MEDALLION FINANCIAL CORP, 10-K filed on 07 Mar 24
 | XBRL Documents
v3.24.0.1
Document and Entity Information - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2023
Mar. 06, 2024
Document and Entity Information [Line Items]    
Document Type 10-K  
Amendment Flag false  
Document Annual Report true  
Document Transition Report false  
Document Period End Date Dec. 31, 2023  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus FY  
Entity Registrant Name MEDALLION FINANCIAL CORP  
Entity Central Index Key 0001000209  
Current Fiscal Year End Date --12-31  
Entity Well-known Seasoned Issuer No  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   23,483,564
Entity Public Float $ 146,115,624  
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Shell Company false  
ICFR Auditor Attestation Flag true  
Document Financial Statement Error Correction [Flag] false  
Entity Incorporation, State or Country Code DE  
Entity File Number 001-37747  
Entity Tax Identification Number 04-3291176  
Entity Address, Address Line One 437 MADISON AVENUE, 38th Floor  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10022  
City Area Code 212  
Local Phone Number 328-2100  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Trading Symbol MFIN  
Security Exchange Name NASDAQ  
Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders, for which a Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year-end of December 31, 2023, are incorporated by reference into Part III of this Form 10-K.

  
Auditor Firm ID 339  
Auditor Name Mazars USA LLP  
Auditor Location New York, New York  
v3.24.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2023
Dec. 31, 2022
Assets    
Cash and cash equivalents $ 52,591 $ 33,172
Federal funds sold 97,254 72,426
Investment securities 54,282 48,492
Equity investments 11,430 10,293
Loans 2,215,886 1,916,953
Allowance for credit losses [1] (84,235) (63,845) [2]
Net loans receivable 2,131,651 1,853,108
Goodwill 150,803 150,803
Intangible assets, net 20,591 22,035
Property, equipment, and right-of-use lease asset, net 14,076 13,168
Accrued interest receivable 13,538 12,613
Loan collateral in process of foreclosure [3] 11,772 21,819
Income tax receivable 671 2,095
Other assets 29,168 19,855
Total assets 2,587,827 2,259,879
Liabilities    
Deposits [4] 1,866,657 1,607,110
Long-term debt [5] 235,544 214,320
Deferred tax liabilities, net 21,207 26,753
Short-term debt 8,000 5,000
Operating lease liabilities 7,019 8,408
Accrued interest payable 6,822 4,790
Accounts payable and accrued expenses [6] 30,804 22,974
Total liabilities 2,176,053 1,889,355
Commitments and contingencies
Stockholders’ equity    
Preferred stock (1,000,000 shares of $0.01 par value stock authorized-none outstanding) 0 0
Common stock (50,000,000 shares of $0.01 par value stock authorized - 29,051,800 shares at December 31, 2023 and 28,663,827 shares at December 31, 2022 issued) 291 287
Additional paid in capital 288,046 283,663
Treasury stock (5,602,154 shares at December 31, 2023 and December 31, 2021) (45,538) (45,538)
Accumulated other comprehensive income (loss) (3,696) (3,349)
Retained earnings 103,883 66,673
Total stockholders’ equity 342,986 301,736
Non-controlling interest in consolidated subsidiaries 68,788 68,788
Total equity 411,774 370,524
Total liabilities and equity $ 2,587,827 $ 2,259,879
Number of shares outstanding 23,449,646 23,061,673
Book value per share $ 14.63 $ 13.08
[1] As of December 31, 2023 and 2022, there was no allowance for credit losses and net charge-offs related to the strategic partnership loans.
[2] Represents allowance prior to the adoption of ASU 2016-13.
[3] Includes financed sales of this collateral to third parties that are reported separately from the loan portfolio, and that are conducted by the Bank of $6.2 million and $7.5 million as of December 31, 2023 and 2022
[4] Includes $4.3 million and $3.8 million of deferred financing costs as of December 31, 2023 and 2022. Refer to Note 5 for more details
[5] Includes $4.2 million and $3.2 million of deferred financing costs as of December 31, 2023 and 2022. Refer to Note 5 for more details.
[6] Includes the short-term portion of lease liabilities of $2.5 million and $2.2 million as of December 31, 2023 and 2022. Refer to Note 6 for more details.
v3.24.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2023
Dec. 31, 2022
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares outstanding 0 0
Common stock, shares authorized 50,000,000 50,000,000
Common stock, par value $ 0.01 $ 0.01
Common stock, shares issued 29,051,800 28,663,827
Treasury stock, Shares 5,602,154 5,602,154
Loan collateral in process of foreclosure, financed sales collateral to third parties $ 6.2 $ 7.5
Short term lease liabilities 2.5 2.2
Deposits [Member]    
Deferred financing costs 4.3 3.8
Long-Term Debt [Member]    
Deferred financing costs $ 4.2 $ 3.2
v3.24.0.1
Consolidated Statements of Operations - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2021
Interest and fees on loans $ 244,829 $ 195,074 $ 157,990
Interest and dividends on investment securities 6,211 1,547 976
Total interest income [1] 251,040 196,621 158,966
Interest on deposits 47,780 22,666 17,543
Interest on long-term debt 12,670 13,387 12,907
Interest on short-term borrowings 2,496 132 690
Total interest expense [2] 62,946 36,185 31,140
Net interest income (loss) 188,094 160,436 127,826
Provision for credit losses 37,810 30,059 4,622
Net interest income after provision for credit losses 150,284 130,377 123,204
Other income      
Gain on equity investments 5,178 2,779 17,379
Gain on sale of loans and taxi medallion 4,992 5,448 1,788
Write-down of loan collateral in process of foreclosure (1,696) (657) (5,592)
Sponsorship and race winnings, net 0 0 12,567
Gain on extinguishment of debt 0 0 4,626
Other income 2,846 1,956 798
Total other income, net 11,320 9,526 31,566
Other expenses      
Salaries and employee benefits 37,562 31,130 31,591
Loan servicing fees 9,543 8,371 7,013
Collection costs 6,000 5,314 5,279
Professional fees 5,886 13,054 5,311
Regulatory fees 3,194 2,418 1,872
Rent expense 2,472 2,378 2,454
Amortization of intangible assets 1,445 1,445 1,445
Race team related expenses 0 0 9,559
Other expenses 9,466 7,943 8,375
Total other expenses 75,568 72,053 72,899
Income before income taxes 86,036 67,850 81,871
Income tax provision (24,910) (17,963) (24,217)
Net income after taxes 61,126 49,887 57,654
Less: income attributable to the non-controlling interest 6,047 6,047 3,546
Total net income attributable to Medallion Financial Corp. $ 55,079 $ 43,840 $ 54,108
Basic net income per share $ 2.45 $ 1.86 $ 2.2
Diluted net income per share $ 2.37 $ 1.83 $ 2.17
Weighted average common shares outstanding      
Basic 22,510,435 23,583,049 24,599,804
Diluted 23,248,323 23,927,342 24,943,169
[1] Included in interest and investment income is $1.6 million, $0.7 million, and $0.8 million of paid-in-kind interest for the years ended December 31, 2023, 2022, and 2021.
[2] Average borrowings outstanding were $2.0 billion, $1.7 billion and $1.4 billion as of December 31, 2023, 2022, and 2021 and the related average borrowing costs were 3.16%, 2.17%, and 2.28% for the years ended December 31, 2023, 2022, and 2021.
v3.24.0.1
Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2021
Interest paid in kind $ 1,600 $ 700 $ 800
Average borrowings outstanding $ 2,000,000 $ 1,700,000 $ 1,400,000
Average borrowing costs rate 3.16% 2.17% 2.28%
Net realized losses on investments $ 5,178 $ 2,779 $ 17,380
v3.24.0.1
Consolidated Statements of Other Comprehensive Income - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2021
Statement of Comprehensive Income [Abstract]      
Net income after taxes $ 61,126 $ 49,887 $ 57,654
Other comprehensive loss, net of tax (347) (4,383) (978)
Total comprehensive income 60,779 45,504 56,676
Less: comprehensive income attributable to the non-controlling interest 6,047 6,047 3,546
Total comprehensive income attributable to Medallion Financial Corp. $ 54,732 $ 39,457 $ 53,130
v3.24.0.1
Consolidated Statement of Changes in Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Capital in Excess of Par [Member]
Treasury Stock [Member]
Retained Earnings (Accumulated Deficit) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Parent [Member]
Noncontrolling Interest [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Common Stock [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Capital in Excess of Par [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Treasury Stock [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Retained Earnings (Accumulated Deficit) [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Parent [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Noncontrolling Interest [Member]
Balance at Dec. 31, 2020 $ 304,561 $ 278 $ 277,539 $ (24,919) $ (23,502) $ 2,012 $ 231,408 $ 73,153                
Balance, shares at Dec. 31, 2020   27,828,871   (2,951,243)                        
Net income after taxes 57,654       54,108   54,108 3,546                
Distributions to non-controlling interest (6,516)             (6,516)                
Disposition of RPAC (1,395)             (1,395)                
Stock-based compensation 2,261 $ 3 2,258       2,261                  
Issuance of restricted stock, net, shares   258,120                            
Forfeiture of restricted stock, net, shares   (21,940)                            
Issuance in connection with vesting of restricted stock units   15,508                            
Exercise of stock options,value $ 241   241       241                  
Exercise of stock options,shares 44,070 [1] 44,070                            
Other comprehensive loss, net of tax $ (978)         (978) (978)                  
Ending balance at Dec. 31, 2021 355,828 $ 281 280,038 $ (24,919) 30,606 1,034 287,040 68,788                
Ending balance, shares at Dec. 31, 2021   28,124,629   (2,951,243)                        
Net income after taxes 49,887       43,840   43,840 6,047                
Distributions to non-controlling interest (6,047)             (6,047)                
Stock-based compensation 3,476 $ 6 3,470       3,476                  
Issuance of restricted stock, net, shares   522,475                            
Forfeiture of restricted stock, net, shares   (29,359)                            
Issuance in connection with vesting of restricted stock units   22,337                            
Exercise of stock options,value $ 155   155       155                  
Exercise of stock options,shares 23,745 [1] 23,745                            
Purchase of common stock (in Shares)       (2,650,911)                        
Purchase of common stock $ (20,619)     $ (20,619)     (20,619)                  
Dividend paid on common stock (7,773)       (7,773)   (7,773)                  
Other comprehensive loss, net of tax (4,383)         (4,383) (4,383)                  
Ending balance at Dec. 31, 2022 370,524 $ 287 283,663 $ (45,538) 66,673 (3,349) 301,736 68,788 $ 360,589 $ 287 $ 283,663 $ (45,538) $ 56,738 $ (3,349) $ 291,801 $ 68,788
Ending balance (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2022 $ (9,935)       (9,935)   (9,935)                  
Ending balance, shares at Dec. 31, 2022 23,061,673 28,663,827   (5,602,154)           28,663,827   (5,602,154)        
Net income after taxes $ 61,126       55,079   55,079 6,047                
Distributions to non-controlling interest (6,047)             (6,047)                
Stock-based compensation 4,713 $ 3 4,710       4,713                  
Withheld restricted stock for employees' tax obligations, shares   (91,169)                            
Issuance of restricted stock, net, shares   399,793                            
Forfeiture of restricted stock, net, shares   (12,807)                            
Issuance in connection with vesting of restricted stock units   23,211                            
Withheld restricted stock for employees' tax obligations, value (768)   (768)       (768)                  
Exercise of stock options,value $ 442 $ 1 441       442                  
Exercise of stock options,shares 68,945 [1] 68,945                            
Dividend paid on common stock $ (7,934)       (7,934)   (7,934)                  
Other comprehensive loss, net of tax (347)         (347) (347)                  
Ending balance at Dec. 31, 2023 $ 411,774 $ 291 $ 288,046 $ (45,538) $ 103,883 $ (3,696) $ 342,986 $ 68,788                
Ending balance, shares at Dec. 31, 2023 23,449,646 29,051,800   (5,602,154)                        
[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 $0.1 million, $0.1 million, and $0.2 million for the years ended December 31, 2023, 2022, and 2021.
v3.24.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income/net decrease in net assets resulting from operations $ 61,126 $ 49,887 $ 57,654
Adjustments to reconcile net income/net decrease in net assets resulting from operations to net cash provided by operating activities:      
Provision for credit losses 37,810 30,059 4,622
Paid-in-kind interest income (1,636) (724) (814)
Depreciation and amortization 5,243 5,229 6,519
Amortization of origination fees, net 9,588 8,707 7,996
(Decrease) increase in deferred and other tax liabilities, net (345) 7,281 18,327
Net change in value of loan collateral in process of foreclosure 10,597 5,738 8,966
Net gains on equity investments (5,178) (2,779) (17,380)
Stock-based compensation expense 4,713 3,476 2,261
Gain on extinguishment of debt 0 0 (4,626)
Increase in accrued interest receivable (925) (1,992) (283)
Gain on disposition of RPAC 0 0 (715)
Increase in other assets (15,470) (3,919) (5,354)
Decrease in accounts payable and accrued expenses 6,209 6,382 2,694
(Decrease) Increase in accrued interest payable 2,032 1,395 (1,141)
Net cash provided by operating activities 113,764 108,740 78,726
CASH FLOWS FROM INVESTING ACTIVITIES      
Loans originated (975,391) (1,000,785) (760,790)
Proceeds from principal receipts, sales, and maturities of loans 616,193 535,067 464,448
Purchases of investments (11,573) (20,713) (19,354)
Proceeds from disposition of RPAC, net 0 0 17,676
Proceeds from principal receipts, sales, and maturities of investments 9,444 14,762 35,647
Proceeds from the sale and principal payments on loan collateral in process of foreclosure 20,631 22,664 24,052
Net cash used for investing activities (340,696) (449,005) (238,321)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from time deposits and funds borrowed 975,175 839,104 805,577
Repayments of time deposits and funds borrowed (689,920) (483,671) (627,263)
Treasury stock repurchased 0 (20,619) 0
Cash dividend paid on common stock (7,703) (7,543) 0
Distributions to non-controlling interests (6,047) (6,047) (6,516)
Payment of withholding taxes on net settlement of vested stock (768) 0 0
Proceeds from the exercise of stock options 442 155 241
Net cash provided by financing activities 271,179 321,379 172,039
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,247 (18,886) 12,444
Cash and cash equivalents, beginning of period 105,598 [1] 124,484 [1] 112,040
Cash and cash equivalents, end of period [1] 149,845 105,598 124,484
SUPPLEMENTAL INFORMATION      
Cash paid during the period for interest 57,509 31,976 29,867
Cash paid during the period for income taxes 25,102 8,848 5,479
NON-CASH INVESTING      
Loans transferred to loan collateral in process of foreclosure, net $ 21,181 $ 12,791 $ 15,888
[1] Includes federal funds sold.
v3.24.0.1
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2021
Pay vs Performance Disclosure      
Net Income (Loss) $ 55,079 $ 43,840 $ 54,108
v3.24.0.1
Insider Trading Arrangements
 3 Months Ended
Dec. 31, 2023
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
Rule 10b5-1 Arrangement Modified false
Non Rule 10b5-1 Arrangement Modified false
v3.24.0.1
Organization of Medallion Financial Corp. and its Subsidiaries
 12 Months Ended
Dec. 31, 2023
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., or the Company, is a specialty finance company organized as a Delaware corporation that reports as a bank holding company, but is not a bank holding company for regulatory purposes. The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Bank, or the Bank, a Federal Deposit Insurance Corporation, or FDIC, insured industrial bank that originates consumer loans, raises deposits, and conducts other banking activities. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies, and undergoes examinations by those agencies. The Bank was formed in May 2002 for the purpose of obtaining an industrial bank charter pursuant to the laws of the State of Utah. The Bank originates consumer loans on a national basis for the purchase of recreational vehicles, or “RVs”, boats and other consumer recreational equipment and to finance home improvements such as roofs, swimming pools, and windows. Prior to 2015, the Bank originated commercial loans to finance the purchase of taxi medallions, all of which are serviced by the Company. The loans are financed primarily with time certificates of deposit which are originated nationally through a variety of brokered deposit relationships.

The Company also conducts business through its subsidiaries Medallion Capital, Inc., or MCI, a Small Business Investment Company, or SBIC, which conducts a mezzanine financing business; Medallion Funding LLC, or MFC, an SBIC, which historically was the Company's primary taxi medallion lending company; and Freshstart Venture Capital Corp., or FSVC, which historically originated and serviced taxi medallion and commercial loans and was an SBIC through 2023. MCI, and MFC, as SBICs, are regulated by the Small Business Administration, or SBA. MCI is financed in part by the SBA.

The Company established a wholly-owned subsidiary, Medallion Financing Trust I, or Fin Trust, for the purpose of issuing unsecured trust preferred securities to investors. Fin Trust is a separate legal and corporate entity with its own creditors who, in any liquidation of Fin Trust, will be entitled to be satisfied out of Fin Trust’s assets prior to any value in Fin Trust becoming available to Fin Trust’s equity holders. The assets of Fin Trust, aggregating $34.0 million at December 31, 2023, are comprised solely of a subordinated note from the Company and 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.
v3.24.0.1
Summary of Significant Accounting Policies
 12 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S., or GAAP, requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties. All of these estimates reflect management’s best judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions change, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of loans and loan collateral in process of foreclosure, goodwill and intangible assets, 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. All significant intercompany transactions, balances, and profits (losses) have been eliminated in consolidation.

