The Company has a controlling ownership stake in Medallion Motorsports, LLC, the primary owner of RPAC Racing, LLC (RPAC), a professional car racing team that competes in the Monster Energy NASCAR Cup Series, which is also consolidated with the Company.

The Company formed a wholly-owned subsidiary, Medallion Servicing Corporation (MSC), to provide loan services to Medallion Bank. The Company has assigned all of its loan servicing rights for Medallion Bank, which consists of servicing taxi medallion loans originated by Medallion Bank, to MSC, which bills and collects the related service fee income from Medallion Bank, and is allocated and charged by the Company for MSC’s share of these servicing costs.

Taxi Medallion Loan Trust III (Trust III) was established for the purpose of owning medallion loans originated by MFC or others. Trust III is a variable interest entity (VIE), MFC is the primary beneficiary and as a result the Company consolidated Trust III in its financial results, until consummation of the restructuring subsequent to September 30, 2018. Trust III is a separate legal and corporate entity with its own creditors which, in any liquidation of Trust III, will be entitled to be satisfied out of Trust III’s assets prior to any value in Trust III becoming available to Trust III’s equity holders. The assets of Trust III, aggregating $63,512,000 at September 30, 2018, are not available to pay obligations of its affiliates or any other party, and the assets of affiliates or any other party are not available to pay obligations of Trust III. Trust III’s loans are serviced by MFC. As of September 30, 2018, Trust III had liabilities of $98,491,000 and a deficit of $34,979,000, as a result of losses taken on the medallion loans in Trust III. As of September 30, 2018, this amount exceeded the Company’s maximum exposure to Trust III, which is solely due to a limited guaranty by MFC of $5,987,000, by $28,992,000. Refer to Note 19 for a discussion of the restructuring the Company executed subsequent to September 30, 2018.

The Company established a wholly-owned subsidiary, Medallion Financing Trust I (Fin Trust) for the purpose of issuing unsecured preferred securities to investors. Fin Trust is a separate legal and corporate entity with its own creditors who, in any liquidation of Fin Trust, will be entitled to be satisfied out of Fin Trust’s assets prior to any value in Fin Trust becoming available to Fin Trust’s equity holders. The assets of Fin Trust, aggregating $36,142,000 at September 30, 2018, are not available to pay obligations of its affiliates or any other party, and the assets of affiliates or any other party are not available to pay obligations of Fin Trust.

MFC, through several wholly-owned subsidiaries (together, Medallion Chicago), purchased $8,689,000 of City of Chicago taxicab medallions out of foreclosure, which are leased to fleet operators while being held for sale. The 159 medallions are carried at a net realizable value of $5,535,000 on the Company’s consolidated balance sheet at September 30, 2018 compared to fair value of $7,450,000 and $9,510,000 at December 31, 2017 and September 30, 2017.

v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Change to Bank Holding Company Accounting

As described above, effective April 2, 2018, the Company withdrew its previous election to be regulated as a BDC under the 1940 Act. Prior to such time, the Company was a closed-end, non-diversified management investment company that had elected to be treated as a BDC under the 1940 Act. Accordingly, commencing with the three months ended June 30, 2018, the Company (which now consolidates the results of Medallion Bank and its other subsidiaries) reports in accordance with Bank Holding Company Accounting; periods prior to such change in status are reported in accordance with Investment Company Accounting. Significant accounting policies that differ between such periods are described in more detail below.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the US (GAAP) requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties. All of these estimates reflect management’s best judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions change, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of loans and other receivables, investments other than securities, loans held for sale, and investments, among other effects.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly-owned and controlled subsidiaries commencing with the three months ended June 30, 2018. All significant intercompany transactions, balances, and profits (losses) have been eliminated in consolidation. Prior to the Company’s election to withdraw from being regulated as a BDC under the 1940 Act effective April 2, 2018, Medallion Bank and various other Company subsidiaries were not consolidated with the Company prior to the three months ended June 30, 2018, and as such see Note 6 for the presentation of financial information for Medallion Bank and other controlled subsidiaries for such prior periods.

The consolidated financial statements have been prepared in accordance with GAAP. The Company consolidates all entities it controls through a majority voting interest, a controlling interest through other contractual rights, or as being identified as the primary beneficiary of VIEs. The primary beneficiary is the party who has both (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third-party’s holding is recorded as non-controlling interest.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original purchased maturity of three months or less to be cash equivalents. Cash balances are generally held in accounts at large national or regional banking organizations in amounts that exceed the federally insured limits.

Fair Value of Assets and Liabilities

The Company follows FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, (FASB ASC 820), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 defines fair value as an exit price (i.e. a price that would be received to sell, as opposed to acquire, an asset or transfer a liability), and emphasizes that fair value is a market-based measurement. It establishes a fair value hierarchy that distinguishes between assumptions developed based on market data obtained from independent external sources and the reporting entity’s own assumptions. Further, it specifies that fair value measurement should consider adjustment for risk, such as the risk inherent in the valuation technique or its inputs. See also Notes 14 and 15 to the consolidated financial statements.