The consolidated financial statements have been prepared in accordance with GAAP. The Company consolidates all entities it controls through a majority voting interest, a controlling interest through other contractual rights, or as being identified as the primary beneficiary of 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. As of December 31, 2023, cash also included $1.3 million of interest-bearing funds deposited in other banks with original terms of 5 to 6 years.

Fair Value of Assets and Liabilities

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

Equity Investments

The Company follows FASB ASC Topic 321, Investments – Equity Securities, or ASC 321, which requires all applicable investments in equity securities with a readily determinable fair value to be valued as such, and those without a readily determinable fair value, are measured at cost, less any impairment plus or minus any observable price changes. Equity investments of $11.4 million and $10.3 million as of December 31, 2023 and 2022, were comprised mainly of nonmarketable stock and stock warrants, are recorded at cost less any impairment plus or minus observable price changes, and a vast majority are held by our SBIC subsidiary in connection with its mezzanine lending business. As of December 31, 2023, cumulative impairment of $3.5 million had been recorded with respect to these investments.

During 2021, the Company purchased $2.0 million of equity securities with a readily determinable fair value. As a result, all unrealized gains and losses are included in gain (loss) on equity investments. As of December 31, 2023 and 2022, the fair value of these securities were $1.7 million and $1.7 million and are included in other assets on the consolidated balance sheet.

The following table presents the unrealized portion related to the equity securities held as of December 31, 2023.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Net gains (losses) recognized during the period on equity securities

 

$

24

 

 

$

(226

)

 

$

(50

)

Less: Net gains (losses) recognized during the period on equity
   securities sold during the period

 

 

—

 

 

 

—

 

 

 

—

 

Unrealized gains (losses) recognized during the reporting period on
   equity securities still held at the reporting date

 

$

24

 

 

$

(226

)

 

$

(50

)

Investment Securities

The Company follows FASB ASC Topic 320, Investments – Debt Securities, or ASC 320, which requires that all applicable investments in debt securities be classified as trading securities, available-for-sale securities, or held-to-maturity securities. Investment securities are purchased from time-to-time in the open market at prices that are greater or lesser than the par value of the investment. The resulting premium or discount is deferred and recognized on a level yield basis as an adjustment to the yield of the related investment. The net premium on investment securities totaled $0.1 million as of both December 31, 2023 and 2022, and less than $0.1 million, $0.1 million, and $0.1 million was amortized to interest income for the years ended December 31, 2023, 2022, and 2021. ASC 320 further requires that held-to-maturity securities be reported at amortized cost and available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings at the date of the consolidated financial statements, and reported in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity, net of the effect of income taxes, until they are sold. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results and any amounts previously included in stockholders’ equity, which were recorded net of the income tax effect, will be reversed. In accordance with ASC 326, we do not maintain an allowance for credit losses for accrued interest receivable.

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.

Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. As of December 31, 2023 and 2022, net loan origination costs were $40.0 million and $34.9 million. Net amortization to income for the years ended December 31, 2023, 2022, and 2021 were $8.3 million, $8.7 million, and $8.0 million.

 

Interest income is recorded on the accrual basis. Taxi 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 loan portfolio has different characteristics, typified by a larger number of smaller dollar loans that have similar characteristics. A loan is considered to be impaired, or nonperforming, when based on current information and events, it is unlikely the Company will be able to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be impaired. Consumer 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 recovery efforts against both the borrower and the underlying collateral are initiated. For the recreation 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 by writing the collateral down to its fair value less selling costs, and the collateral is sent to auction. When the collateral is sold, the net auction proceeds are applied to the account, and any remaining balance is written off. Proceeds collected on charged-off accounts are recorded as recoveries. Total loans 90 days or more past due were $16.8 million or 0.77% of the total loan portfolio as of December 31, 2023, as compared to $8.9 million, or 0.47% as of December 31, 2022. Beginning in the first quarter of 2023, the Company began charging off recreation loans at the point when borrowers filed for bankruptcy. This change resulted in approximately $2.5 million of loans being charged off in the first quarter of 2023.

The Company may modify the contractual cash flow of loans in situations where borrowers are experiencing financial difficulties. The Company strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before they reach nonaccrual status. These modified terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance and other actions intended to minimize the economic loss to the Company and to avoid foreclosure or repossession of the collateral. For modifications where the Company forgives principal, the entire amount of such principal forgiveness is immediately charged off. Modified loans are considered impaired loans.

Loan collateral in process of foreclosure primarily includes taxi 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. For New York City taxi medallion loans in the process of foreclosure, the Company continued to utilize a net value of $79,500 when assessing net realizable value for these taxi medallion loans, despite fluctuating current transfer prices which may exceed that level from time to time. The "loan collateral in the process of foreclosure" designation reflects that the collection activities on these loans have transitioned from working with the borrower, to the liquidation of the collateral securing the loans.

The Company accounts for its sales of loans in accordance with FASB Accounting Standards Codification Topic 860, Transfers and Servicing, or 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 $14.0 million at December 31, 2023 and $19.5 million December 31, 2022. The Company has evaluated the servicing aspect of its business in accordance with FASB ASC 860 and determined that no material servicing asset or liability existed as of December 31, 2023 and 2022.

Allowance for Credit Losses

On January 1, 2023, the Company 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. For consumer loans, the Company uses historical delinquency and actual loss rates modified by quantitative adjustments based on macroeconomic factors over a twelve-month reasonable and supportable forecast period. For commercial loans, the Company assesses the historical impact that macroeconomic indicators have had on the loan portfolio, to determine an approximate allowance for credit loss. Unlike consumer loans, where loans may have similar performing characteristics, each commercial loan is unique. The Company evaluates each commercial loan for specific impairment with additional allowance for credit losses recognized as necessary. For taxi medallion loans, the Company maintains specific reserves adjusting the carrying amount of loans down to net collateral value. The allowance is evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation is inherently subjective, as it requires estimates, including those based on changes in economic conditions, that are susceptible to significant revision as more information becomes available. Credit losses are deducted from the allowance, and subsequent recoveries are added back to the allowance.

 

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after December 15, 2022 are presented under ASC 326. The transition to the CECL methodology on January 1, 2023 resulted in an increase of $13.7 million to the Company's 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. The CECL methodology transition effects on the allowance for credit losses are shown in the following table:

(Dollars in thousands)

 

December 31, 2022
Pre-Topic 326
Adoption

 

 

Effect of ASC 326
Adoption
(Transition Amounts)

 

 

January 1, 2023
Post-ASC 326
Adoption

 

Assets:

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

Recreation

 

$

41,966

 

 

$

10,037

 

 

$

52,003

 

Home improvement

 

 

11,340

 

 

 

1,518

 

 

 

12,858

 

Commercial

 

 

1,049

 

 

 

2,157

 

 

 

3,206

 

Taxi medallion

 

 

9,490

 

 

 

—

 

 

 

9,490

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

Allowance for credit losses on loans

 

$

63,845

 

 

$

13,712

 

 

$

77,557

 

Prior to January 1, 2023, the Company used historical delinquency and actual loss rates with a three-year look-back period for taxi medallion loans and a one-year look-back period for recreation and home improvement loans and used historical loss experience and other projections for commercial loans. The allowance was evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation was inherently subjective, as it required estimates that were susceptible to significant revision as more information became available.

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 reporting, and was subject to a purchase price accounting allocation process conducted by an independent third-party expert to arrive at the current categories and amounts. Goodwill is not amortized, but is subject to quarterly review by management to determine whether additional impairment testing is needed, and such testing is performed at least on an annual basis. Intangible assets are amortized over their useful life of approximately 20 years. As of December 31, 2023 and 2022, the Company had intangible assets of $20.6 million and $22.0 million. The Company recognized $1.4 million of amortization expense on the intangible assets for each of the years ended December 31, 2023 and 2022. Additionally, loan portfolio premiums of $12.4 million were determined as of April 2, 2018, of which none were outstanding as of December 31, 2023 and 2022, and of which $0.0 million, $0.5 million, and $2.2 million was amortized to interest income for the years ended December 31, 2023, 2022, and 2021. Management performed a step 0 analysis in assessing the goodwill and intangibles for impairment at December 31, 2023 and 2022, concluding that there was no impairment of these assets.

The following table details of the intangible assets as of December 31, 2023 and 2022:

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Brand-related intellectual property

 

$

4,916

 

 

$

16,775

 

Home improvement contractor relationships

 

 

15,675

 

 

 

5,260

 

Total intangible assets

 

$

20,591

 

 

$

22,035

 

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 $0.4 million, $0.4 million, and $0.3 million for the years ended December 31, 2023, 2022, and 2021.

 

Deferred Costs

Deferred financing costs represent costs associated with obtaining the Company’s borrowing facilities, and are amortized on a straight line basis over the lives of the related financing agreements and life of the respective pool. Amortization expense was $3.1 million, $2.6 million, and $2.4 million for the years ended December 31, 2023, 2022, and 2021. 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 will be amortized against income over an appropriate period, or written off. The amount on the Company’s balance sheet for all of these purposes were $8.5 million and $7.0 million as of December 31, 2023 and 2022.

Income Taxes

Income taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes, or ASC 740. Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at 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 the Company’s valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods and the expected timing of the reversal of temporary differences. The Company recognizes tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. The Company records income tax related interest and penalties, if applicable, within current income tax expense.

Earnings Per Share (EPS)

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

 

Year Ended December 31,

 

(Dollars in thousands, except share and per share data)

 

2023

 

 

2022

 

 

2021

 

Net income attributable to common stockholders

 

$

55,079

 

 

$

43,840

 

 

$

54,108

 

Weighted average common shares outstanding applicable to basic EPS

 

 

22,510,435

 

 

 

23,583,049

 

 

 

24,599,804

 

Effect of restricted stock grants

 

 

461,098

 

 

 

276,469

 

 

 

250,763

 

Effect of dilutive stock options

 

 

142,216

 

 

 

67,825

 

 

 

92,602

 

Effect of performance stock unit grants

 

 

134,574

 

 

 

—

 

 

 

—

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

 

 

23,248,323

 

 

 

23,927,342

 

 

 

24,943,169

 

Basic income per share

 

$

2.45

 

 

$

1.86

 

 

$

2.20

 

Diluted income per share

 

 

2.37

 

 

 

1.83

 

 

 

2.17

 

Potentially dilutive common shares excluded from the above calculations aggregated 92,310 shares, 347,963 shares, and 421,190 shares as of December 31, 2023, 2022, and 2021.

Stock Compensation

The Company follows FASB ASC Topic 718, or ASC 718, Compensation – Stock Compensation, for its equity incentive, stock option, and restricted stock plans, and accordingly, the Company recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options are reflected in net income resulting from operations for any new grants using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option. Stock-based employee compensation costs pertaining to restricted stock are reflected in net income 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 years ended December 31, 2023, 2022, and 2021, the Company issued 399,793, 522,475, and 258,120 restricted shares of stock-based compensation awards, 296,444, 0, and 0 performance stock units, 83,158, 129,638, and 16,803 restricted stock units, and 0, 0, and 317,398 shares of other stock-based compensation awards; and recognized $4.7 million, $3.5 million, and $2.3 million, or $0.20, $0.15, and $0.09 per diluted common share for each respective year, of non-cash stock-based compensation expense related to the grants. As of December 31, 2023, the total remaining unrecognized compensation cost related to unvested stock options and restricted stock was $5.0 million, which is expected to be recognized over the next 9 quarters.

 

Regulatory Capital

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

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

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%, a level which could preclude its ability to pay dividends to the Company, and that an adequate allowance for credit losses be maintained. As of December 31, 2023, the Bank’s Tier 1 leverage ratio was 16.2%. The Bank’s actual capital amounts and ratios, and the regulatory minimum ratios are presented in the following table.

 

Regulatory

 

 

December 31,

 

(Dollars in thousands)

 

Minimum

 

 

Well-Capitalized

 

 

2023

 

 

2022

 

Common equity tier 1 capital

 

 

 

 

 

 

 

$

293,774

 

 

$

242,049

 

Tier 1 capital

 

 

 

 

 

 

 

 

362,561

 

 

 

310,837

 

Total capital

 

 

 

 

 

 

 

 

390,153

 

 

 

334,913

 

Average assets

 

 

 

 

 

 

 

 

2,232,816

 

 

 

1,917,904

 

Risk-weighted assets

 

 

 

 

 

 

 

 

2,155,641

 

 

 

1,888,530

 

Leverage ratio (1)

 

 

4.0

%

 

 

5.0

%

 

 

16.2

%

 

 

16.2

%

Common equity tier 1 capital ratio (2)

 

 

7.0

 

 

 

6.5

 

 

 

13.6

 

 

 

12.8

 

Tier 1 capital ratio (3)

 

 

8.5

 

 

 

8.0

 

 

 

16.8

 

 

 

16.5

 

Total capital ratio (3)

 

 

10.5

 

 

 

10.0

 

 

 

18.1

 

 

 

17.7

 
(1)
Calculated by dividing Tier 1 capital by average assets.
(2)
Calculated by subtracting preferred stock or non-controlling interest from Tier 1 capital and dividing by risk-weighted assets.
(3)
Calculated by dividing Tier 1 or total capital by risk-weighted assets.

In the table above, the minimum risk-based ratios as of December 31, 2023 and 2022 reflect the capital conservation buffer of 2.5%. The minimum regulatory requirements, inclusive of the capital conservation buffer, were the binding requirements for the risk-based requirements, and the “well-capitalized” requirements were the binding requirements for Tier 1 leverage capital as of both December 31, 2023 and 2022.

Recently Issued Accounting Standards

On January 1, 2023, the Company adopted ASC 326. Please refer to Allowance for Credit Losses, within this footnote, for the impact of adopting this standard.

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures, or Topic 323: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The main objective of this new standard is to allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company is assessing the impact of the update on the accompanying financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The amendments in this update seek to clarify or improve disclosure and presentation requirements. The Company is assessing the impact of the update on the accompanying financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting, or Topic 280: Improvements to Reportable Segment Disclosures. The main objective of this update is to provide transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company is assessing the impact of the update on the accompanying financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes, or Topic 740: Improvements to Income Tax Disclosures. The main objective of this update is to improve financial reporting disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for the annual periods beginning after December 15, 2024. The Company is assessing the impact of the update on the accompanying financial statements.

Reclassifications

Certain reclassifications have been made to prior year balances to conform with the current year presentation. These reclassifications have no effect on the previously reported results of operations.
v3.24.0.1
Investment Securities
 12 Months Ended
Dec. 31, 2023
Schedule of Investments [Abstract]  
Investment Securities

(3) INVESTMENT SECURITIES

The following tables present details of fixed maturity securities available for sale as of December 31, 2023 and 2022.

December 31, 2023
(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

44,653

 

 

$

—

 

 

$

(4,791

)

 

$

39,862

 

State and municipalities

 

 

13,733

 

 

 

21

 

 

 

(1,501

)

 

 

12,253

 

Agency bonds

 

 

2,187

 

 

 

—

 

 

 

(20

)

 

 

2,167

 

Total

 

$

60,573

 

 

$

21

 

 

$

(6,312

)

 

$

54,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022
(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

43,286

 

 

$

—

 

 

$

(4,933

)

 

$

38,353

 

State and municipalities

 

 

11,015

 

 

 

13

 

 

 

(889

)

 

 

10,139

 

Total

 

$

54,301

 

 

$

13

 

 

$

(5,822

)

 

$

48,492

 

The amortized cost and estimated market value of investment securities as of December 31, 2023 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.

December 31, 2023
(Dollars in thousands)

 

Amortized
Cost

 

 

Fair
Value

 

Due in one year or less

 

$

2,395

 

 

$

2,336

 

Due after one year through five years

 

 

7,313

 

 

 

7,049

 

Due after five years through ten years

 

 

8,833

 

 

 

7,808

 

Due after ten years

 

 

42,032

 

 

 

37,089

 

Total

 

$

60,573

 

 

$

54,282

 

The following tables show information pertaining to securities with gross unrealized losses as of December 31, 2023 and 2022, 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

 

December 31, 2023
(Dollars in thousands)

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

(78

)

 

$

5,797

 

 

$

(4,714

)

 

$

33,971

 

State and municipalities

 

$

(204

)

 

$

4,839

 

 

$

(1,296

)

 

$

7,371

 

Agency bonds

 

 

—

 

 

 

—

 

 

 

(20

)

 

 

2,167

 

Total

 

$

(282

)

 

$

10,636

 

 

$

(6,030

)

 

$

43,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than Twelve Months

 

 

Twelve Months and Over

 

December 31, 2022
(Dollars in thousands)

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

(731

)

 

$

12,321

 

 

$

(4,202

)

 

$

26,023

 

State and municipalities

 

 

(286

)

 

 

4,628

 

 

 

(603

)

 

 

3,502

 

Total

 

$

(1,017

)

 

$

16,949

 

 

$

(4,805

)

 

$

29,525

 

As of December 31, 2023 and 2022, the Company had 60 and 57 securities with unrealized losses that have not been recognized in 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.
v3.24.0.1
Loans and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2023
Text Block [Abstract]  
Loans and allowance for credit losses

(4) LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table shows the major classification of loans, inclusive of capitalized loan origination costs, at December 31, 2023 and 2022.

 

As of December 31,

 

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Amount

 

 

As a
Percent of
Gross Loans

 

 

Amount

 

 

As a
Percent of
Gross Loans

 

Recreation

 

$

1,336,226

 

 

 

60

%

 

$

1,183,512

 

 

 

62

%

Home improvement

 

 

760,617

 

 

 

34

 

 

 

626,399

 

 

 

33

 

Commercial

 

 

114,827

 

 

 

5

 

 

 

92,899

 

 

 

5

 

Taxi medallion

 

 

3,663

 

 

*

 

 

 

13,571

 

 

 

1

 

Strategic partnership

 

 

553

 

 

*

 

 

 

572

 

 

*

 

Total gross loans

 

 

2,215,886

 

 

 

100

%

 

 

1,916,953

 

 

 

100

%

Allowance for credit losses

 

 

(84,235

)

 

 

 

 

 

(63,845

)

 

 

 

Total net loans

 

$

2,131,651

 

 

 

 

 

$

1,853,108

 

 

 

 

(*) Less than 1%.

The following tables show the activity of the gross loans for the years ended December 31, 2023 and 2022.


(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

 

 


(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

 

 

The following table sets forth the activity in the allowance for credit losses for the years ended December 31, 2023 and 2022.

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Allowance for credit losses – beginning balance (1)

 

$

63,845

 

 

$

50,166

 

CECL transition amount upon ASU 2016-13 adoption

 

 

13,712

 

 

 

—

 

Charge-offs

 

 

 

 

 

 

Recreation

 

 

(50,512

)

 

 

(27,055

)

Home improvement

 

 

(12,308

)

 

 

(6,393

)

Commercial

 

 

(1,019

)

 

 

(6,083

)

Taxi medallion

 

 

(3,829

)

 

 

(314

)

Total charge-offs

 

 

(67,668

)

 

 

(39,845

)

Recoveries

 

 

 

 

 

 

Recreation

 

 

11,449

 

 

 

13,785

 

Home improvement

 

 

2,886

 

 

 

2,761

 

Commercial

 

 

10

 

 

 

47

 

Taxi medallion

 

 

22,191

 

 

 

6,872

 

Total recoveries

 

 

36,536

 

 

 

23,465

 

Net charge-offs (2)

 

 

(31,132

)

 

 

(16,380

)

Provision for credit losses

 

 

37,810

 

 

 

30,059

 

Allowance for credit losses – ending balance (3)

 

$

84,235

 

 

$

63,845

 
(1)
Represents allowance prior to the adoption of ASU 2016-13.
(2)
As of December 31, 2023, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $176.8 million, including $107.9 million related to loans secured by New York taxi medallions, some of which may represent collection opportunities for the Company.
(3)
As of December 31, 2023 and 2022, there was no allowance for credit losses and net charge-offs related to the strategic partnership loans.

With the adoption of ASC 326, the Company also adopted ASU 2022-02, Financial Instruments – Credit Losses, or Topic 326: Troubled Debt Restructurings and Vintage Disclosures. Under this standard, the Company is required to disclose current period gross write-offs, by year of origination, for financing receivables.

(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

 

The following tables set forth the allowance for credit losses by type as of December 31, 2023 and 2022.

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

%

The following table presents total nonaccrual loans and foregone interest, substantially all of which is in the taxi medallion portfolio. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Total nonaccrual loans

 

$

25,974

 

 

$

32,133

 

 

$

35,571

 

Interest foregone for the year

 

 

928

 

 

 

1,267

 

 

 

1,620

 

Amount of foregone interest applied to principal for the year

 

 

238

 

 

 

375

 

 

 

432

 

Interest foregone life-to-date

 

 

2,119

 

 

 

2,419

 

 

 

3,623

 

Amount of foregone interest applied to principal life-to-date

 

 

822

 

 

 

1,204

 

 

 

942

 

Percentage of nonaccrual loans to gross loan portfolio

 

 

1.2

%

 

 

1.7

%

 

 

2.4

%

Percentage of allowance for credit losses to nonaccrual loans

 

 

324.3

%

 

 

198.7

%

 

 

141.0

%

 

The following tables present the performance status of loans as of December 31, 2023 and 2022.

December 31, 2023
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,326,567

 

 

$

9,655

 

 

$

1,336,222

 

 

 

0.72

%

Home improvement

 

 

759,128

 

 

 

1,493

 

 

 

760,621

 

 

 

0.20

 

Commercial

 

 

103,664

 

 

 

11,163

 

 

 

114,827

 

 

 

9.72

 

Taxi medallion

 

 

—

 

 

 

3,663

 

 

 

3,663

 

 

 

100.00

 

Strategic partnership

 

 

553

 

 

 

—

 

 

 

553

 

 

 

—

 

Total

 

$

2,189,912

 

 

$

25,974

 

 

$

2,215,886

 

 

 

1.17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,173,846

 

 

$

9,666

 

 

$

1,183,512

 

 

 

0.82

%

Home improvement

 

 

625,820

 

 

 

579

 

 

 

626,399

 

 

 

0.09

 

Commercial

 

 

84,165

 

 

 

8,734

 

 

 

92,899

 

 

 

9.40

 

Taxi medallion

 

 

—

 

 

 

13,571

 

 

 

13,571

 

 

 

100.00

 

Strategic partnership

 

 

572

 

 

 

—

 

 

 

572

 

 

 

—

 

Total

 

$

1,884,403

 

 

$

32,550

 

 

$

1,916,953

 

 

 

1.70

%

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

The following tables provide additional information on attributes of the nonperforming loan portfolio as of December 31, 2023 and 2022, all of which had an allowance recorded against the principal balance.

 

 

December 31,

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

$

9,655

 

 

$

9,655

 

 

$

416

 

 

$

9,666

 

 

$

9,666

 

 

$

343

 

Home improvement

 

 

1,493

 

 

 

1,493

 

 

 

41

 

 

 

579

 

 

 

579

 

 

 

10

 

Commercial

 

 

11,163

 

 

 

11,301

 

 

 

1,897

 

 

 

8,734

 

 

 

8,823

 

 

 

963

 

Taxi medallion

 

 

3,663

 

 

 

4,347

 

 

 

1,536

 

 

 

13,571

 

 

 

14,686

 

 

 

9,490

 

Total nonperforming loans with an allowance

 

$

25,974

 

 

$

26,796

 

 

$

3,890

 

 

$

32,550

 

 

$

33,754

 

 

$

10,806

 

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Average
Investment
Recorded

 

 

Interest Income
Recognized

 

 

Average
Investment
Recorded

 

 

Interest Income
Recognized

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

$

9,048

 

 

$

16

 

 

$

9,093

 

 

$

401

 

Home improvement

 

 

1,382

 

 

 

1

 

 

 

514

 

 

 

4

 

Commercial

 

 

7,368

 

 

 

—

 

 

 

13,381

 

 

 

—

 

Taxi medallion

 

 

4,607

 

 

 

—

 

 

 

16,019

 

 

 

—

 

Total nonperforming loans with an allowance

 

$

22,405

 

 

$

17

 

 

$

39,007

 

 

$

405

 

 

The following tables show the aging of all loans as of December 31, 2023 and 2022.

December 31, 2023

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total

 

 

Current

 

 

Total (1)

 

 

Accruing

 

Recreation

 

$

40,282

 

 

$

15,039

 

 

$

9,095

 

 

$

64,416

 

 

$

1,228,175

 

 

$

1,292,591

 

 

$

—

 

Home improvement

 

 

3,936

 

 

 

2,562

 

 

 

1,502

 

 

 

8,000

 

 

 

756,069

 

 

 

764,069

 

 

 

—

 

Commercial

 

 

—

 

 

 

2,156

 

 

 

6,240

 

 

 

8,396

 

 

 

107,140

 

 

 

115,536

 

 

 

—

 

Taxi medallion

 

 

201

 

 

 

—

 

 

 

—

 

 

 

201

 

 

 

3,462

 

 

 

3,663

 

 

 

—

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

553

 

 

 

553

 

 

 

—

 

Total

 

$

44,419

 

 

$

19,757

 

 

$

16,837

 

 

$

81,013

 

 

$

2,095,399

 

 

$

2,176,412

 

 

$

—

 
(1)
Excludes $40.0 million of capitalized loan origination costs.

December 31, 2022

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total

 

 

Current

 

 

Total (1)

 

 

Accruing

 

Recreation

 

$

31,781

 

 

$

11,877

 

 

$

7,365

 

 

$

51,023

 

 

$

1,095,072

 

 

$

1,146,095

 

 

$

—

 

Home improvement

 

 

3,266

 

 

 

1,256

 

 

 

579

 

 

 

5,101

 

 

 

623,776

 

 

 

628,877

 

 

 

—

 

Commercial

 

 

—

 

 

 

—

 

 

 

74

 

 

 

74

 

 

 

93,396

 

 

 

93,470

 

 

 

—

 

Taxi medallion

 

 

142

 

 

 

393

 

 

 

885

 

 

 

1,420

 

 

 

12,151

 

 

 

13,571

 

 

 

—

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

572

 

 

 

572

 

 

 

—

 

Total

 

$

35,189

 

 

$

13,526

 

 

$

8,903

 

 

$

57,618

 

 

$

1,824,967

 

 

$

1,882,585

 

 

$

—

 
(1)
Excludes $34.9 million of capitalized loan origination costs.

The Company estimates that the weighted average loan-to-value ratio of the taxi medallion loans was approximately 183% and 339% as of December 31, 2023 and 2022.

Under ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," concurrent with the elimination of troubled debt restructuring, or TDR, disclosures, the Company must disclose loans to borrowers experiencing financial difficulty that were modified during the reporting period. The Company did not have any such loan modifications on January 1, 2023 or during the year ended December 31, 2023.

The following table shows the TDRs, which the Company entered into during the year ended December 31, 2022.

(Dollars in thousands)

 

Number of Loans

 

 

Pre-
Modification
Investment

 

 

Post-
Modification
Investment

 

Recreation loans

 

 

80

 

 

 

1,203

 

 

 

1,203

 

Taxi medallion loans

 

 

2

 

 

 

252

 

 

 

252

 

As of December 31, 2022, no taxi medallion loans and two commercial loans were modified as TDRs in the previous 12 months. Modified taxi medallion loans and commercial loans had a respective investment value of $0.9 million and $5.3 million. As of December 31, 2022, 63 recreation loans modified as TDRs were in default and had an investment value of $0.9 million.

The following tables show the activity of the loan collateral in process of foreclosure, which relates only to the recreation and taxi medallion loans, for the years ended December 31, 2023 and 2022.

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, 2022
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion (1)

 

 

Total

 

Loan collateral in process of foreclosure – December 31, 2021

 

$

1,720

 

 

$

35,710

 

 

$

37,430

 

Transfer from loans, net

 

 

12,444

 

 

 

347

 

 

 

12,791

 

Sales

 

 

(7,707

)

 

 

(2,668

)

 

 

(10,375

)

Cash payments received

 

 

—

 

 

 

(12,289

)

 

 

(12,289

)

Collateral valuation adjustments

 

 

(5,081

)

 

 

(657

)

 

 

(5,738

)

Loan collateral in process of foreclosure – December 31, 2022

 

$

1,376

 

 

$

20,443

 

 

$

21,819

 
(1)
As of December 31, 2022, taxi medallion loans in the process of foreclosure included 452 taxi medallions in the New York market, 335 taxi medallions in the Chicago market, 54 taxi medallions in the Newark market, and 39 taxi medallions in various other markets.
v3.24.0.1
Funds Borrowed
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Funds Borrowed

(5) FUNDS BORROWED

The following table presents outstanding balances of funds borrowed as of December 31, 2023.

 

Payments Due for the Year Ending December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

2028

 

 

Thereafter

 

 

December 31, 2023 (1)

 

 

December 31, 2022 (1)

 

 

Interest
Rate (2)

 

Deposits (3)

 

$

678,846

 

 

$

533,405

 

 

$

325,498

 

 

$

184,458

 

 

$

147,232

 

 

$

—

 

 

$

1,869,439

 

 

$

1,609,672

 

 

 

3.07

%

Privately placed notes

 

 

3,000

 

 

 

—

 

 

 

31,250

 

 

 

53,750

 

 

 

39,000

 

 

 

12,500

 

 

 

139,500

 

 

 

121,000

 

 

 

8.08

 

SBA debentures and borrowings

 

 

5,000

 

 

 

14,000

 

 

 

14,000

 

 

 

2,000

 

 

 

1,250

 

 

 

39,000

 

 

 

75,250

 

 

 

68,512

 

 

 

3.69

 

Trust preferred securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33,000

 

 

 

33,000

 

 

 

33,000

 

 

 

7.75

 

Total

 

$

686,846

 

 

$

547,405

 

 

$

370,748

 

 

$

240,208

 

 

$

187,482

 

 

$

84,500

 

 

$

2,117,189

 

 

$

1,832,184

 

 

 

3.50

%
(1)
Excludes deferred financing costs of $8.5 million and $7.0 million as of December 31, 2023 and 2022.
(2)
Weighted average contractual rate as of December 31, 2023.
(3)
Balance excludes $1.5 million and $1.3 million of strategic partner reserve deposits as of December 31, 2023 and 2022.

(A) DEPOSITS

Most deposits are raised through the use of investment brokerage firms that package time deposits in denominations of less than $250,000 qualifying for FDIC insurance into larger pools that are sold to the Bank. The rates paid on the deposits are highly competitive with market rates paid by other financial institutions. Additionally, a brokerage fee is paid, depending on the maturity of the deposits, which averages less than 0.15%. Interest on the deposits is accrued daily and paid monthly, quarterly, semiannually, or at maturity. In October 2020, the Bank began to originate time deposits through internet listing services. These deposits are from other financial institutions and, as of December 31, 2023 and 2022, the Bank had $11.8 million and $12.4 million in listing service deposit balances. 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 $14.9 million in retail savings deposit balances. The following table presents the maturity of the deposit pools, which includes strategic partner reserve deposits, as of December 31, 2023.

(Dollars in thousands)

 

December 31, 2023

 

Three months or less

 

$

191,715

 

Over three months through six months

 

 

190,494

 

Over six months through one year

 

 

296,637

 

Over one year

 

 

1,190,593

 

Deposits

 

 

1,869,439

 

 Strategic partner collateral deposits

 

 

1,500

 

Total deposits

 

$

1,870,939

 

(B) FEDERAL RESERVE DISCOUNT WINDOW AND OTHER BORROWINGS

In March 2023, the Bank established a discount window line of credit at the Federal Reserve. 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.

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, 2023, nothing was outstanding on these lines.

(C) PRIVATELY PLACED NOTES

In December 2023, the Company 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. The Company intends to use the net proceeds from the offering for general corporate purposes, including the repayment of the remaining 8.25% notes maturing in March 2024.

In September 2023, the Company 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 Company used the net proceeds from the offering for general corporate purposes, including the repurchase of $33.0 million of the 8.25% notes issued in March 2019 with a maturity date of March 2024 described below.

In February 2021, the Company completed a private placement to certain institutional investors of $25.0 million aggregate principal amount of 7.25% unsecured senior notes due February 2026, with interest payable semiannually. In March 2021, an additional $3.3 million principal amount of such notes was issued to certain institutional investors. Subsequently in April 2021, an additional $3.0 million principal amount of such notes was issued to certain institutional investors. The Company used the net proceeds from the offering for general corporate purposes, including repayment of outstanding debt.

 

In December 2020, the Company completed a private placement to certain institutional investors of $33.6 million aggregate principal amount of 7.50% unsecured senior notes due December 2027, with interest payable semiannually. In February and March 2021, an additional $8.5 million principal amount of such notes was issued to certain institutional investors. Subsequently in April 2021, an additional $11.7 million principal amount of such notes was issued to certain institutional investors. The Company used the net proceeds from the offering for general corporate purposes, including repayment of outstanding debt.

In March 2019, the Company completed a private placement to certain institutional investors of $30.0 million aggregate principal amount of 8.25% unsecured senior notes due in March 2024, with interest payable semiannually. The Company used the net proceeds from the offering for general corporate purposes, including repaying certain borrowings under its notes payable to banks at a discount which led to a gain of $4.1 million in 2019. In August 2019, an additional $6.0 million principal amount of such notes was issued to certain institutional investors. As described above, in September 2023, the Company repurchased and cancelled $33.0 million of these notes, leaving $3.0 million principal amount remaining outstanding as of December 31, 2023.