Equity Investments

Equity investments of $10,752,000 at September 30, 2018, comprised mainly of nonmarketable stock, equity units and equity warrants, are recorded at cost and are evaluated for impairment periodically. Prior to April 2, 2018, equity investments were recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation. The fair value of investments that had no ready market were determined in good faith by the Board of Directors, based upon the financial condition and operating performance of the underlying investee companies as well as general market trends for businesses in the same industry. Included in the equity investments were non-marketablesecurities of $9,521,000 at December 31, 2017.

 

Investment Securities (Bank Holding Company Accounting)

The Company follows FASB ASC Topic 320, Investments – Debt and Equity Securities (ASC 320), which requires that all applicable investments in equity securities with readily determinable fair values, and debt securities be classified as trading securities, available-for-sale securities, or held-to-maturity securities. Investment securities are purchased from time-to-time in the open market at prices that are greater or lesser than the par value of the investment. The resulting premium or discount is deferred and recognized on a level yield basis as an adjustment to the yield of the related investment. The net premium on investment securities totaled $186,000, and $26,000 and $47,000 was amortized to interest income for the three and six months ended September 30, 2018. Medallion Bank, a previously unconsolidated subsidiary under Investment Company Accounting, for the period, had net premium on investment securities of $250,000 as of September 30, 2017, and $21,000 and $61,000 was amortized to interest income for the three and nine months ended September 30, 2017. Refer to Note 3 for more details. ASC 320 further requires that held-to-maturity securities be reported at amortized cost and available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings at the date of the consolidated financial statements, and reported in accumulated other comprehensive income (loss) as a separate component of shareholder’s equity, net of the effect of income taxes, until they are sold. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results and any amounts previously included in shareholder’s equity, which were recorded net of the income tax effect, will be reversed.

Other Investment Valuation (Investment Company Accounting)

Prior to April 2, 2018, under the 1940 Act, the Company’s investment in Medallion Bank, as a wholly owned portfolio investment, was subject to quarterly assessments of fair value. The Company conducted a thorough valuation analysis, and also received an opinion regarding the valuation from an independent third party to assist the Board of Directors in its determination of the fair value of Medallion Bank on at least an annual basis. The Company’s analysis included factors such as various regulatory restrictions that were established at Medallion Bank’s inception, by the FDIC and State of Utah, and also by additional regulatory restrictions, such as the prior moratorium imposed by the Dodd-Frank Act on the acquisition of control of an industrial bank by a “commercial firm” (a company whose gross revenues are primarily derived from non-financial activities) which expired in July 2013 and the lack of any new charter issuances since the moratorium’s expiration. Because of these restrictions and other factors, the Company’s Board of Directors had previously determined that Medallion Bank had little value beyond its recorded book value. As a result of this valuation process, the Company had previously used Medallion Bank’s actual results of operations as the best estimate of changes in fair value, and recorded the results as a component of unrealized appreciation (depreciation) on investments. In the 2015 second quarter, the Company first became aware of external interest in Medallion Bank and its portfolio assets at values in excess of their book value. Expression of interest in Medallion Bank from both investment bankers and interested parties has continued. The Company incorporated these new factors in the Medallion Bank’s fair value analysis and the Board of Directors determined that Medallion Bank had a fair value in excess of book value. In addition, in the 2016 third quarter there was a court ruling involving a marketplace lender that the Company believes heightens the interest of marketplace lenders to acquire or merge with Utah industrial banks. The Company also engaged a valuation specialist to assist the Board of Directors in their determination of Medallion Bank’s fair value, and this appreciation of $15,500,000 was thereby recorded in 2015, and additional appreciation of $128,918,000 was recorded in 2016, $7,849,000 was recorded in 2017, and $39,826,000 was recorded in the first quarter of 2018. Refer to Note 6 for additional details.

At December 31, 2017, there were non-marketable securities of $302,147,000 related to portfolio investments in controlled subsidiaries that were not consolidated with the Company. Because of the inherent uncertainty of valuations, the Board of Directors’ estimates of the values of the investments may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

Loans

The Company’s loans are currently reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, and which is amortized to interest income over the life of the loan. Effective April 2, 2018, the existing loan balances were recharged at fair value in connection with the change in reporting, and balances, net of reserves, became the fair value opening balances.

Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. At September 30, 2018 and December 31, 2017, net loan origination costs were $14,041,000 and $90,000 ($11,187,000 when combined with Medallion Bank). The majority of these loan origination costs were capitalized into the loan balances on April 2, 2018 in connection with the change in reporting status. Net amortization (accretion) to income for the three months ended September 30, 2018 and 2017 was $1,147,000 and ($17,000) ($901,000 when combined with Medallion Bank), and was $2,192,000 ($3,065,000 when combined with Medallion Bank) and ($55,000) ($2,526,000 when combined with Medallion Bank) for the comparable nine month periods.

 

Interest income is recorded on the accrual basis. Taxicab medallion and commercial loans are placed on nonaccrual status, and all uncollected accrued interest is reversed, when there is doubt as to the collectability of interest or principal, or if loans are 90 days or more past due, unless management has determined that they are both well-secured and in the process of collection. Interest income on nonaccrual loans is generally recognized when cash is received, unless a determination has been made to apply all cash receipts to principal. The consumer portfolio has different characteristics, typified by a larger number of lower dollar loans that have similar characteristics. A loan is considered to be impaired, or nonperforming, when based on current information and events, it is likely the Company will be unable to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be impaired. These loans are placed on nonaccrual, when they become 90 days past due, or earlier if they enter bankruptcy, and are charged off in their entirety when deemed uncollectible, or when they become 120 days past due, whichever occurs first, at which time appropriate collection and recovery efforts against both the borrower and the underlying collateral are initiated. For the recreational consumer loan portfolio, the process to repossess the collateral is started at 60 days past due. If the collateral is not located and the account reaches 120 days delinquent, the account is charged off. If the collateral is repossessed, a loss is recorded to write the collateral down to its fair value less selling costs, and the collateral is sent to auction. When the collateral is sold, the net auction proceeds are applied to the account, and any remaining balance is written off. Proceeds collected on charged off accounts are recorded as a recovery. Total loans more than 90 days past due were $14,061,000 at September 30, 2018, or 1.29% of the total loan portfolio, compared to $60,450,000, or 18.9% at December 31, 2017.

Loan collateral in process of foreclosure primarily includes taxicab medallion loans that have reached 120 days past due and have been charged down to their net realizable value, in addition to consumer repossessed collateral in the process of being sold. The taxicab medallion loan component reflects that the collection activities on the loans have transitioned from working with the borrower, to the liquidation of the collateral securing the loans.

The Company had $123,173,000 and $183,529,000 of net loans pledged as collateral under borrowing arrangements at September 30, 2018 and December 31, 2017.

The Company accounted for its sales of loans in accordance with FASB Accounting Standards Codification Topic 860, Transfers and Servicing (FASB ASC 860) which provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. In accordance with FASB ASC 860, the Company had elected the fair value measurement method for its servicing assets and liabilities. The principal portion of loans serviced for others by the Company and its affiliates was $26,558,000 at September 30, 2018 and $338,867,000 at December 31, 2017, which included $311,988,000 of loans serviced for Medallion Bank. The Company has evaluated the servicing aspect of its business in accordance with FASB ASC 860, most of which relates to servicing assets held by Medallion Bank, and determined that no material servicing asset or liability existed as of September 30, 2018 and December 31, 2017. The Company assigned its servicing rights to the Medallion Bank portfolio to MSC. The costs of servicing were allocated to MSC by the Company, and the servicing fee income was billed to and collected from Medallion Bank by MSC.

Allowance for Loan Losses (Bank Holding Company Accounting)

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. In analyzing the adequacy of the allowance for loan losses, the Company uses historical delinquency and actual loss rates with a one year lookback period for consumer loans. For commercial loans deemed nonperforming, the historical loss experience and other projections are looked at, and for medallion loans, non performing loans are valued at the median sales price over the most recent quarter, and performing medallion loans are reserved utilizing historical loss ratios over a three year lookback period. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. As a result, reserves of $15,587,000 (includes Bank’s reserves since April 2nd); are recorded as a general reserve on medallion loans as an additional buffer against future losses. Credit losses are deducted from the allowance and subsequent recoveries are added back to the allowance.

Unrealized Appreciation (Depreciation) and Realized Gains (Losses) on Investments (Investment Company Accounting)

Prior to April 2, 2018, under Investment Company Accounting, the Company’s loans, net of participations and any unearned discount, were considered investment securities under the 1940 Act and recorded at fair value. As part of the fair value methodology, loans were valued at cost adjusted for any unrealized appreciation (depreciation). Since no ready market existed for these loans, the fair value was determined in good faith by the Board of Directors. In determining the fair value, the Board of Directors considered factors such as the financial condition of the borrower, the adequacy of the collateral, individual credit risks, cash flows of the borrower, market conditions for loans (e.g. values used by other lenders and any active bid/ask market), historical loss experience, and the relationships between current and projected market rates and portfolio rates of interest and maturities. Investments other than securities, which represent collateral received from defaulted borrowers, were valued similarly.

 

Under Investment Company Accounting, the Company recognized unrealized appreciation (depreciation) on investments as the amount by which the fair value estimated by the Company is greater (less) than the cost basis of the investment portfolio. Realized gains or losses on investments are generated through sales of investments, foreclosure on specific collateral, and writeoffs of loans or assets acquired in satisfaction of loans, net of recoveries. Unrealized appreciation on investments was $139,700,000, and $100,732,000 as of December 31, 2017 and September 30, 2017. Refer to Note 5 for additional details.

Goodwill and Intangible Assets

The Company’s goodwill and intangible assets arose as a result of the excess of fair value over book value for several of the Company’s previously unconsolidated portfolio investment companies as of April 2, 2018. This fair value was brought forward under the Company’s new Bank Holding Company reporting, and was subject to a purchase price accounting allocation process conducted by an independent third party expert to arrive at the current categories and amounts. Goodwill is not amortized, but is subject to impairment testing on an annual basis. Intangible assets are amortized over their useful life of approximately 20 years. See below for detailed information on the fair value allocation as of April 2, 2018. As of September 30, 2018, the Company had goodwill and intangible assets of $210,761 and recognized $361 and $722 of amortization expense for the three and nine months periods then ended.