(D) SBA DEBENTURES AND BORROWINGS

Over the years, the SBA has approved commitments for MCI and FSVC, typically for a four and half year term and a 1% fee. During 2017, the SBA restructured FSVC’s debentures with SBA totaling $33.5 million in principal into a new loan by the SBA to FSVC in the principal amount of $34.0 million, or the SBA Loan. In connection with the SBA Loan, FSVC executed a Note, or the SBA Note, with an effective date of March 1, 2017, in favor of SBA, in the principal amount of $34.0 million. The SBA Loan bore an interest rate of 3.25% with all remaining unpaid principal and interest being due on April 30, 2024, the maturity date. In October 2023, FSVC repaid, in full, all amounts due to the SBA under the SBA Note.

On July 10, 2023, MCI accepted a commitment from the SBA for $20.0 million in debenture financing. In connection with the commitment, MCI paid the SBA a leverage fee of $0.2 million, with an additional $0.4 million fee to be paid pro-rata as MCI draws under the commitment. As of December 31, 2023, $9.8 million of the commitment had been drawn, and $5.5 million was drawable, with the balance of $4.7 million drawable upon the infusion of $2.4 million of capital from either the capitalization of retained earnings or a capital infusion into MCI from the Company.

(E) TRUST PREFERRED SECURITIES

In June 2007, the Company issued and sold $36.1 million aggregate principal amount of unsecured junior subordinated notes to Fin Trust which, in turn, sold $35.0 million of trust preferred securities to Merrill Lynch International and issued 1,083 shares of common stock to the Company. Prior to the cessation of LIBOR on June 30, 2023, the notes bore a variable rate of interest of 90-day LIBOR plus 2.13%. With the cessation of LIBOR, interest is calculated using the Secured Overnight Financing Rate (SOFR) adjusted by a relevant spread adjustment of approximately 26 basis points, plus 2.13%. The notes mature in September 2037 and are prepayable at par. Interest is payable quarterly in arrears. The terms of the trust preferred securities and the notes are substantially identical. In December 2007, $2.0 million of the trust preferred securities were repurchased from a third-party investor. As of December 31, 2023, $33.0 million was outstanding on the trust preferred securities.

(F) COVENANT COMPLIANCE

Certain of the Company's debt agreements contain financial covenants that require the Company to maintain certain financial ratios and minimum tangible net worth. As of December 31, 2023, the Company was in compliance with all such covenants.
v3.24.0.1
Leases
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
leases

(6) LEASES

The Company has leased premises that expire at various dates through November 30, 2030 subject to various operating leases. The Company has implemented ASC Topic 842 under a modified retrospective approach, in which no adjustments have been made to the prior year balances.

The following table presents the operating lease costs and additional information for the years ended December 31, 2023, 2022, and 2021.

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Operating lease costs

 

$

2,390

 

 

$

2,216

 

 

$

2,287

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

 

2,472

 

 

 

2,378

 

 

 

2,454

 

Right-of-use asset obtained in exchange for lease liability

 

 

(226

)

 

 

(187

)

 

 

(118

)

 

The following table presents the breakout of the operating leases as of December 31, 2023 and 2022.

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Operating lease right-of-use assets

 

$

8,785

 

 

$

9,723

 

Other current liabilities

 

 

2,472

 

 

 

2,239

 

Operating lease liabilities

 

 

7,019

 

 

 

8,408

 

Total operating lease liabilities

 

 

9,491

 

 

 

10,647

 

Weighted average remaining lease term

 

4.9 years

 

 

5.5 years

 

Weighted average discount rate

 

 

5.47

%

 

 

5.66

%

The following table presents maturities of the lease liabilities as of December 31, 2023.

(Dollars in thousands)

 

 

 

2024

 

$

2,536

 

2025

 

 

2,546

 

2026

 

 

2,567

 

2027

 

 

1,342

 

2028

 

 

573

 

Thereafter

 

 

1,139

 

Total lease payments

 

 

10,703

 

Less imputed interest

 

 

1,212

 

Total operating lease liabilities

 

$

9,491

 
v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

(7) INCOME TAXES

The Company is subject to federal and applicable state corporate income taxes on its taxable ordinary income and capital gains. As a corporation taxed under Subchapter C of the Internal Revenue Code, the Company is able, and intends, to file a consolidated federal income tax return with corporate subsidiaries in which it holds 80% or more of the outstanding equity interest measured by both vote and fair value.

The following table sets forth the significant components of the Company's deferred and other tax assets and liabilities as of December 31, 2023 and 2022.

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Goodwill and other intangibles

 

$

43,034

 

 

$

43,397

 

Provision for credit losses

 

 

(13,032

)

 

 

(9,945

)

Net operating loss carryforwards (1)

 

 

(3,802

)

 

 

(3,730

)

Accrued expenses, compensation, and other assets

 

 

(6,976

)

 

 

(3,819

)

Unrealized gains on other investments

 

 

(1,877

)

 

 

(1,445

)

Total deferred tax liability

 

 

17,347

 

 

 

24,458

 

Valuation allowance

 

 

3,860

 

 

 

2,295

 

Deferred tax liability, net

 

$

21,207

 

 

$

26,753

 
(1)
As of December 31, 2023, the Company had an estimated $11.1 million of net operating loss carryforwards, $1.7 million of which expires at various dates between December 31, 2026 and December 31, 2035, which had a net carrying value of $1.2 million of December 31, 2023.

The following table shows the components of the Company's tax provision for the years ended December 31, 2023, 2022, and 2021.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

18,634

 

 

$

5,213

 

 

$

3,550

 

State

 

 

6,014

 

 

 

560

 

 

 

1,563

 

Deferred

 

0

 

 

0

 

 

0

 

Federal

 

 

(52

)

 

 

8,090

 

 

 

13,686

 

State

 

 

314

 

 

 

4,100

 

 

 

5,418

 

Net provision for income taxes

 

$

24,910

 

 

$

17,963

 

 

$

24,217

 

The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax (provision) benefit reported for the years ended December 31, 2023, 2022, and 2021.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Statutory Federal income tax provision at 21%

 

$

18,068

 

 

$

14,249

 

 

$

17,193

 

State and local income taxes, net of federal income tax benefit

 

 

3,534

 

 

 

2,787

 

 

 

3,363

 

Valuation allowance against deferred tax assets

 

 

1,565

 

 

 

—

 

 

 

1,833

 

Change in effective state income tax rates and accrual

 

 

(222

)

 

 

(811

)

 

 

1,691

 

Income attributable to non-controlling interest

 

 

—

 

 

 

—

 

 

 

(628

)

Non-deductible expenses

 

 

2,024

 

 

 

1,987

 

 

 

178

 

Other

 

 

(59

)

 

 

(249

)

 

 

587

 

Total income tax provision

 

$

24,910

 

 

$

17,963

 

 

$

24,217

 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible pursuant to ASC 740. The Company considers the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company’s evaluation of the realizability of deferred tax assets must consider both positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. Based upon these considerations, the Company determined the necessary valuation allowance as of December 31, 2023.

The Company has filed tax returns in many states. Federal, New York State, New York City, and Utah state tax filings of the Company for the tax years 2020 through the present are the more significant filings that are open for examination.
v3.24.0.1
Stock Options and Restricted Stock
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock Options and Restricted Stock

(8) STOCK OPTIONS AND RESTRICTED STOCK

The Company’s Board of Directors approved the 2018 Equity Incentive Plan, or the 2018 Plan, which was approved by the Company’s stockholders on June 15, 2018. The terms of 2018 Plan provide for grants of a variety of different type of stock awards to the Company’s employees and non-employee directors, including options, restricted stock, restricted stock units, performance stock units, and stock appreciation rights, etc. On April 22, 2020, the Company’s Board of Directors approved an amendment to the 2018 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 19, 2020, and subsequently on April 26, 2022, the Company’s Board of Directors approved an additional amendment to the 2018 Plan to further increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 14, 2022. A total of 5,710,968 shares of the Company’s common stock are issuable under the 2018 Plan, and 2,228,057 were issuable as of December 31, 2023. Awards under the 2018 Plan are subject to certain limitations as set forth in the 2018 Plan, which will terminate when all shares of common stock authorized for delivery have been delivered and the forfeiture restrictions on all awards have lapsed, or by action of the Board of Directors pursuant to the 2018 Plan, whichever occurs first.

The Company’s Board of Directors approved the 2015 Non-Employee Director Stock Option Plan, or the 2015 Director Plan, on March 12, 2015, which was approved by the Company’s shareholders on June 5, 2015, and on which exemptive relief to implement the 2015 Director Plan was received from the SEC on February 29, 2016. A total of 300,000 shares of the Company’s common stock were issuable under the 2015 Director Plan, and 258,334 remained issuable as of June 15, 2018. Effective June 15, 2018, the 2018 Plan was approved, and these remaining shares were rolled into the 2018 Plan. Under the 2015 Director Plan, unless otherwise determined by a committee of the Board of Directors comprised of directors who are not eligible for grants under the 2015 Director Plan, the Company granted options to purchase 12,000 shares of the Company’s common stock to a non-employee director upon election to the Board of Directors, with an adjustment for directors who were elected to serve less than a full term. The option price per share could not be less than the current market value of the Company’s common stock on the date the option was granted. Options granted under the 2015 Director Plan vested annually, as defined in the 2015 Director Plan. The term of the options could not exceed ten years.

The Company’s Board of Directors approved the First Amended and Restated 2006 Director Plan, or the Amended Director Plan, on April 16, 2009, which was approved by the Company’s shareholders on June 5, 2009, and on which exemptive relief to implement the Amended Director Plan was received from the SEC on July 17, 2012. A total of 200,000 shares of the Company’s common stock were issuable under the Amended Director Plan. No additional shares are available for issuance under the Amended Director Plan. Under the Amended Director Plan, unless otherwise determined by a committee of the Board of Directors comprised of directors who are not eligible for grants under the Amended Director Plan, the Company would grant options to purchase 9,000 shares of the Company’s common stock to an Eligible Director upon election to the Board of Directors, with an adjustment for directors who were elected to serve less than a full term. The option price per share could not be less than the current market value of the Company’s common stock on the date the option was granted. Options granted under the Amended Director Plan vested annually, as defined in the Amended Director Plan. The term of the options could not exceed ten years.

Additional shares are only available for future issuance under the 2018 Plan. At December 31, 2023, 959,522 options on the Company’s common stock were outstanding under the Company’s plans, of which 697,647 options were vested. Additionally, as of December 31, 2023, there were 995,376 unvested restricted shares, 296,444 unvested performance stock units, 84,822 unvested restricted stock units, and 160,595 vested restricted stock units under the 2018 Plan.

 

The fair value of each restricted stock grant is determined on the date of grant by the closing market price of the Company’s common stock on the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. There were no options granted during the year ended December 31, 2023. The following assumption categories are used to determine the value of any option grants.

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

Risk free interest rate

 

 

—

 

 

 

—

 

 

 

0.97

%

Expected dividend yield

 

 

—

 

 

 

—

 

 

 

—

 

Expected life of option in years (1)

 

 

—

 

 

 

—

 

 

 

6.25

 

Expected volatility (2)

 

 

—

 

 

 

—

 

 

 

53.98

%
(1)
Expected life is calculated using the simplified method.
(2)
The Company determines its expected volatility based on the Company's historical volatility.

During 2023, the Company’s Compensation Committee of the Board of Directors began granting performance stock units, or PSUs, to certain officers and employees of the Company. Granted PSUs are subject to specified performance criteria for a particular performance period. The number of PSUs that vest can range from zero to 200% of the grant amount. In addition, dividends that accrue during the vesting period are reinvested in dividend equivalent PSUs. PSUs and the related dividend equivalent PSUs are converted into shares of common stock after vesting. Once the PSUs and dividend equivalent PSUs have vested, shares of common stock are delivered.

The following table presents the activity for the stock option programs for the years ended December 31, 2023, 2022, and 2021.

 

Number of
Options

 

 

 

Exercise
Price Per
Share

 

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2020 (2)

 

 

951,669

 

 

 

2.14 - 12.55

 

 

 

6.41

 

Granted

 

 

317,398

 

 

 

 

6.79

 

 

 

6.79

 

Cancelled

 

 

(113,310

)

 

 

4.89 - 11.53

 

 

 

6.64

 

Exercised (1)

 

 

(44,070

)

 

 

5.21 - 7.25

 

 

 

5.58

 

Outstanding at December 31, 2021 (2)

 

 

1,111,687

 

 

 

2.14-12.55

 

 

 

6.41

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(26,093

)

 

 

4.89 - 12.55

 

 

 

7.08

 

Exercised (1)

 

 

(23,745

)

 

 

4.89 - 7.25

 

 

 

6.51

 

Outstanding at December 31, 2022 (2)

 

 

1,061,849

 

 

 

2.14 - 9.38

 

 

 

6.51

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(33,382

)

 

 

4.89 - 9.38

 

 

 

6.80

 

Exercised (1)

 

 

(68,945

)

 

 

4.89 - 7.25

 

 

 

6.44

 

Outstanding at December 31, 2023 (2)

 

 

959,522

 

 

$

2.14 - 9.38

 

 

$

6.51

 

Options exercisable at

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

320,922

 

 

 

2.14-12.55

 

 

$

6.53

 

December 31, 2022

 

 

548,426

 

 

 

2.14 - 9.38

 

 

 

6.51

 

December 31, 2023

 

 

697,647

 

 

 

2.14 - 9.38

 

 

 

6.51

 
(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 $0.1 million, $0.1 million, and $0.2 million for the years ended December 31, 2023, 2022, and 2021.
(2)
The aggregate intrinsic value, which represents the difference between the price of the Company’s common stock at December 31, 2023 and the related exercise price of the underlying options, was $3.2 million for outstanding options and $2.3 million for exercisable options as of December 31, 2023. The remaining contractual life was 6.1 years for outstanding options and 5.9 years for exercisable options at December 31, 2023.

The following table presents the activity for the unvested options outstanding under the plans for the year ended December 31, 2023.

 

Number of
Options

 

 

 

Exercise Price
Per Share

 

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2022

 

 

513,423

 

 

$

4.89 - 7.25

 

 

$

6.52

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(3,336

)

 

 

4.89 - 7.25

 

 

 

5.51

 

Vested

 

 

(248,212

)

 

 

4.89 - 7.25

 

 

 

6.55

 

Outstanding at December 31, 2023

 

 

261,875

 

 

$

4.89 - 7.25

 

 

$

6.49

 

The intrinsic value of the options vested was $0.4 million, $0.3 million, and less than $0.1 million for the years ended December 31, 2023, 2022, and 2021.

 

The following table presents the activity for the restricted stock programs for the years ended December 31, 2023, 2022, and 2021.

 

Number of
Shares

 

 

 

Grant
Price Per
Share

 

Weighted
Average
Grant Price

 

Outstanding at December 31, 2020

 

 

416,140

 

 

 

4.39 - 7.25

 

$

6.24

 

Granted

 

 

258,120

 

 

 

6.79 - 8.40

 

 

7.38

 

Cancelled

 

 

(21,940

)

 

 

4.89 - 7.25

 

 

5.98

 

Vested (1)

 

 

(158,994

)

 

 

4.39 - 7.25

 

 

6.16

 

Outstanding at December 31, 2021 (2)

 

 

493,326

 

 

 

4.89 - 7.25

 

 

6.87

 

Granted

 

 

522,475

 

 

 

6.86 -7.68

 

 

7.46

 

Cancelled

 

 

(29,373

)

 

 

4.89 - 8.40

 

 

7.32

 

Vested (1)

 

 

(129,140

)

 

 

4.89 - 7.25

 

 

6.53

 

Outstanding at December 31, 2022 (2)

 

 

857,288

 

 

$

4.89 - 7.25

 

 

7.27

 

Granted

 

 

399,793

 

 

 

7.67 - 9.37

 

 

8.34

 

Cancelled

 

 

(12,807

)

 

 

4.89 - 8.40

 

 

7.24

 

Vested (1)

 

 

(248,898

)

 

 

4.89 - 7.68

 

 

7.10

 

Outstanding at December 31, 2023 (2)

 

 

995,376

 

 

$

4.89 - 9.37

 

$

7.74

 
(1)
The aggregate fair value of the restricted stock vested was $2.1 million, $1.0 million, and $1.1 million for the years ended December 31, 2023, 2022, and 2021.
(2)
The aggregate fair value of the restricted stock was $9.8 million as of December 31, 2023. The remaining vesting period was 2.2 years at December 31, 2023.

During the year ended December 31, 2023, the Company granted 83,158 restricted stock units, or RSUs, with a vesting date of June 22, 2024 at a grant price of $9.14 and during the year ended December 31, 2022 granted 129,638 RSUs with a vesting date of June 14, 2023 at a grant price of $6.75. For the RSUs granted in 2023 and 2022, unitholders had the option of deferring settlement until a future date if the recipient makes a formal election under the guidelines of IRC Section 409A. As of December 31, 2023, there were 245,417 RSUs outstanding, including 160,595 which had previously vested.