 

(in thousands)

   Fair Value as of
March 31, 2018
     Allocation as
of April 2,
2018
 

Medallion Bank

     

Assets

     

Net loans(1)

      $ 890,000  

Other assets

        130,393  

Liabilities

     

Funds borrowed and other liabilities

        (853,650
     

 

 

 

Total fair value excluding goodwill and intangibles

        166,743  

Goodwill

        150,803  

Intangibles

        28,900  
     

 

 

 

Total fair value(2)

   $ 346,446      $ 346,446  
  

 

 

    

 

 

 

 

(1)

Includes $12,387 of premiums associated with the loan portfolio.

(2)

Includes $26,303 of preferred stock held by the US Treasury. See Note 17 for details.

 

(in thousands)

   Fair Value as
of March 31,
2018
     Allocation as
of April 2,
2018
 

RPAC Racing LLC

     

Assets

     

Cash

      $ 1,647  

Net fixed assets

        774  

Race cars and parts, net

        203  

Race cars held for sale

        916  

Other assets

        1,902  

Liabilities

     

Deferred revenue

        (6,531

Notes payable(1)

        (27,220

Other liabilities

        (2,275
     

 

 

 

Total fair value excluding goodwill and intangibles

        (30,584

Intangibles

        31,779  
     

 

 

 

Total fair value(2)

   $ 1,195      $ 1,195  
  

 

 

    

 

 

 

 

(1)

Includes $20,177 due to the Company and its affiliates as of March 31, 2018.

(2)

Fair value as of March 31, 2018 represents the Company’s investment in RPAC Racing LLC series D units.

 

Fixed Assets

Fixed assets are carried at cost less accumulated depreciation and amortization, and are depreciated on a straight-line basis over their estimated useful lives of 3 to 10 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated economic useful life of the improvement. Depreciation and amortization expense was $131,000 and $23,000 ($64,000 had Medallion Bank been consolidated) for the quarters ended September 30, 2018 and 2017, and was $289,000 and $71,000 ($166,000 had Medallion Bank been consolidated) for the comparable nine months.

Deferred Costs

Deferred financing costs, included in other assets, represents costs associated with obtaining the Company’s borrowing facilities, and are amortized on a straight line basis over the lives of the related financing agreements and life of the respective pool. Amortization expense was $558,000 and $229,000 ($567,000 had Medallion Bank been consolidated) for the quarters ended September 30, 2018 and 2017, and was $1,322,000 and $697,000 ($1,680,000 had Medallion Bank been consolidated) for the comparable nine months, recorded as interest expense. In addition, the Company capitalizes certain costs for transactions in the process of completion (other than business combinations), including those for potential investments, and the sourcing of other financing alternatives. Upon completion or termination of the transaction, any accumulated amounts are amortized against income over an appropriate period, or written off. The amount on the Company’s balance sheet for these purposes was $4,859,000, $3,070,000 ($5,011,000 had Medallion Bank been consolidated), and $3,295,000 ($5,437,000 had Medallion Bank been consolidated) as of September 30, 2018, December 31, 2017, and September 30, 2017.

Income Taxes

Income taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are also recorded for net operating losses, capital losses, and any tax credit carryforwards. A valuation allowance is provided against a deferred tax asset when it is more likely than not that some or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether a valuation allowance for deferred tax assets is needed. Items considered in determining our valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods, and the expected timing of the reversal of temporary differences. Under ASC 740, forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence, such as cumulative losses in recent years. The Company recognizes tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. The Company records income tax related interest and penalties, if applicable, within current income tax expense.

 

Earnings (Loss) Per Share (EPS)

Basic earnings (loss) per share are computed by dividing net income (loss)/net increase (decrease) in net assets resulting from operations available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if option contracts to issue common stock were exercised, or if restricted stock vests, and has been computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and restricted stock. The Company uses the treasury stock method to calculate diluted EPS, which is a method of recognizing the use of proceeds that could be obtained upon exercise of options and warrants, including unvested compensation expense related to the shares, in computing diluted EPS. It assumes that any proceeds would be used to purchase common stock at the average market price during the period. The table below shows the calculation of basic and diluted EPS.

 

     Three Months Ended September 30,      Nine Months Ended September 30,  

(Dollars in thousands, except per share data)

   2018      2017      2018      2017  

Net loss/ net decrease in net assets resulting from operations available to common shareholders

   ($ 4,697    $ 619      ($ 34,218    ($ 3,067
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding applicable to basic EPS

     24,235,242        23,930,086        24,207,273        23,916,334  

Effect of dilutive stock options

     —          —          —          —    

Effect of restricted stock grants

     —          153,833        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

     24,235,242        24,083,919        24,207,273        23,916,334  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic loss per share

   ($ 0.19    $ 0.03      ($ 1.41    ($ 0.13

Diluted loss per share

     (0.19      0.03        (1.41      (0.13
  

 

 

    

 

 

    

 

 

    

 

 

 

Potentially dilutive common shares excluded from the above calculations aggregated 115,000 and 359,000 shares as of September 30, 2018 and 2017.

Stock Compensation

The Company follows FASB ASC Topic 718 (ASC 718), “Compensation – Stock Compensation”, for its equity incentive, stock option and restricted stock plans, and accordingly, the Company recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options is reflected in net income (loss)/net increase (decrease) in net assets resulting from operations for any new grants using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option. Stock-based employee compensation costs pertaining to restricted stock are reflected in net income (loss)/net increase in net assets resulting from operations for any new grants using the grant date fair value of the shares granted, expensed over the vesting period of the underlying stock.

During the nine months ended September 30, 2018 and 2017, the Company issued 101,010 and 258,232 of restricted shares of stock-based compensation awards, and 39,000 and 23,333 shares of other stock-based compensation awards, and recognized $151,000 and $446,000, or $0.01 and $0.02 per share for the 2018 third quarter and nine months, and $222,000 and $551,000, or $0.01 and $0.02 per share in the comparable 2017 periods, of non-cash stock-based compensation expense related to the grants. As of September 30, 2018, the total remaining unrecognized compensation cost related to unvested stock options and restricted stock was $408,000, which is expected to be recognized over the next 11 quarters (see Note 9).

Derivatives

The Company manages its exposure to increases in market rates of interest by periodically purchasing interest rate caps to lock in the cost of funds of its variable-rate debt in the event of a rapid run up in interest rates. The Company entered into contracts to purchase interest rate caps on $20,000,000 of notional value of principal from various multinational banks, with termination dates ranging to December 2018. The caps provide for payments to the Company if various LIBOR thresholds are exceeded during the cap terms. Total cap purchases were generally fully expensed when paid, including $0 for the three and nine months ended September 30, 2018 and $0 and $19,000 for the comparable 2017 periods, and all are carried at $0 on the balance sheet at September 30, 2018.

 

Regulatory Capital

Medallion Bank is subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the bank regulators about components, risk weightings, and other factors.

FDIC-insured banks, including Medallion Bank, are subject to certain federal laws, which impose various legal limitations on the extent to which banks may finance or otherwise supply funds to certain of their affiliates. In particular, Medallion Bank is subject to certain restrictions on any extensions of credit to, or other covered transactions, such as certain purchases of assets, with the Company or its affiliates.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios as defined in the regulations (set forth in the table below). Additionally, as conditions of granting the Bank’s application for federal deposit insurance, the FDIC ordered that the Tier 1 leverage capital to total assets ratio, as defined, be not less than 15%, and that an adequate allowance for loan losses be maintained. As of September 30, 2018, the Bank’s Tier 1 leverage capital ratio was 15.08%. The Bank’s actual capital amounts and ratios, and the regulatory minimum ratios are presented in the following table.

 

     Regulatory              

(Dollars in  thousands)

   Minimum     Well-
capitalized
    September 30, 2018     December 31, 2017  

Common equity Tier 1 capital

     —         —       $ 138,946     $ 137,494  

Tier 1 capital

     —         —         165,249       163,797  

Total capital

     —         —         178,552       176,876  

Average assets

     —         —         1,096,094       1,127,087  

Risk-weighted assets

     —         —         1,010,792       995,145  

Leverage ratio(1)

     4.0     5.0     15.1     14.5

Common equity Tier 1 capital ratio(2)

     4.5       6.5       13.7       13.8  

Tier 1 capital ratio(3)

     6.0       8.0       16.3       16.5  

Total capital ratio(3)

     8.0       10.0       17.7       17.8  

 

(1)

Calculated by dividing Tier 1 capital by average assets.

(2)

Calculated by subtracting preferred stock or non-controlling interests from Tier 1 capital and dividing by risk-weighted assets.

(3)

Calculated by dividing Tier 1 or total capital by risk-weighted assets.

In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer on top of the minimum risk-based capital ratios. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will increase by 0.625% each subsequent January 1 until January 1, 2019. Including the buffer, by January 1, 2019, the Bank will be required to maintain the following minimum capital ratios: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0%, a Tier 1 risk-based capital ratio of greater than 8.5% and a total risk-based capital ratio of greater than 10.5%

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value. The objective of this update is to modify the disclosure requirements as it relates to the fair value of assets and liabilities. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not believe this update will have a material impact on its financial disclosures.

In January 2017, the FASB issued ASU 2017-04 Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of this update is to simplify the subsequent measurement of goodwill, by eliminating step 2 from the goodwill impairment test. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not believe this update will have a material impact on its financial condition.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this new standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial assets and other commitments to extend credit held by a reporting entity at each reporting date. The aftermath of the global economic crisis and the delayed recognition of credit losses associated with loans (and other financial instruments) was identified as a weakness in the application of existing accounting standards. Specifically, because the existing “incurred” loss model delays recognition until it is probable a credit loss was incurred, the FASB explored alternatives that would use more forward-looking information. Under the FASB’s new standard, the concepts used by entities to account for credit losses on financial instruments will fundamentally change. The existing “probable” and “incurred” loss recognition threshold is removed. Loss estimates are based upon lifetime “expected” credit losses. The use of past and current events must now be supplemented with “reasonable and supportable” expectations about the future to determine the amount of credit loss. The collective changes to the recognition and measurement accounting standards for financial instruments and their anticipated impact on the allowance for credit losses modeling have been universally referred to as the CECL (current expected credit loss) model. ASU 2016-13 applies to all entities and is effective for fiscal years beginning after December 15, 2019 for public entities and is effective for fiscal years beginning after December 15, 2020 for all other entities, with early adoption permitted. The Company is assessing the impact the update will have on its financial statements, but expects the update to have a significant impact on how the Company expects to account for estimated credit losses on its loans.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for leases classified as operating under GAAP. ASU 2016-02 applies to all entities and is effective for fiscal years beginning after December 15, 2018 for public entities. The Company has assessed the impact the update will have on its financial condition and does not believe this update will have a material impact on its financial condition.