During the year ended December 31, 2023, the Company granted 296,444 PSUs at a grant price of $6.08. No PSUs were granted during the year ended December 31, 2022. The PSUs have vesting conditions based upon certain levels of total pre-tax income as well as return on common equity attained over a three-year period. The PSUs cliff vest after three years based upon the performance of the Company. Dividend equivalent PSUs accumulate and convert to additional shares for the benefit of the grantee at the vesting date or are forfeited if the performance conditions are not met.
v3.24.0.1
Segment Reporting
 12 Months Ended
Dec. 31, 2023
Segment Reporting [Abstract]  
Segment Reporting

(9) SEGMENT REPORTING

The Company has five business segments, which include four lending and one non-operating segments, which are reflective of how Company management makes decisions about its business and operations.

The four lending segments reflect the main types of lending performed at the Company, which are recreation, home improvement, commercial, and taxi medallion. The recreation and home improvement lending segments are conducted by the Bank and loans are made to borrowers residing nationwide. The highest concentrations of recreation loans are in Texas and Florida at 15% and 10% of loans outstanding and with no other states at or above 10% as of December 31, 2023. The recreation lending segment is a consumer finance business that works with third-party dealers and financial service providers for the purpose of financing RVs, boats, and other consumer recreational equipment, of which RVs and boats make up 54% and 19% of the segment portfolio with no other product lines exceeding 10% as of December 31, 2023. The home improvement lending segment works with contractors and financial service providers to finance residential home improvement with the largest product lines being roofs, swimming pools, and windows at 41%, 20%, and 13% with no other product lines exceeding 10%. The highest concentrations of home improvement loans are in Texas and Florida, both at 10% of loans outstanding and with no other states at or above 10% as of December 31, 2023. The commercial lending segment focuses on serving a wide variety of industries, with concentrations in manufacturing, construction, and wholesale trade making up 53%, 13%, and 11% of the loans outstanding as of December 31, 2023 with no other product lines exceeding 10%. The commercial lending segment invests across the United States with concentrations in California, Minnesota, and Wisconsin having 27%, 12%, and 10% of the segment portfolio, and no other states having a concentration at or above 10%. The taxi medallion lending segment arose in connection with the financing of taxi medallions, taxis, and related assets, primarily all of which are located in the New York City metropolitan area as of December 31, 2023.

The Company's corporate and other investments segment is a non-operating segment that includes items not allocated to the Company's operating segments such as investment securities, equity investments, intercompany eliminations, and other corporate elements. Additionally, through December 1, 2021, the date of disposition, the Company had another non-operating segment, RPAC, a race car team.

As part of segment reporting, capital ratios for all operating segments have been normalized as a percentage of consolidated total equity divided by total assets, with the net adjustment applied to corporate and other investments. In addition, the commercial segment primarily represents the mezzanine lending business, with certain legacy commercial loans (immaterial to total) allocated to corporate and other investments.

 

As part of segment reporting, capital ratios for all operating segments have been normalized as a percentage of consolidated total equity divided by total assets, with the net adjustment applied to corporate and other investments. In addition, the commercial segment primarily represents the mezzanine lending business, with certain legacy commercial loans (immaterial to total) allocated to corporate and other investments.

The following table presents segment data as of and for the year ended December 31, 2023.

Year Ended December 31, 2023

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

167,765

 

 

$

62,703

 

 

$

12,719

 

 

$

1,596

 

 

$

6,257

 

 

$

251,040

 

Total interest expense

 

 

31,436

 

 

 

18,137

 

 

 

3,597

 

 

 

72

 

 

 

9,704

 

 

 

62,946

 

Net interest income (loss)

 

 

136,329

 

 

 

44,566

 

 

 

9,122

 

 

 

1,524

 

 

 

(3,447

)

 

 

188,094

 

Provision (benefit) for credit losses

 

 

44,592

 

 

 

17,583

 

 

 

1,988

 

 

 

(26,318

)

 

 

(35

)

 

 

37,810

 

Net interest income (loss) after loss provision

 

 

91,737

 

 

 

26,983

 

 

 

7,134

 

 

 

27,842

 

 

 

(3,412

)

 

 

150,284

 

Other income

 

 

376

 

 

 

6

 

 

 

5,971

 

 

 

3,358

 

 

 

1,609

 

 

 

11,320

 

Operating expenses

 

 

(32,601

)

 

 

(16,752

)

 

 

(3,547

)

 

 

(7,256

)

 

 

(15,412

)

 

 

(75,568

)

Net income (loss) before taxes

 

 

59,512

 

 

 

10,237

 

 

 

9,558

 

 

 

23,944

 

 

 

(17,215

)

 

 

86,036

 

Income tax (provision) benefit

 

 

(17,231

)

 

 

(2,964

)

 

 

(2,767

)

 

 

(6,933

)

 

 

4,985

 

 

 

(24,910

)

Net income (loss) after taxes

 

 

42,281

 

 

 

7,273

 

 

 

6,791

 

 

 

17,011

 

 

 

(12,230

)

 

 

61,126

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,047

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

55,079

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

1,336,222

 

 

$

760,621

 

 

$

114,827

 

 

$

3,663

 

 

$

553

 

 

$

2,215,886

 

Total assets

 

 

1,297,870

 

 

 

744,904

 

 

 

110,850

 

 

 

12,247

 

 

 

421,956

 

 

 

2,587,827

 

Total funds borrowed

 

 

1,062,584

 

 

 

609,863

 

 

 

90,754

 

 

 

10,027

 

 

 

345,462

 

 

 

2,118,690

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

3.36

%

 

 

1.04

%

 

 

6.65

%

 

 

91.25

%

 

 

(3.13

)%

 

 

2.51

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

17.33

 

Return on average equity

 

 

21.24

 

 

 

6.60

 

 

 

41.51

 

 

 

574.86

 

 

 

(19.78

)

 

 

15.79

 

Interest yield

 

 

13.07

 

 

 

8.86

 

 

 

12.80

 

 

 

26.94

 

 

N/A

 

 

 

11.19

 

Net interest margin, gross

 

 

10.62

 

 

 

6.29

 

 

 

9.18

 

 

 

25.73

 

 

N/A

 

 

 

8.38

 

Net interest margin, net of allowance

 

 

11.09

 

 

 

6.45

 

 

 

9.45

 

 

 

61.60

 

 

N/A

 

 

 

8.68

 

Reserve coverage

 

 

4.31

 

 

 

2.76

 

 

 

3.61

 

 

 

41.93

 

 

N/A

 

 

 

3.80

 

Delinquency status (1)

 

 

0.70

 

 

 

0.20

 

 

 

5.40

 

 

 

—

 

 

N/A

 

 

 

0.77

 

Charge-off (recovery) ratio (2)

 

 

3.04

 

 

 

1.33

 

 

 

1.02

 

 

 

(309.96

)

 

N/A

 

 

 

1.48

 
(1)
Loans 90 days or more past due.
(2)
Negative balances indicate recoveries for the period.

(*) Line item is not applicable to segments.

 

The following table presents segment data as of and for the year ended December 31, 2022.

Year Ended December 31, 2022

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

139,145

 

 

$

44,703

 

 

$

9,348

 

 

$

632

 

 

$

2,793

 

 

$

196,621

 

Total interest expense

 

 

17,932

 

 

 

7,697

 

 

 

3,040

 

 

 

508

 

 

 

7,008

 

 

 

36,185

 

Net interest income (loss)

 

 

121,213

 

 

 

37,006

 

 

 

6,308

 

 

 

124

 

 

 

(4,215

)

 

 

160,436

 

Provision (benefit) for credit losses

 

 

22,802

 

 

 

7,616

 

 

 

5,963

 

 

 

(6,474

)

 

 

152

 

 

 

30,059

 

Net interest income (loss) after loss provision

 

 

98,411

 

 

 

29,390

 

 

 

345

 

 

 

6,598

 

 

 

(4,367

)

 

 

130,377

 

Other income

 

 

—

 

 

 

14

 

 

 

3,306

 

 

 

4,341

 

 

 

1,865

 

 

 

9,526

 

Operating expenses

 

 

(30,463

)

 

 

(13,514

)

 

 

(4,910

)

 

 

(10,520

)

 

 

(12,646

)

 

 

(72,053

)

Net income (loss) before taxes

 

 

67,948

 

 

 

15,890

 

 

 

(1,259

)

 

 

419

 

 

 

(15,148

)

 

 

67,850

 

Income tax (provision) benefit

 

 

(17,989

)

 

 

(4,207

)

 

 

333

 

 

 

(111

)

 

 

4,011

 

 

 

(17,963

)

Net income (loss) after taxes

 

 

49,959

 

 

 

11,683

 

 

 

(926

)

 

 

308

 

 

 

(11,137

)

 

 

49,887

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,047

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

43,840

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

1,183,512

 

 

$

626,399

 

 

$

92,899

 

 

$

13,571

 

 

$

572

 

 

$

1,916,953

 

Total assets

 

 

1,154,680

 

 

 

618,923

 

 

 

101,447

 

 

 

25,496

 

 

 

359,333

 

 

 

2,259,879

 

Total funds borrowed

 

 

936,789

 

 

 

502,131

 

 

 

82,304

 

 

 

20,685

 

 

 

291,526

 

 

 

1,833,435

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

4.38

%

 

 

1.95

%

 

 

(0.91

)%

 

 

1.18

%

 

 

(3.02

)%

 

 

2.40

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

14.92

 

Return on average equity

 

 

26.66

 

 

 

12.08

 

 

 

(5.50

)

 

 

6.97

 

 

 

(18.40

)

 

 

13.74

 

Interest yield

 

 

12.82

 

 

 

8.49

 

 

 

10.63

 

 

 

4.58

 

 

N/A

 

 

 

10.70

 

Net interest margin, gross

 

 

11.17

 

 

 

7.03

 

 

 

7.17

 

 

 

0.90

 

 

N/A

 

 

 

8.73

 

Net interest margin, net of allowance

 

 

11.57

 

 

 

7.16

 

 

 

7.28

 

 

 

2.76

 

 

N/A

 

 

 

9.05

 

Reserve coverage

 

 

3.55

 

 

 

1.81

 

 

 

1.13

 

 

 

69.93

 

 

N/A

 

 

 

3.33

 

Delinquency status (1)

 

 

0.64

 

 

 

0.09

 

 

 

0.08

 

 

 

6.52

 

 

N/A

 

 

 

0.47

 

Charge-off (recovery) ratio (2)

 

 

1.22

 

 

 

0.69

 

 

 

6.86

 

 

 

(47.51

)

 

N/A

 

 

 

0.96

 
(1)
Loans 90 days or more past due.
(2)
Negative balances indicate recoveries for the period.

(*) Line item is not applicable to segments.

 

The following table presents segment data as of and for the year ended December 31, 2021.

Year Ended December 31, 2021

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

RPAC (2)

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income (loss)

 

$

118,305

 

 

$

34,204

 

 

$

6,592

 

 

$

(1,483

)

 

$

—

 

 

$

1,348

 

 

$

158,966

 

Total interest expense

 

 

9,993

 

 

 

4,153

 

 

 

2,720

 

 

 

5,914

 

 

 

546

 

 

 

7,814

 

 

 

31,140

 

Net interest income (loss)

 

 

108,312

 

 

 

30,051

 

 

 

3,872

 

 

 

(7,397

)

 

 

(546

)

 

 

(6,466

)

 

 

127,826

 

Provision (benefit) for credit losses

 

 

7,671

 

 

 

2,750

 

 

 

—

 

 

 

(7,752

)

 

 

—

 

 

 

1,953

 

 

 

4,622

 

Net interest income (loss) after loss provision

 

 

100,641

 

 

 

27,301

 

 

 

3,872

 

 

 

355

 

 

 

(546

)

 

 

(8,419

)

 

 

123,204

 

Sponsorship and race winnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

12,567

 

 

 

—

 

 

 

12,567

 

Race team related expenses

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,559

)

 

 

—

 

 

 

(9,559

)

Other income (loss)

 

 

—

 

 

 

63

 

 

 

6,542

 

 

 

(641

)

 

 

716

 

 

 

12,319

 

 

 

18,999

 

Operating expenses

 

 

(30,156

)

 

 

(11,703

)

 

 

(3,441

)

 

 

(1,350

)

 

 

(5,824

)

 

 

(10,866

)

 

 

(63,340

)

Net income (loss) before taxes

 

 

70,485

 

 

 

15,661

 

 

 

6,973

 

 

 

(1,636

)

 

 

(2,646

)

 

 

(6,966

)

 

 

81,871

 

Income tax (provision) benefit

 

 

(18,699

)

 

 

(4,155

)

 

 

(1,850

)

 

 

433

 

 

 

(1,498

)

 

 

1,552

 

 

 

(24,217

)

Net income (loss) after taxes

 

 

51,786

 

 

 

11,506

 

 

 

5,123

 

 

 

(1,203

)

 

 

(4,144

)

 

 

(5,414

)

 

 

57,654

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,546

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

54,108

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans net

 

$

961,320

 

 

$

436,772

 

 

$

76,696

 

 

$

14,046

 

 

$

—

 

 

$

90

 

 

$

1,488,924

 

Total assets

 

 

943,753

 

 

 

442,503

 

 

 

102,711

 

 

 

86,526

 

 

 

—

 

 

 

297,564

 

 

 

1,873,057

 

Total funds borrowed

 

 

744,701

 

 

 

349,172

 

 

 

81,048

 

 

 

68,276

 

 

 

—

 

 

 

234,804

 

 

 

1,478,001

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

5.93

%

 

 

2.90

%

 

 

6.12

%

 

 

(0.13

)%

 

 

(16.03

)%

 

 

(2.01

)%

 

 

3.33

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

21.24

 

Return on average equity

 

 

29.66

 

 

 

14.49

 

 

 

30.61

 

 

 

(0.64

)

 

 

(697.38

)

 

 

(14.49

)

 

 

17.64

 

Interest yield

 

 

13.45

 

 

 

9.14

 

 

 

9.86

 

 

 

(6.97

)

 

N/A

 

 

N/A

 

 

 

11.08

 

Net interest margin, gross

 

 

12.31

 

 

 

8.03

 

 

 

5.79

 

 

 

(34.78

)

 

N/A

 

 

N/A

 

 

 

8.91

 

Net interest margin, net of allowance

 

 

12.76

 

 

 

8.17

 

 

 

5.81

 

 

 

(93.60

)

 

N/A

 

 

N/A

 

 

 

9.25

 

Reserve coverage

 

 

3.37

 

 

 

1.68

 

 

 

1.49

 

 

 

65.74

 

 

N/A

 

 

N/A

 

 

 

3.37

 

Delinquency status (1)

 

 

0.41

 

 

 

0.03

 

 

 

0.10

 

 

 

—

 

 

N/A

 

 

N/A

 

 

 

0.28

 

Charge-off (recovery) ratio

 

 

0.29

 

 

 

0.15

 

 

 

—

 

 

 

41.72

 

 

N/A

 

 

N/A

 

 

 

0.89

 
(1)
Loans 90 days or more past due.
(2)
The Company sold its interest in RPAC in December 2021. Selected earnings data are applicable through the date of sale.

(*) Line item is not applicable to segments.
v3.24.0.1
Commitments and Contingencies
 12 Months Ended
Dec. 31, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

(10) COMMITMENTS AND CONTINGENCIES

(A) EMPLOYMENT AGREEMENTS

The Company has employment agreements with certain key officers, including Mr. Alvin Murstein and Mr. Andrew Murstein, for either a one-, two-, three-, four-, or five-year term. Typically, the contracts with a one- or two-year term will renew for new one- or two-year terms unless prior to the term either the Company or the executive provides notice to the other party of its intention not to extend the employment period beyond the current one or two-year term (as applicable); however, in addition to Mr. Andrew Murstein's employment agreement, as further described below, there is currently one agreement that renews after two years for additional one-year terms and one agreement with a three-year term that does not have a renewal period. In the event of a change in control, as defined, during the employment period, the agreements provide for severance compensation to the executive in an amount equal to the balance of the salary, bonus, and value of fringe benefits which the executive would be entitled to receive for the remainder of the employment period.

On April 25, 2023, Mr. Alvin Murstein, the Company’s Chairman of the Board and Chief Executive Officer, notified the Company of his election not to renew the term of his employment pursuant to the First Amended and Restated Employment Agreement, dated May 29, 1998, as amended, between him and the Company. Accordingly, the term of his employment as Chief Executive Officer of the Company will expire on May 28, 2027, unless sooner terminated in accordance with the provisions thereof.

In addition, on April 27, 2023, Mr. Andrew Murstein, the Company’s President and Chief Operating Officer, entered into an amendment to the First Amended and Restated Employment Agreement, dated May 29, 1998, as amended, between him and the Company. Pursuant to such amendment, effective as of May 29, 2023, (i) the expiration of his then current term of employment shall be revised to end on May 28, 2027, and (ii) on May 29, 2024, and on each May 29 thereafter, such term of employment shall automatically renew each year for a three-year term unless, prior to the end of the first year of the then-applicable three-year term, either Mr. Murstein or the Company provides at least 30 days’ advance notice to the other party of its intention not to renew the then-applicable term of employment for a new three-year term, in each case unless such employment term is otherwise terminated pursuant to the terms thereof.

Employment agreements expire at various dates through 2027, with future minimum payments under these agreements of approximately $9.9 million as follows:

(Dollars in thousands)

 

 

 

2024

 

$

4,259

 

2025

 

 

2,547

 

2026

 

 

2,161

 

2027

 

 

900

 

Thereafter

 

 

—

 

Total

 

$

9,867

 

(B) OTHER COMMITMENTS

As of December 31, 2023 the Company had no other commitments. Generally, any commitments would be on the same terms as loans to or investments in existing borrowers or investees, and generally have fixed expiration dates. Since some commitments would be expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

(C) SEC LITIGATION

On December 29, 2021, the SEC filed a civil complaint in the U.S. District Court for the Southern District of New York against the Company and its President and Chief Operating Officer alleging certain violations of the antifraud, books and records, internal controls and anti-touting provisions of the federal securities laws. The litigation relates to certain issues that occurred during the period 2015 to 2017, including (i) the Company’s retention of third parties in 2015 and 2016 concerning posting information about the Company on certain financial websites and (ii) the Company’s financial reporting and disclosures concerning certain assets, including Medallion Bank, in 2016 and 2017, a period when the Company had previously reported as a business development company (BDC) under the Investment Company Act of 1940. Since April 2018, the Company does not report as a BDC, and has not worked with such third parties since 2016. The Company does not expect to change previously reported financial results. The Company filed a motion to dismiss the complaint on March 22, 2022, the SEC filed an amended complaint on April 26, 2022 and the Company filed a motion to dismiss the amended complaint on August 5, 2022.

The SEC is seeking injunctive relief, disgorgement plus pre-judgment interest and civil penalties in amounts unspecified, as well as an officer and director bar against the Company’s President and Chief Operating Officer. The Company and its President and Chief Operating Officer intend to defend themselves vigorously and believe that the SEC will not prevail on its claims. 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. In addition, the Company has and expects to further incur significant legal fees and expenses in defending such charges by the SEC and the Company may be subject to shareholder litigation relating to these SEC matters.

(D) OTHER LITIGATION AND REGULATORY MATTERS

The Company and its subsidiaries are subject to inquiries from certain regulators and are currently involved in various legal proceedings incident to the normal course of business, including collection matters with respect to certain loans. The Company intends to vigorously defend any outstanding claims and pursue its legal rights. In the opinion of management, based on the advice of legal counsel, except for the pending SEC litigation, as described above, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision could result in a material adverse impact on the financial condition or results of operations of the Company.
v3.24.0.1
Related Party Transactions
 12 Months Ended
Dec. 31, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

(11) RELATED PARTY TRANSACTIONS

Certain directors, officers, and stockholders of the Company are also directors and officers of its main consolidated subsidiaries, MFC, MCI, FSVC, and the Bank, as well as other subsidiaries. Officer salaries are set by the Board of Directors of the Company.

Jeffrey Rudnick, the son of one of the Company’s directors, served as the Company’s Senior Vice President at a salary of $250,950, $239,000, and $195,000 for the years ended December 31, 2023, 2022, and 2021, which was increased to $260,988 effective January 1, 2024. Mr. Rudnick received an annual cash bonus of $95,000, $85,000, and $75,000 as well as an equity bonus in the amount of $52,000, $50,000, and $45,019 for the years ended December 31, 2023, 2022, and 2021.
v3.24.0.1
Stockholders'/Shareholders' Equity
 12 Months Ended
Dec. 31, 2023
Federal Home Loan Banks [Abstract]  
Stockholders'/Shareholders' Equity

(12) STOCKHOLDERS’/SHAREHOLDERS’ EQUITY

On April 29, 2022, our board of directors authorized a new stock repurchase program with no expiration date, pursuant to which we were authorized to repurchase up to $35 million of our shares, which was increased to $40 million on August 10, 2022, also with no expiration date. Such new repurchase program replaced the previous one, which was terminated. 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 any shares during the year ended December 31, 2023.
v3.24.0.1
Employee Benefit Plans
 12 Months Ended
Dec. 31, 2023
Postemployment Benefits [Abstract]  
Employee Benefit Plans

(13) EMPLOYEE BENEFIT PLANS

The Company has a 401(k) Investment Plan, or the 401(k) Plan, which, effective June 1, 2022, covers all full-time and part-time employees of the Company who have attained the age of 18 and have a minimum of thirty (30) days of service. Under the 401(k) Plan, an employee may elect to defer not less than 1% of total annual compensation, up to the applicable limits set forth in the Internal Revenue Code. Employee contributions are invested in various mutual funds according to the directions of the employee. Once eligible full-time employees have completed a minimum of ninety (90) days of service, and part time employees have worked at least 1,000 hours, the Company matches employee contributions to the 401(k) Plan in an amount per employee equal to fifty percent of the first 8% of the employee’s annual contributions, subject to legal limits. Prior to June 1, 2022, the 401(k) Plan covered full- and part-time employees of the Company aged 21 and older that had completed a minimum of thirty (30) days of service, with the Company matching one-third of the first 6% of the contributions of eligible employees that had completed at least one (1) year of service (in the case of full-time employees) or 1,000 hours (in the case of part-time employees). The Company’s 401(k) plan expense was approximately $0.5 million, $0.3 million, and $0.3 million for the years ended December 31, 2023, 2022, and 2021.

v3.24.0.1
Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2023
Investments, All Other Investments [Abstract]  
Fair Value of Financial Instruments

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB ASC Topic 825, “Financial Instruments,” requires disclosure of fair value information about certain financial instruments, whether assets, liabilities, or off-balance-sheet commitments, if practicable. The following methods and assumptions were used to estimate the fair value of each class of financial instrument. Fair value estimates that were derived from broker quotes cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

(a)
Cash and cash equivalents – Book value equals fair value.
(b)
Equity securities – The Company’s equity securities are recorded at cost less impairment plus or minus observable price changes.
(c)
Investment securities – The Company’s investments are recorded at the estimated fair value of such investments.
(d)
Loans receivable – The Company’s loans are recorded at book value which approximated fair value.
(e)
Floating rate borrowings – Due to the short-term nature of these instruments, the carrying amount approximates fair value.
(f)
Commitments to extend credit – The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and present creditworthiness of the counter parties. For fixed rate loan commitments, fair value also includes a consideration of the difference between the current levels of interest rates and the committed rates. At December 31, 2023 and 2022, the estimated fair value of these off-balance-sheet instruments was not material.
(g)
Fixed rate borrowings – The fair value of the debentures payable to the SBA is estimated based on current market interest rates for similar debt.

 

The following table presents the carrying amounts and fair values of the Company’s financial instruments as of December 31, 2023 and 2022.

 

 

December 31,

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Carrying
Amount

 

 

Fair
Value

 

 

Carrying
Amount

 

 

Fair
Value

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents, and federal funds sold (1)

 

$

149,845

 

 

$

149,845

 

 

$

105,598

 

 

$

105,598

 

Equity investments

 

 

11,430

 

 

 

11,430

 

 

 

10,293

 

 

 

10,293

 

Investment securities

 

 

54,282

 

 

 

54,282

 

 

 

48,492

 

 

 

48,492

 

Loans receivable

 

 

2,131,651

 

 

 

2,131,651

 

 

 

1,853,108

 

 

 

1,853,108

 

Accrued interest receivable (2)

 

 

13,538

 

 

 

13,538

 

 

 

12,613

 

 

 

12,613

 

Equity securities(3)

 

 

1,748

 

 

 

1,748

 

 

 

1,724

 

 

 

1,724

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Funds borrowed

 

 

2,118,689

 

 

 

2,118,689

 

 

 

1,833,434

 

 

 

1,833,434

 

Accrued interest payable (2)

 

 

6,822

 

 

 

6,822

 

 

 

4,790

 

 

 

4,790

 
(1)
Categorized as level 1 within the fair value hierarchy, excluding $1.3 million as of December 31, 2023 and $1.3 million as of December 31, 2022 of interest-bearing deposits categorized as level 2. See Note 15.
(2)
Categorized as level 3 within the fair value hierarchy. See Note 15.
(3)
Included within other assets on the balance sheet.
v3.24.0.1
Fair Value of Assets and Liabilities
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value of Assets and Liabilities

(15) FAIR VALUE OF ASSETS AND LIABILITIES

The Company follows the provisions of FASB ASC 820, which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.

In accordance with FASB ASC 820, the Company has categorized its assets and liabilities measured at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The Company's assessment and classification of an investment within a level can change over time based upon maturity or liquidity of the investment and would be reflected at the beginning of the quarter in which the change occurred.

As required by FASB ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a level 3 fair value measurement may include inputs that are observable (levels 1 and 2) and unobservable (level 3). Therefore, gains and losses for such assets and liabilities categorized within the level 3 table below may include changes in fair value that are attributable to both observable inputs (levels 1 and 2) and unobservable inputs (level 3).

Assets and liabilities measured at fair value, recorded on the consolidated balance sheets, are categorized based on the inputs to the valuation techniques as follows:

Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations).

Level 2. Assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

a)
Quoted prices for similar assets or liabilities in active markets (for example, restricted stock);
b)
Quoted price for identical or similar assets or liabilities in non-active markets (for example, corporate and municipal bonds, which trade infrequently);
c)
Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and
d)
Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (examples include certain residential and commercial mortgage-related assets, including loans, securities, and derivatives).

Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the assets or liability (examples include certain private equity investments, and certain residential and commercial mortgage-related assets, including loans, securities, and derivatives).

 

A review of fair value hierarchy classification is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain assets or liabilities. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in/out of the level 3 category as of the beginning of the quarter in which the reclassifications occur.

Equity investments were recorded at cost less impairment plus or minus observable price changes. Commencing in 2020, the Company elected to measure equity investments at fair value on a non-recurring basis, which have been adjusted for all periods presented.

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022.

December 31, 2023
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

—

 

 

$

1,250

 

 

$

—

 

 

$

1,250

 

Available for sale investment securities

 

 

—

 

 

 

54,282

 

 

 

—

 

 

 

54,282

 

Equity securities

 

 

1,748

 

 

 

—

 

 

 

—

 

 

 

1,748

 

Total(1)

 

$

1,748

 

 

$

55,532

 

 

$

—

 

 

$

57,280

 
(1)
Total unrealized losses of $0.3 million, net of tax, was included in comprehensive loss for the year ended December 31, 2023 related to these assets.

December 31, 2022
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

—

 

 

$

1,250

 

 

$

—

 

 

$

1,250

 

Available for sale investment securities

 

 

—

 

 

 

48,492

 

 

 

—

 

 

 

48,492

 

Equity securities

 

 

1,724

 

 

 

—

 

 

 

—

 

 

 

1,724

 

Total(1)

 

$

1,724

 

 

$

49,742

 

 

$

—

 

 

$

51,466

 
(1)
Total unrealized losses of $4.4 million, net of tax, was included in other comprehensive loss for the year ended December 31, 2022 related to these assets.

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and 2022.

December 31, 2023
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

—

 

 

$

—

 

 

$

11,430

 

 

$

11,430

 

Impaired loans

 

 

—

 

 

 

—

 

 

 

25,974

 

 

 

25,974

 

Loan collateral in process of foreclosure

 

 

—

 

 

 

—

 

 

 

11,772

 

 

 

11,772

 

Total

 

$

—

 

 

$

—

 

 

$

49,176

 

 

$

49,176

 

 

December 31, 2022
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

—

 

 

$

—

 

 

$

10,293

 

 

$

10,293

 

Impaired loans

 

 

—

 

 

 

—

 

 

 

32,133

 

 

 

32,133

 

Loan collateral in process of foreclosure

 

 

—

 

 

 

—

 

 

 

21,819

 

 

 

21,819

 

Total

 

$

—

 

 

$

—

 

 

$

64,245

 

 

$

64,245

 

 

Significant Unobservable Inputs

ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as level 3 within the fair value hierarchy. The tables below are not intended to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.

The valuation techniques and significant unobservable inputs used in non-recurring level 3 fair value measurements of assets and liabilities as of December 31, 2023 and 2022.

(Dollars in thousands)

 

Fair Value
at December 31, 2023

 

 

Valuation Techniques

 

Unobservable Inputs

 

Range
(Weighted Average)

Equity investments

 

$

11,157

 

 

Investee financial analysis

 

Financial condition and operating performance of the borrower (1)

 

N/A

 

 

 

 

 

 

 

Collateral support

 

N/A

 

 

 

273

 

 

Precedent market transaction

 

Offering price

 

$8.73 / share

Impaired loans

 

 

25,974

 

 

Market approach

 

Historical and actual loss experience

 

0.00% - 28.48%

 

 

 

 

 

 

 

 

 

60% of balance

 

 

 

 

 

 

 

Transfer prices (2)

 

$0.0 - $79.5

 

 

 

 

 

 

 

Collateral value

 

N/A

Loan collateral in process of foreclosure

 

 

11,772

 

 

Market approach

 

Transfer prices (2)

 

$0.0 - $79.5

 

 

 

 

 

 

 

Collateral value (3)

 

$2.3 - $45.0

 

(Dollars in thousands)

 

Fair Value
at December 31, 2022

 

 

Valuation Techniques

 

Unobservable Inputs

 

Range
(Weighted Average)

Equity investments

 

$

10,020

 

 

Investee financial analysis

 

Financial condition and operating performance of the borrower (1)

 

N/A

 

 

 

 

 

 

 

Collateral support

 

N/A

 

 

 

273

 

 

Precedent market transaction

 

Offering price

 

$8.73 / share

Impaired loans

 

 

32,133

 

 

Market approach

 

Historical and actual loss experience

 

0.00% - 6.55%

 

 

 

 

 

 

 

 

 

60% of balance

 

 

 

 

 

 

 

Transfer prices (2)

 

$0.0 - 79.5

 

 

 

 

 

 

 

Collateral value

 

N/A

Loan collateral in process of foreclosure

 

 

21,819

 

 

Market approach

 

Transfer prices (2)

 

$0.0 - 79.5

 

 

 

 

 

 

 

Collateral value (3)

 

$2.5 - $54.1
(1)
Includes projections based on revenue, EBITDA, leverage and liquidation amounts. These assumptions are based on a variety of factors, including economic conditions, industry and market developments, market valuations of comparable companies, and company-specific developments, including exit strategies and realization opportunities.
(2)
Represents amount net of liquidation costs.
(3)
Relates to the recreation portfolio.
v3.24.0.1
Medallion Bank Preferred Stock (Non-controlling Interest)
 12 Months Ended
Dec. 31, 2023
Medallion Bank Preferred Stock (Non-controlling Interest)

(16) MEDALLION BANK PREFERRED STOCK (Non-controlling interest)

On December 17, 2019, the Bank closed an initial public offering of 1,840,000 shares of its Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, with a $46.0 million aggregate liquidation amount, yielding net proceeds of $42.5 million, which were recorded in the Bank’s shareholders’ equity. Dividends are payable quarterly from the date of issuance to, but excluding April 1, 2025, at a rate of 8% per annum, and from and including April 1, 2025, at a floating rate equal to a benchmark rate (which is expected to be three-month Secured Overnight Financing Rate, or SOFR) plus a spread of 6.46% per annum.

On July 21, 2011, the Bank issued, and the U.S. Treasury purchased, 26,303 shares of Senior Non-Cumulative Perpetual Preferred Stock, Series E for an aggregate purchase price of $26.3 million under the Small Business Lending Fund Program, or SBLF, with a liquidation amount of $1,000 per share. The SBLF is a voluntary program intended to encourage small business lending by providing capital to qualified smaller banks at favorable rates. The Bank pays a dividend rate of 9% on the Series E.
v3.24.0.1
Parent Company Only Condensed Financial Statements
 12 Months Ended
Dec. 31, 2023
Condensed Financial Information Disclosure [Abstract]  
Parent Company Only Condensed Financial Statements

(17) PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

The following shows the condensed financial information of Medallion Financial Corp. (parent company only).

Condensed Balance Sheets

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Cash

 

$

31,001

 

 

$

20,669

 

Investment in bank subsidiary(1)

 

 

523,189

 

 

 

479,496

 

Investment in non-bank subsidiaries

 

 

88,931

 

 

 

83,727

 

Income tax receivable

 

 

21,951

 

 

 

22,835

 

Net loans receivable

 

 

2,403

 

 

 

2,538

 

Loan collateral in process of foreclosure

 

 

795

 

 

 

2,001

 

Other assets

 

 

6,613

 

 

 

7,603

 

Total assets

 

$

674,883

 

 

$

618,869

 

Liabilities

 

 

 

 

 

 

Long-term borrowings (2)

 

$

166,625

 

 

$

151,808

 

Short-term borrowings

 

 

3,000

 

 

 

—

 

Deferred tax liabilities

 

 

35,719

 

 

 

38,091

 

Intercompany payables

 

 

32,600

 

 

 

33,378

 

Other liabilities

 

 

25,165

 

 

 

25,068

 

Total liabilities

 

 

263,109

 

 

 

248,345

 

Parent company equity

 

 

342,986

 

 

 

301,736

 

Non-controlling interest

 

 

68,788

 

 

 

68,788

 

Total stockholders’ equity

 

 

411,774

 

 

 

370,524

 

Total liabilities and equity

 

$

674,883

 

 

$

618,869

 
(1)
Includes $171.4 million and $172.8 million of goodwill and intangible assets of the Company which relate specifically to the Bank and $68.8 million related to non-controlling interests in consolidated subsidiaries as of December 31, 2023 and 2022.
(2)
Includes $2.8 million and $2.1 million of deferred financing costs as of December 31, 2023 and 2022.