v3.10.0.1
Investment Securities
9 Months Ended
Sep. 30, 2018
Investments Schedule [Abstract]  
Investment Securities

(3) INVESTMENT SECURITIES (Bank Holding Company Accounting)

Fixed maturity securities available for sale at September 30, 2018 consisted of the following:

 

(Dollars in thousands)

   Amortized Cost      Gross
Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

Mortgage-backed securities, principally obligations of US federal agencies

   $ 35,147      $ 9      $ (1,188    $ 33,968  

State and municipalities

     12,239        1        (451      11,789  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 47,386      $ 10      $ (1,639    $ 45,757  
  

 

 

    

 

 

    

 

 

    

 

 

 

The amortized cost and estimated market value of investment securities as of September 30, 2018 by contractual maturity are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

(Dollars in thousands)

   Amortized
Cost
     Fair
Value
 

Due in one year or less

   $ 27      $ 27  

Due after one year through five years

     11,404        11,035  

Due after five years through ten years

     11,718        11,283  

Due after ten years

     24,237        23,412  
  

 

 

    

 

 

 

Total

   $ 47,386      $ 45,757  
  

 

 

    

 

 

 

Information pertaining to securities with gross unrealized losses at September 30, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows.

 

     Less than Twelve Months      Twelve Months and Over  

(Dollars in thousands)

   Gross Unrealized
Losses
     Fair Value      Gross Unrealized
Losses
     Fair Value  

Mortgage-backed securities, principally obligations of US federal agencies

   $ (143    $ 7,165      $ (1,045    $ 24,751  

State and municipalities

     (142      5,918        (309      5,726  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ (285    $ 13,083      $ (1,354    $ 30,477  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

As of December 31, 2017, under Investment Company Accounting, investment securities made up 0% of the net investments.

v3.10.0.1
Loans and Allowance for Loan Losses
9 Months Ended
Sep. 30, 2018
Text Block [Abstract]  
Loans and Allowance for Loan Losses

(4) LOANS AND ALLOWANCE FOR LOAN LOSSES (Bank Holding Company Accounting)

The following table shows the major classification of loans, inclusive of capitalized loan origination costs, at September 30, 2018 under Bank Holding Company Accounting.

 

(Dollars in thousands)

   Amount      As a
Percent of
Gross
Loans
 

Recreation

   $ 575,875        53

Home improvement

     169,642        16  

Commercial

     82,558        7  

Medallion

     261,470        24  
  

 

 

    

 

 

 

Total gross loans

     1,089,545        100
     

 

 

 

Allowance for loan losses

     (29,484   
  

 

 

    

Total net loans

   $ 1,060,061     
  

 

 

    

The following table sets forth the activity in the allowance for loan losses for the three and six months ended September 30, 2018 under Bank Holding Company Accounting.

 

(Dollars in thousands)

   Three Months
Ended
September 30,
2018
     Six Months
Ended
September 30,
2018
 

Allowance for loan losses – beginning balance(1)

   $ 21,425      $ —    

Charge-offs

     

Recreation

     (4,825      (9,471

Home improvement

     (659      (1,220

Commercial

     —          —    

Medallion

     (6,457      (12,737
  

 

 

    

 

 

 

Total charge-offs

     (11,941      (23,428
  

 

 

    

 

 

 

Recoveries

     

Recreation

     1,318        3,217  

Home improvement

     367        606  

Commercial

     —          4  

Medallion

     110        304  
  

 

 

    

 

 

 

Total recoveries

     1,795        4,131  
  

 

 

    

 

 

 

Net charge-offs

     (10,146      (19,297
  

 

 

    

 

 

 

Provision for loan losses

     18,205        48,781  
  

 

 

    

 

 

 

Allowance for loan losses – ending balance(2)

   $ 29,484      $ 29,484  
  

 

 

    

 

 

 

 

(1)

Beginning balance for the six months ended September 30, 2018 reflects the transition to Bank Holding Company Accounting by netting previously established unrealized depreciation against the gross loan balances resulting in a starting point of zero for this table.

(2)

Includes $15,587 of a general reserve for current and performing medallion loans under 90 days past due, as an additional buffer against future losses, representing 53% of the total allowance, and 7% of the loans in question.

 

The following table sets forth the composition of the allowance for loan losses by type as of September 30, 2018:

 

     Amount      Percentage
of
Allowance
    Allowance as a
Percent of Loan
Category
 

Recreation

   $ 2,880        10     0.50

Home Improvement

     861        3       0.51  

Commercial

     100        —         0.12  

Medallion

     25,643        87       9.81  
  

 

 

    

 

 

   

Total

   $ 29,484        100     2.71
  

 

 

    

 

 

   

The following table presents total nonaccrual loans and foregone interest, substantially all of which is in the medallion portfolio. The decline reflects the charge-offs of certain loans and their movement to loan collateral in process of foreclosure. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.