Condensed Statements of Operations

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Dividend income

 

$

25,125

 

 

$

24,750

 

 

$

19,000

 

Interest income (loss)

 

 

1,243

 

 

 

(119

)

 

 

(2,554

)

Total Dividend and interest income

 

 

26,368

 

 

 

24,631

 

 

 

16,446

 

Interest expense

 

 

12,771

 

 

 

11,289

 

 

 

11,209

 

Net interest income

 

 

13,597

 

 

 

13,342

 

 

 

5,237

 

Provision for credit losses

 

 

(310

)

 

 

(353

)

 

 

(4,718

)

Net interest income after provision for credit losses

 

 

13,907

 

 

 

13,695

 

 

 

9,955

 

Other expense, net (1)

 

 

(20,156

)

 

 

(18,423

)

 

 

(6,224

)

Income (loss) before income taxes and undistributed earnings of subsidiaries

 

 

(6,249

)

 

 

(4,728

)

 

 

3,731

 

Income tax benefit

 

 

5,291

 

 

 

7,940

 

 

 

4,452

 

Income (loss) before undistributed earnings of subsidiaries

 

 

(958

)

 

 

3,212

 

 

 

8,183

 

Undistributed earnings of subsidiaries

 

 

56,037

 

 

 

40,628

 

 

 

45,925

 

Net income attributable to parent company

 

$

55,079

 

 

$

43,840

 

 

$

54,108

 
(1)
Includes $3.1 million, $4.9 million, and $7.8 million of net gains on the disposition of taxi medallion assets for the years ended December 31, 2023, 2022, and 2021.

Condensed Statements of Other Comprehensive Income

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Net income

 

$

55,079

 

 

$

43,840

 

 

$

54,108

 

Other comprehensive loss, net of tax

 

 

(347

)

 

 

(4,383

)

 

 

(978

)

Total comprehensive income attributable to Medallion
   Financial Corp.

 

$

54,732

 

 

$

39,457

 

 

$

53,130

 

 

Condensed Statements of Cash Flow

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income/net decrease in net assets resulting from operations

 

$

55,079

 

 

$

43,840

 

 

$

54,108

 

Adjustments to reconcile net income/net decrease in net assets resulting from
operations to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Equity in undistributed (earnings) losses of subsidiaries

 

 

(81,164

)

 

 

(64,300

)

 

 

(60,304

)

(Benefit) provision for credit losses

 

 

(310

)

 

 

(353

)

 

 

(4,718

)

Depreciation and amortization

 

 

2,198

 

 

 

2,740

 

 

 

4,485

 

Change in deferred and other tax assets/liabilities, net

 

 

(947

)

 

 

(1,780

)

 

 

(5,666

)

Net change in loan collateral in process of foreclosure

 

 

252

 

 

 

64

 

 

 

1,619

 

Gain on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

(2,204

)

Net realized gains on sale of investments

 

 

—

 

 

 

—

 

 

 

(11,701

)

Stock-based compensation expense

 

 

4,713

 

 

 

3,476

 

 

 

2,261

 

Decrease (increase) in other assets

 

 

990

 

 

 

1,055

 

 

 

(1,150

)

Increase in deferred financing costs

 

 

(1,437

)

 

 

(39

)

 

 

(1,504

)

Decrease in intercompany payables

 

 

(778

)

 

 

(6,325

)

 

 

(11,649

)

(Decrease) increase in other liabilities

 

 

(134

)

 

 

5,430

 

 

 

(1,894

)

Net cash used for operating activities

 

 

(21,538

)

 

 

(16,192

)

 

 

(38,317

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Loans originated

 

 

(1,612

)

 

 

(92

)

 

 

—

 

Proceeds from principal receipts, sales, and maturities of loans and investments

 

 

2,057

 

 

 

723

 

 

 

28,552

 

Purchases of investments

 

 

—

 

 

 

—

 

 

 

(90

)

Proceeds from sale and principal payments of loan collateral in process of foreclosure

 

 

954

 

 

 

3,697

 

 

 

666

 

Investment in subsidiaries

 

 

(5,125

)

 

 

(4,750

)

 

 

(3,500

)

Dividends from subsidiaries

 

 

25,125

 

 

 

24,750

 

 

 

19,000

 

Net cash provided by investing activities

 

 

21,399

 

 

 

24,328

 

 

 

44,628

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Proceeds from funds borrowed

 

 

51,500

 

 

 

—

 

 

 

51,400

 

Repayments of funds borrowed

 

 

(33,000

)

 

 

—

 

 

 

(51,155

)

Treasury stock repurchased

 

 

—

 

 

 

(20,619

)

 

 

—

 

Dividends paid to shareholders

 

 

(7,703

)

 

 

(7,543

)

 

 

—

 

Payment of withholding taxes on net settlement of vested stock

 

 

(768

)

 

 

—

 

 

 

—

 

Proceeds from the exercise of stock options

 

 

442

 

 

 

155

 

 

 

241

 

Net cash (used for) provided by financing activities

 

 

10,471

 

 

 

(28,007

)

 

 

486

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

10,332

 

 

 

(19,871

)

 

 

6,797

 

Cash and cash equivalents, beginning of period

 

 

20,669

 

 

 

40,540

 

 

 

33,743

 

Cash and cash equivalents, end of period

 

$

31,001

 

 

$

20,669

 

 

$

40,540

 
v3.24.0.1
Variable Interest Entities
 12 Months Ended
Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable Interest Entities

(18) VARIABLE INTEREST ENTITIES

During the 2018 third quarter, the Company determined that Taxi Medallion Trust III, or Trust III, was a VIE. Trust III had historically been consolidated as a subsidiary of MFC, although it should have been consolidated under the variable interest model, since MFC was its primary beneficiary until October 31, 2018. Trust III was a VIE since the key decision-making authority rested in the servicing agreement (where MFC was the servicer for Trust III) rather than in the voting rights of the equity interests and as a result the decision-making rights were considered a variable interest. This conclusion was supported by a qualitative assessment that Trust III did not have sufficient equity at risk. Since the inception of Trust III, MFC had also been party to a limited guaranty which was considered a variable interest because, pursuant to the guaranty, MFC absorbed variability as a result of the on-going performance of the loans in Trust III. As of October 31, 2018, the Company determined that MFC was no longer the primary beneficiary of Trust III and accordingly deconsolidated the VIE, leading to a net gain of $25.3 million recorded as well as a new promissory note payable by MFC of $1.4 million issued in settlement of the limited guaranty. Subsequent to deconsolidation, the Company’s interest in Trust III was accounted for as an equity investment and had a value of $0 through its transfer to a third party in 2021. In addition, the Company remained the servicer of the assets of Trust III for a fee, until its disposition.
v3.24.0.1
Subsequent Events
 12 Months Ended
Dec. 31, 2023
Subsequent Events [Abstract]  
Subsequent Events

(19) SUBSEQUENT EVENTS

The Company has evaluated the effects of events that have occurred subsequent to December 31, 2023, through the date of financial statement issuance for potential recognition or disclosure. As of such date, there was one subsequent event that required disclosure.

On February 28, 2024, MCI accepted a commitment from the SBA for $18.5 million in debenture financing with a ten-year term. MCI can draw funds under the commitment, in whole or in part, until September 30, 2028. In connection with the commitment, MCI 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 MCI draws under the commitment.
v3.24.0.1
Summary of Significant Accounting Policies (Policies)
 12 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Use of Estimates

Use of Estimates

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

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly-owned and controlled subsidiaries. All significant intercompany transactions, balances, and profits (losses) have been eliminated in consolidation.

The consolidated financial statements have been prepared in accordance with GAAP. The Company consolidates all entities it controls through a majority voting interest, a controlling interest through other contractual rights, or as being identified as the primary beneficiary of 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

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. As of December 31, 2023, cash also included $1.3 million of interest-bearing funds deposited in other banks with original terms of 5 to 6 years.
Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

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

Equity Investments

Equity Investments

The Company follows FASB ASC Topic 321, Investments – Equity Securities, or ASC 321, which requires all applicable investments in equity securities with a readily determinable fair value to be valued as such, and those without a readily determinable fair value, are measured at cost, less any impairment plus or minus any observable price changes. Equity investments of $11.4 million and $10.3 million as of December 31, 2023 and 2022, were comprised mainly of nonmarketable stock and stock warrants, are recorded at cost less any impairment plus or minus observable price changes, and a vast majority are held by our SBIC subsidiary in connection with its mezzanine lending business. As of December 31, 2023, cumulative impairment of $3.5 million had been recorded with respect to these investments.

During 2021, the Company purchased $2.0 million of equity securities with a readily determinable fair value. As a result, all unrealized gains and losses are included in gain (loss) on equity investments. As of December 31, 2023 and 2022, the fair value of these securities were $1.7 million and $1.7 million and are included in other assets on the consolidated balance sheet.

The following table presents the unrealized portion related to the equity securities held as of December 31, 2023.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Net gains (losses) recognized during the period on equity securities

 

$

24

 

 

$

(226

)

 

$

(50

)

Less: Net gains (losses) recognized during the period on equity
   securities sold during the period

 

 

—

 

 

 

—

 

 

 

—

 

Unrealized gains (losses) recognized during the reporting period on
   equity securities still held at the reporting date

 

$

24

 

 

$

(226

)

 

$

(50

)
Investment Securities

Investment Securities

The Company follows FASB ASC Topic 320, Investments – Debt Securities, or ASC 320, which requires that all applicable investments in debt securities be classified as trading securities, available-for-sale securities, or held-to-maturity securities. Investment securities are purchased from time-to-time in the open market at prices that are greater or lesser than the par value of the investment. The resulting premium or discount is deferred and recognized on a level yield basis as an adjustment to the yield of the related investment. The net premium on investment securities totaled $0.1 million as of both December 31, 2023 and 2022, and less than $0.1 million, $0.1 million, and $0.1 million was amortized to interest income for the years ended December 31, 2023, 2022, and 2021. ASC 320 further requires that held-to-maturity securities be reported at amortized cost and available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings at the date of the consolidated financial statements, and reported in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity, net of the effect of income taxes, until they are sold. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results and any amounts previously included in stockholders’ equity, which were recorded net of the income tax effect, will be reversed. In accordance with ASC 326, we do not maintain an allowance for credit losses for accrued interest receivable.
Loans

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.

Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. As of December 31, 2023 and 2022, net loan origination costs were $40.0 million and $34.9 million. Net amortization to income for the years ended December 31, 2023, 2022, and 2021 were $8.3 million, $8.7 million, and $8.0 million.

 

Interest income is recorded on the accrual basis. Taxi 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 loan portfolio has different characteristics, typified by a larger number of smaller dollar loans that have similar characteristics. A loan is considered to be impaired, or nonperforming, when based on current information and events, it is unlikely the Company will be able to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be impaired. Consumer 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 recovery efforts against both the borrower and the underlying collateral are initiated. For the recreation 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 by writing the collateral down to its fair value less selling costs, and the collateral is sent to auction. When the collateral is sold, the net auction proceeds are applied to the account, and any remaining balance is written off. Proceeds collected on charged-off accounts are recorded as recoveries. Total loans 90 days or more past due were $16.8 million or 0.77% of the total loan portfolio as of December 31, 2023, as compared to $8.9 million, or 0.47% as of December 31, 2022. Beginning in the first quarter of 2023, the Company began charging off recreation loans at the point when borrowers filed for bankruptcy. This change resulted in approximately $2.5 million of loans being charged off in the first quarter of 2023.

The Company may modify the contractual cash flow of loans in situations where borrowers are experiencing financial difficulties. The Company strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before they reach nonaccrual status. These modified terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance and other actions intended to minimize the economic loss to the Company and to avoid foreclosure or repossession of the collateral. For modifications where the Company forgives principal, the entire amount of such principal forgiveness is immediately charged off. Modified loans are considered impaired loans.

Loan collateral in process of foreclosure primarily includes taxi 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. For New York City taxi medallion loans in the process of foreclosure, the Company continued to utilize a net value of $79,500 when assessing net realizable value for these taxi medallion loans, despite fluctuating current transfer prices which may exceed that level from time to time. The "loan collateral in the process of foreclosure" designation reflects that the collection activities on these loans have transitioned from working with the borrower, to the liquidation of the collateral securing the loans.

The Company accounts for its sales of loans in accordance with FASB Accounting Standards Codification Topic 860, Transfers and Servicing, or 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 $14.0 million at December 31, 2023 and $19.5 million December 31, 2022. The Company has evaluated the servicing aspect of its business in accordance with FASB ASC 860 and determined that no material servicing asset or liability existed as of December 31, 2023 and 2022.
Allowance for Credit Losses

Allowance for Credit Losses

On January 1, 2023, the Company 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. For consumer loans, the Company uses historical delinquency and actual loss rates modified by quantitative adjustments based on macroeconomic factors over a twelve-month reasonable and supportable forecast period. For commercial loans, the Company assesses the historical impact that macroeconomic indicators have had on the loan portfolio, to determine an approximate allowance for credit loss. Unlike consumer loans, where loans may have similar performing characteristics, each commercial loan is unique. The Company evaluates each commercial loan for specific impairment with additional allowance for credit losses recognized as necessary. For taxi medallion loans, the Company maintains specific reserves adjusting the carrying amount of loans down to net collateral value. The allowance is evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation is inherently subjective, as it requires estimates, including those based on changes in economic conditions, that are susceptible to significant revision as more information becomes available. Credit losses are deducted from the allowance, and subsequent recoveries are added back to the allowance.

 

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after December 15, 2022 are presented under ASC 326. The transition to the CECL methodology on January 1, 2023 resulted in an increase of $13.7 million to the Company's 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. The CECL methodology transition effects on the allowance for credit losses are shown in the following table:

(Dollars in thousands)

 

December 31, 2022
Pre-Topic 326
Adoption

 

 

Effect of ASC 326
Adoption
(Transition Amounts)

 

 

January 1, 2023
Post-ASC 326
Adoption

 

Assets:

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

Recreation

 

$

41,966

 

 

$

10,037

 

 

$

52,003

 

Home improvement

 

 

11,340

 

 

 

1,518

 

 

 

12,858

 

Commercial

 

 

1,049

 

 

 

2,157

 

 

 

3,206

 

Taxi medallion

 

 

9,490

 

 

 

—

 

 

 

9,490

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

Allowance for credit losses on loans

 

$

63,845

 

 

$

13,712

 

 

$

77,557

 

Prior to January 1, 2023, the Company used historical delinquency and actual loss rates with a three-year look-back period for taxi medallion loans and a one-year look-back period for recreation and home improvement loans and used historical loss experience and other projections for commercial loans. The allowance was evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation was inherently subjective, as it required estimates that were susceptible to significant revision as more information became available.

Goodwill and Intangible Assets

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 reporting, and was subject to a purchase price accounting allocation process conducted by an independent third-party expert to arrive at the current categories and amounts. Goodwill is not amortized, but is subject to quarterly review by management to determine whether additional impairment testing is needed, and such testing is performed at least on an annual basis. Intangible assets are amortized over their useful life of approximately 20 years. As of December 31, 2023 and 2022, the Company had intangible assets of $20.6 million and $22.0 million. The Company recognized $1.4 million of amortization expense on the intangible assets for each of the years ended December 31, 2023 and 2022. Additionally, loan portfolio premiums of $12.4 million were determined as of April 2, 2018, of which none were outstanding as of December 31, 2023 and 2022, and of which $0.0 million, $0.5 million, and $2.2 million was amortized to interest income for the years ended December 31, 2023, 2022, and 2021. Management performed a step 0 analysis in assessing the goodwill and intangibles for impairment at December 31, 2023 and 2022, concluding that there was no impairment of these assets.

The following table details of the intangible assets as of December 31, 2023 and 2022:

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Brand-related intellectual property

 

$

4,916

 

 

$

16,775

 

Home improvement contractor relationships

 

 

15,675

 

 

 

5,260

 

Total intangible assets

 

$

20,591

 

 

$

22,035

 
Fixed Assets

Fixed Assets

Fixed assets are carried at cost less accumulated depreciation and amortization, and are depreciated on a straight-line basis over their estimated useful lives of 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 $0.4 million, $0.4 million, and $0.3 million for the years ended December 31, 2023, 2022, and 2021.
Deferred Costs

Deferred Costs

Deferred financing costs represent costs associated with obtaining the Company’s borrowing facilities, and are amortized on a straight line basis over the lives of the related financing agreements and life of the respective pool. Amortization expense was $3.1 million, $2.6 million, and $2.4 million for the years ended December 31, 2023, 2022, and 2021. 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 will be amortized against income over an appropriate period, or written off. The amount on the Company’s balance sheet for all of these purposes were $8.5 million and $7.0 million as of December 31, 2023 and 2022.