 

     Bank Holding Company Accounting     Investment Company Accounting  

(Dollars in thousands)

   September 30, 2018     June 30, 2018     December 31, 2017 (1)     September 30, 2017 (2)  

Total nonaccrual loans

   $ 45,765     $ 47,904     $ 98,494     $ 132,316  

Interest foregone quarter to date

     563       770       823       1,845  

Amount of foregone interest applied to principal in the quarter

     350       400       52       574  

Interest foregone life to date

     8,530       8,281       12,485       16,286  

Amount of foregone interest applied to principal life to date

     3,412       3,748       3,495       9,750  

Percentage of nonaccrual loans to gross loan portfolio

     4     4     31     36

 

(1)

Does not include Medallion Bank nonaccrual loans of $32,668, $1,487 of interest income foregone and $1,221 of foregone interest paid and applied to principal.

(2)

Does not include Medallion Bank nonaccrual loans of $39,626, $1,278 of interest income foregone and $1,102 of foregone interest paid and applied to principal.

The following presents our performance status of loans as of September 30, 2018 under Bank Holding Company Accounting.

 

(Dollars in  thousands)

   Performing      Non-Performing      Total  

Recreation

   $ 570,800      $ 5,075      $ 575,875  

Home improvement

     169,475        167        169,642  

Commercial

     77,155        5,403        82,558  

Medallion

     223,413        38,057        261,470  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,040,843      $ 48,702      $ 1,089,545  
  

 

 

    

 

 

    

 

 

 

For those loans aged 31-90 days, there is a possibility that their delinquency status will continue to deteriorate and they will subsequently be placed on nonaccrual status and be reserved for, and as such, deemed nonperforming.

The following table provides additional information on attributes of the nonperforming loan portfolio as of September 30, 2018 under Bank Holding Company Accounting, all of which had an allowance recorded against the principal balance.

 

     September 30, 2018      Three Months Ended September 30,
2018
    Six Months Ended
September 30, 2018
 

(Dollars in  thousands)

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average Recorded
Investment
     Interest Income
Recognized
    Average
Recorded
Investment
     Interest Income
Recognized
 

With an allowance recorded

 

             

Recreation

   $ 5,075      $ 5,075      $ 180      $ 5,494      $ 106     $ 4,496      $ 231  

Home improvement

     167        167        3        178        —         119        —    

Commercial

     5,403        5,814        100        7,047        (82     5,838        (12

Medallion

     38,057        39,038        10,085        55,065        101       54,917        215  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total nonperforming loans with an allowance

   $ 48,702      $ 50,094      $ 10,368      $ 67,784      $ 125     $ 65,370      $ 434  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

The following table provides additional information on attributes of the nonperforming loan portfolio as of December 31, 2017 and September 30, 2017.

 

(Dollars in  thousands)

   Recorded
Investment (1) (2)
     Unpaid Principal
Balance
     Average Recorded
Investment
 

December 31, 2017

        

Medallion(3)

   $ 79,871      $ 82,612      $ 128,671  

Commercial(3)

     18,623        20,491        18,792  

September 30, 2017

        

Medallion(3)

   $ 120,716      $ 123,199      $ 124,944  

Commercial(3)

     11,600        18,867        11,951  

 

(1)

As of December 31, 2017 and September 30, 2017, $20,851 and $55,871 of unrealized depreciation was recorded as a valuation allowance on these loans.

(2)

Interest income of $124 and $1,383 was recognized on loans for the three and nine months ended September 30, 2017.

(3)

Included in the unpaid principal balance is unearned paid-in-kind interest on nonaccrual loans of $4,609 and $9,750 as of December 31, 2017 and September 30, 2017, which is included in the nonaccrual disclosures on page 25.

The following tables show the aging of all loans as of September 30, 2018 and December 31, 2017:

 

Bank Holding Company Accounting

   Days Past Due                    Recorded
Investment >
90 Days and
Accruing
 

September 30, 2018

(Dollars in thousands)

   31-60      61-90      91 +      Total      Current      Total (1)  

Recreation

   $ 14,974      $ 4,095      $ 3,164      $ 22,233      $ 534,065      $ 556,298      $ —  

Home improvement

     782        212        175        1,169        170,825        171,994        —    

Commercial

     471        95        421        987        81,571        82,558        —    

Medallion

     11,012        4,993        10,301        26,306        227,187        253,493        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 27,239      $ 9,395      $ 14,061      $ 50,695      $ 1,013,648      $ 1,064,343      $ —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Excludes loan premiums of $10,606 resulting from purchase price accounting and $14,596 of capitalized loan origination costs.

 

Investment Company Accounting

   Days Past Due                           Recorded
Investment >
90 Days and
Accruing
 

December 31, 2017

(Dollars in thousands)

   31-60      61-90      91 +      Total      Current      Total  

Medallion loans

   $ 16,049      $ 12,387      $ 59,701      $ 88,137      $ 140,279      $ 228,416      $ 265  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial loans

                    

Secured mezzanine

     —          —          —          —          88,334        88,334        —    

Other secured commercial

     —          —          749        749        1,728        2,477        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans

     —          —          749        749        90,062        90,811        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 16,049      $ 12,387      $ 60,450      $ 88,886      $ 230,341      $ 319,227      $ 265  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

The following table shows the troubled debt restructurings which the Company entered into during the three months ended September 30, 2018 under Bank Holding Company Accounting.

 

(Dollars in  thousands)

   Number of Loans      Pre-
Modification
Investment
     Post-
Modification
Investment
 

Medallion loans

     10      $ 4,810      $ 4,810  
  

 

 

    

 

 

    

 

 

 

The following table shows the troubled debt restructurings which the Company entered into during the nine months ended September 30, 2018 under a combined accounting approach.

 

(Dollars in  thousands)

   Number of Loans      Pre-
Modification
Investment
     Post-
Modification
Investment
 

Medallion loans

     17      $ 7,505      $ 7,505  
  

 

 

    

 

 

    

 

 

 

During the twelve months ended September 30, 2018, three loans modified as troubled debt restructurings were in default and had an investment value of $1,305,000 as of September 30, 2018, net of $773,000 of an allowance for loan loss under Bank Holding Company Accounting.

The following table shows troubled debt restructurings which the Company entered into during the quarter ended September 30, 2017 under Investment Company Accounting.

 

(Dollars in  thousands)

   Number of Loans      Pre-
Modification
Investment
     Post-
Modification
Investment
 

Medallion loans

     7      $ 2,994      $ 2,994  
  

 

 

    

 

 

    

 

 

 

The following table shows troubled debt restructurings which the Company entered into during the nine months ended September 30, 2017 under Investment Company Accounting.

 

(Dollars in  thousands)

   Number of Loans      Pre-
Modification
Investment
     Post-
Modification
Investment
 

Medallion loans

     54      $ 34,905      $ 34,831  
  

 

 

    

 

 

    

 

 

 

Commercial loans

     2        6,547        6,547  
  

 

 

    

 

 

    

 

 

 

Total

     56      $ 41,452      $ 41,378  
  

 

 

    

 

 

    

 

 

 

During the twelve months ended September 30, 2017, sixteen loans modified as troubled debt restructurings were in default and had an investment value of $5,027,000 as of September 30, 2017, net of $4,495,000 of unrealized depreciation under Investment Company Accounting.

v3.10.0.1
Unrealized Appreciation (Depreciation) and Realized Gains (Losses) on Investments
9 Months Ended
Sep. 30, 2018
Schedule of Investments [Abstract]  
Unrealized Appreciation (Depreciation) and Realized Gains (Losses) on Investments

(5) UNREALIZED APPRECIATION (DEPRECIATION) AND REALIZED GAINS (LOSSES) ON INVESTMENTS (Investment Company Accounting)

The following table sets forth the pre-tax change in the Company’s unrealized appreciation (depreciation) on investments under Investment Company Accounting for the three months ended March 31, 2018 and for the 2017 quarters shown below.

 

(Dollars in  thousands)

   Medallion
Loans
    Commercial
Loans
    Investments in
Subsidiaries
     Equity
Investments
    Investments
Other
Than Securities
    Total  

Balance December 31, 2017

   ($ 20,338   ($ 513   $ 158,920      $ 3,121     ($ 1,490   $ 139,700  

Net change in unrealized

             

Appreciation on investments

     —         —         38,795        (998     —         37,797  

Depreciation on investments

     (38,170     18       —          —         (1,915     (40,067

Reversal of unrealized appreciation (depreciation) related to realized

             

Gains on investments

     —         —         —          —         —         —    

Losses on investments

     34,747       —         —          —         —         34,747  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance March 31, 2018

   ($ 23,761   ($ 495   $ 197,715      $ 2,123     ($ 3,405   $ 172,177  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(Dollars in thousands)

   Medallion
Loans
    Commercial
Loans
    Investment in
Subsidiaries
    Equity
Investments
    Investments
Other
Than Securities
    Total  

Balance December 31, 2016

   ($ 28,523   ($ 1,378   $ 152,750     $ 3,934     $ 584     $ 127,367  

Net change in unrealized

            

Appreciation on investments

     —         —         3,751       1,261       —         5,012  

Depreciation on investments

     (8,670     (332     —         —         —         (9,002

Reversal of unrealized appreciation (depreciation) related to realized

            

Gains on investments

     —         —         —         (2,093     —         (2,093

Losses on investments

     825       —         —         486       —         1,311  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance March 31, 2017

     (36,368     (1,710     156,501       3,588       584       122,595  

Net change in unrealized

            

Appreciation on investments

     —         —         (771     120       —         (651

Depreciation on investments

     (12,425     (118     —         —         —         (12,543

Reversal of unrealized appreciation (depreciation) related to realized

            

Gains on investments

     —         —         —         —         —         —    

Losses on investments

     337       636       —         —         —         973  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance June 30, 2017

     (48,456     (1,192     155,730       3,708       584       110,374  

Net change in unrealized

            

Appreciation on investments

     —         —         (2,771     (361     —         (3,132

Depreciation on investments

     (6,669     75       —         —         (15     (6,609

Reversal of unrealized appreciation (depreciation) related to realized

            

Gains on investments

     —         —         —         (272     —         (272

Losses on investments<