Income Taxes

Income Taxes

Income taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes, or ASC 740. Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at 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 the Company’s valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods and the expected timing of the reversal of temporary differences. The Company recognizes tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. The Company records income tax related interest and penalties, if applicable, within current income tax expense.
Earnings Per Share (EPS)

Earnings Per Share (EPS)

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

 

Year Ended December 31,

 

(Dollars in thousands, except share and per share data)

 

2023

 

 

2022

 

 

2021

 

Net income attributable to common stockholders

 

$

55,079

 

 

$

43,840

 

 

$

54,108

 

Weighted average common shares outstanding applicable to basic EPS

 

 

22,510,435

 

 

 

23,583,049

 

 

 

24,599,804

 

Effect of restricted stock grants

 

 

461,098

 

 

 

276,469

 

 

 

250,763

 

Effect of dilutive stock options

 

 

142,216

 

 

 

67,825

 

 

 

92,602

 

Effect of performance stock unit grants

 

 

134,574

 

 

 

—

 

 

 

—

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

 

 

23,248,323

 

 

 

23,927,342

 

 

 

24,943,169

 

Basic income per share

 

$

2.45

 

 

$

1.86

 

 

$

2.20

 

Diluted income per share

 

 

2.37

 

 

 

1.83

 

 

 

2.17

 

Potentially dilutive common shares excluded from the above calculations aggregated 92,310 shares, 347,963 shares, and 421,190 shares as of December 31, 2023, 2022, and 2021.
Stock Compensation

Stock Compensation

The Company follows FASB ASC Topic 718, or ASC 718, Compensation – Stock Compensation, for its equity incentive, stock option, and restricted stock plans, and accordingly, the Company recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options are reflected in net income resulting from operations for any new grants using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option. Stock-based employee compensation costs pertaining to restricted stock are reflected in net income 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 years ended December 31, 2023, 2022, and 2021, the Company issued 399,793, 522,475, and 258,120 restricted shares of stock-based compensation awards, 296,444, 0, and 0 performance stock units, 83,158, 129,638, and 16,803 restricted stock units, and 0, 0, and 317,398 shares of other stock-based compensation awards; and recognized $4.7 million, $3.5 million, and $2.3 million, or $0.20, $0.15, and $0.09 per diluted common share for each respective year, of non-cash stock-based compensation expense related to the grants. As of December 31, 2023, the total remaining unrecognized compensation cost related to unvested stock options and restricted stock was $5.0 million, which is expected to be recognized over the next 9 quarters.
Regulatory Capital

Regulatory Capital

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

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

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%, a level which could preclude its ability to pay dividends to the Company, and that an adequate allowance for credit losses be maintained. As of December 31, 2023, the Bank’s Tier 1 leverage ratio was 16.2%. The Bank’s actual capital amounts and ratios, and the regulatory minimum ratios are presented in the following table.

 

Regulatory

 

 

December 31,

 

(Dollars in thousands)

 

Minimum

 

 

Well-Capitalized

 

 

2023

 

 

2022

 

Common equity tier 1 capital

 

 

 

 

 

 

 

$

293,774

 

 

$

242,049

 

Tier 1 capital

 

 

 

 

 

 

 

 

362,561

 

 

 

310,837

 

Total capital

 

 

 

 

 

 

 

 

390,153

 

 

 

334,913

 

Average assets

 

 

 

 

 

 

 

 

2,232,816

 

 

 

1,917,904

 

Risk-weighted assets

 

 

 

 

 

 

 

 

2,155,641

 

 

 

1,888,530

 

Leverage ratio (1)

 

 

4.0

%

 

 

5.0

%

 

 

16.2

%

 

 

16.2

%

Common equity tier 1 capital ratio (2)

 

 

7.0

 

 

 

6.5

 

 

 

13.6

 

 

 

12.8

 

Tier 1 capital ratio (3)

 

 

8.5

 

 

 

8.0

 

 

 

16.8

 

 

 

16.5

 

Total capital ratio (3)

 

 

10.5

 

 

 

10.0

 

 

 

18.1

 

 

 

17.7

 
(1)
Calculated by dividing Tier 1 capital by average assets.
(2)
Calculated by subtracting preferred stock or non-controlling interest from Tier 1 capital and dividing by risk-weighted assets.
(3)
Calculated by dividing Tier 1 or total capital by risk-weighted assets.

In the table above, the minimum risk-based ratios as of December 31, 2023 and 2022 reflect the capital conservation buffer of 2.5%. The minimum regulatory requirements, inclusive of the capital conservation buffer, were the binding requirements for the risk-based requirements, and the “well-capitalized” requirements were the binding requirements for Tier 1 leverage capital as of both December 31, 2023 and 2022.
Recently Issued Accounting Standards

Recently Issued Accounting Standards

On January 1, 2023, the Company adopted ASC 326. Please refer to Allowance for Credit Losses, within this footnote, for the impact of adopting this standard.

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures, or Topic 323: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The main objective of this new standard is to allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company is assessing the impact of the update on the accompanying financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The amendments in this update seek to clarify or improve disclosure and presentation requirements. The Company is assessing the impact of the update on the accompanying financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting, or Topic 280: Improvements to Reportable Segment Disclosures. The main objective of this update is to provide transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company is assessing the impact of the update on the accompanying financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes, or Topic 740: Improvements to Income Tax Disclosures. The main objective of this update is to improve financial reporting disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for the annual periods beginning after December 15, 2024. The Company is assessing the impact of the update on the accompanying financial statements.
Reclassifications

Reclassifications

Certain reclassifications have been made to prior year balances to conform with the current year presentation. These reclassifications have no effect on the previously reported results of operations.
v3.24.0.1
Summary of Significant Accounting Policies (Tables)
 12 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Summary of Unrealized Portion Related to Equity Securities

The following table presents the unrealized portion related to the equity securities held as of December 31, 2023.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Net gains (losses) recognized during the period on equity securities

 

$

24

 

 

$

(226

)

 

$

(50

)

Less: Net gains (losses) recognized during the period on equity
   securities sold during the period

 

 

—

 

 

 

—

 

 

 

—

 

Unrealized gains (losses) recognized during the reporting period on
   equity securities still held at the reporting date

 

$

24

 

 

$

(226

)

 

$

(50

)
Summary of Finalized Adoption Related to Allowance for Credit Losses on Loans The CECL methodology transition effects on the allowance for credit losses are shown in the following table:

(Dollars in thousands)

 

December 31, 2022
Pre-Topic 326
Adoption

 

 

Effect of ASC 326
Adoption
(Transition Amounts)

 

 

January 1, 2023
Post-ASC 326
Adoption

 

Assets:

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

Recreation

 

$

41,966

 

 

$

10,037

 

 

$

52,003

 

Home improvement

 

 

11,340

 

 

 

1,518

 

 

 

12,858

 

Commercial

 

 

1,049

 

 

 

2,157

 

 

 

3,206

 

Taxi medallion

 

 

9,490

 

 

 

—

 

 

 

9,490

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

Allowance for credit losses on loans

 

$

63,845

 

 

$

13,712

 

 

$

77,557

 
Schedule of Intangible Assets

The following table details of the intangible assets as of December 31, 2023 and 2022:

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Brand-related intellectual property

 

$

4,916

 

 

$

16,775

 

Home improvement contractor relationships

 

 

15,675

 

 

 

5,260

 

Total intangible assets

 

$

20,591

 

 

$

22,035

 
Summary of the Calculation of Basic and Diluted EPS

 

Year Ended December 31,

 

(Dollars in thousands, except share and per share data)

 

2023

 

 

2022

 

 

2021

 

Net income attributable to common stockholders

 

$

55,079

 

 

$

43,840

 

 

$

54,108

 

Weighted average common shares outstanding applicable to basic EPS

 

 

22,510,435

 

 

 

23,583,049

 

 

 

24,599,804

 

Effect of restricted stock grants

 

 

461,098

 

 

 

276,469

 

 

 

250,763

 

Effect of dilutive stock options

 

 

142,216

 

 

 

67,825

 

 

 

92,602

 

Effect of performance stock unit grants

 

 

134,574

 

 

 

—

 

 

 

—

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

 

 

23,248,323

 

 

 

23,927,342

 

 

 

24,943,169

 

Basic income per share

 

$

2.45

 

 

$

1.86

 

 

$

2.20

 

Diluted income per share

 

 

2.37

 

 

 

1.83

 

 

 

2.17

 
Summary of Bank's Actual Capital Amounts and Ratios, and the Regulatory Minimum Ratios The Bank’s actual capital amounts and ratios, and the regulatory minimum ratios are presented in the following table.

 

Regulatory

 

 

December 31,

 

(Dollars in thousands)

 

Minimum

 

 

Well-Capitalized

 

 

2023

 

 

2022

 

Common equity tier 1 capital

 

 

 

 

 

 

 

$

293,774

 

 

$

242,049

 

Tier 1 capital

 

 

 

 

 

 

 

 

362,561

 

 

 

310,837

 

Total capital

 

 

 

 

 

 

 

 

390,153

 

 

 

334,913

 

Average assets

 

 

 

 

 

 

 

 

2,232,816

 

 

 

1,917,904

 

Risk-weighted assets

 

 

 

 

 

 

 

 

2,155,641

 

 

 

1,888,530

 

Leverage ratio (1)

 

 

4.0

%

 

 

5.0

%

 

 

16.2

%

 

 

16.2

%

Common equity tier 1 capital ratio (2)

 

 

7.0

 

 

 

6.5

 

 

 

13.6

 

 

 

12.8

 

Tier 1 capital ratio (3)

 

 

8.5

 

 

 

8.0

 

 

 

16.8

 

 

 

16.5

 

Total capital ratio (3)

 

 

10.5

 

 

 

10.0

 

 

 

18.1

 

 

 

17.7

 
(1)
Calculated by dividing Tier 1 capital by average assets.
(2)
Calculated by subtracting preferred stock or non-controlling interest from Tier 1 capital and dividing by risk-weighted assets.
(3)
Calculated by dividing Tier 1 or total capital by risk-weighted assets.
v3.24.0.1
Investment Securities (Tables)
 12 Months Ended
Dec. 31, 2023
Schedule of Investments [Abstract]  
Summary of Fixed Maturity Securities Available for Sale

The following tables present details of fixed maturity securities available for sale as of December 31, 2023 and 2022.

December 31, 2023
(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

44,653

 

 

$

—

 

 

$

(4,791

)

 

$

39,862

 

State and municipalities

 

 

13,733

 

 

 

21

 

 

 

(1,501

)

 

 

12,253

 

Agency bonds

 

 

2,187

 

 

 

—

 

 

 

(20

)

 

 

2,167

 

Total

 

$

60,573

 

 

$

21

 

 

$

(6,312

)

 

$

54,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022
(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

43,286

 

 

$

—

 

 

$

(4,933

)

 

$

38,353

 

State and municipalities

 

 

11,015

 

 

 

13

 

 

 

(889

)

 

 

10,139

 

Total

 

$

54,301

 

 

$

13

 

 

$

(5,822

)

 

$

48,492

 
Summary of Amortized Cost and Estimated Market Value of Investment Securities by Contractual Maturity

The amortized cost and estimated market value of investment securities as of December 31, 2023 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.

December 31, 2023
(Dollars in thousands)

 

Amortized
Cost

 

 

Fair
Value

 

Due in one year or less

 

$

2,395

 

 

$

2,336

 

Due after one year through five years

 

 

7,313

 

 

 

7,049

 

Due after five years through ten years

 

 

8,833

 

 

 

7,808

 

Due after ten years

 

 

42,032

 

 

 

37,089

 

Total

 

$

60,573

 

 

$

54,282

 
Summary of Securities with Gross Unrealized Losses

The following tables show information pertaining to securities with gross unrealized losses as of December 31, 2023 and 2022, 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

 

December 31, 2023
(Dollars in thousands)

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

(78

)

 

$

5,797

 

 

$

(4,714

)

 

$

33,971

 

State and municipalities

 

$

(204

)

 

$

4,839

 

 

$

(1,296

)

 

$

7,371

 

Agency bonds

 

 

—

 

 

 

—

 

 

 

(20

)

 

 

2,167

 

Total

 

$

(282

)

 

$

10,636

 

 

$

(6,030

)

 

$

43,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than Twelve Months

 

 

Twelve Months and Over

 

December 31, 2022
(Dollars in thousands)

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Mortgage-backed securities, principally obligations of U.S. federal agencies

 

$

(731

)

 

$

12,321

 

 

$

(4,202

)

 

$

26,023

 

State and municipalities

 

 

(286

)

 

 

4,628

 

 

 

(603

)

 

 

3,502

 

Total

 

$

(1,017

)

 

$

16,949

 

 

$

(4,805

)

 

$

29,525

 
v3.24.0.1
Loans and Allowance for credit Losses (Tables)
 12 Months Ended
Dec. 31, 2023
Text Block [Abstract]  
Summary of Inclusive Capitalized Loans

The following table shows the major classification of loans, inclusive of capitalized loan origination costs, at December 31, 2023 and 2022.

 

As of December 31,

 

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Amount

 

 

As a
Percent of
Gross Loans

 

 

Amount

 

 

As a
Percent of
Gross Loans

 

Recreation

 

$

1,336,226

 

 

 

60

%

 

$

1,183,512

 

 

 

62

%

Home improvement

 

 

760,617

 

 

 

34

 

 

 

626,399

 

 

 

33

 

Commercial

 

 

114,827

 

 

 

5

 

 

 

92,899

 

 

 

5

 

Taxi medallion

 

 

3,663

 

 

*

 

 

 

13,571

 

 

 

1

 

Strategic partnership

 

 

553

 

 

*

 

 

 

572

 

 

*

 

Total gross loans

 

 

2,215,886

 

 

 

100

%

 

 

1,916,953

 

 

 

100

%

Allowance for credit losses

 

 

(84,235

)

 

 

 

 

 

(63,845

)

 

 

 

Total net loans

 

$

2,131,651

 

 

 

 

 

$

1,853,108

 

 

 

 

(*) Less than 1%.
Schedule of Activity of Gross Loans

The following tables show the activity of the gross loans for the years ended December 31, 2023 and 2022.


(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

 

 


(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

 

 
Summary of Activity in Allowance for Loan Losses

The following table sets forth the activity in the allowance for credit losses for the years ended December 31, 2023 and 2022.

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Allowance for credit losses – beginning balance (1)

 

$

63,845

 

 

$

50,166

 

CECL transition amount upon ASU 2016-13 adoption

 

 

13,712

 

 

 

—

 

Charge-offs

 

 

 

 

 

 

Recreation

 

 

(50,512

)

 

 

(27,055

)

Home improvement

 

 

(12,308

)

 

 

(6,393

)

Commercial

 

 

(1,019

)

 

 

(6,083

)

Taxi medallion

 

 

(3,829

)

 

 

(314

)

Total charge-offs

 

 

(67,668

)

 

 

(39,845

)

Recoveries

 

 

 

 

 

 

Recreation

 

 

11,449

 

 

 

13,785

 

Home improvement

 

 

2,886

 

 

 

2,761

 

Commercial

 

 

10

 

 

 

47

 

Taxi medallion

 

 

22,191

 

 

 

6,872

 

Total recoveries

 

 

36,536

 

 

 

23,465

 

Net charge-offs (2)

 

 

(31,132

)

 

 

(16,380

)

Provision for credit losses

 

 

37,810

 

 

 

30,059

 

Allowance for credit losses – ending balance (3)

 

$

84,235

 

 

$

63,845

 
(1)
Represents allowance prior to the adoption of ASU 2016-13.
(2)
As of December 31, 2023, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $176.8 million, including $107.9 million related to loans secured by New York taxi medallions, some of which may represent collection opportunities for the Company.
(3)
As of December 31, 2023 and 2022, there was no allowance for credit losses and net charge-offs related to the strategic partnership loans.
Summary of Gross Write-offs

(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

 
Summary of Allowance for Loan Losses by Type

The following tables set forth the allowance for credit losses by type as of December 31, 2023 and 2022.

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

%
Summary of Total Nonaccrual Loans and Foregone Interest

The following table presents total nonaccrual loans and foregone interest, substantially all of which is in the taxi medallion portfolio. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Total nonaccrual loans

 

$

25,974

 

 

$

32,133

 

 

$

35,571

 

Interest foregone for the year

 

 

928

 

 

 

1,267

 

 

 

1,620

 

Amount of foregone interest applied to principal for the year

 

 

238

 

 

 

375

 

 

 

432

 

Interest foregone life-to-date

 

 

2,119

 

 

 

2,419

 

 

 

3,623

 

Amount of foregone interest applied to principal life-to-date

 

 

822

 

 

 

1,204

 

 

 

942

 

Percentage of nonaccrual loans to gross loan portfolio

 

 

1.2

%

 

 

1.7

%

 

 

2.4

%

Percentage of allowance for credit losses to nonaccrual loans

 

 

324.3

%

 

 

198.7

%

 

 

141.0

%

 
Summary of Performance Status of Loan

The following tables present the performance status of loans as of December 31, 2023 and 2022.

December 31, 2023
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,326,567

 

 

$

9,655

 

 

$

1,336,222

 

 

 

0.72

%

Home improvement

 

 

759,128

 

 

 

1,493

 

 

 

760,621

 

 

 

0.20

 

Commercial

 

 

103,664

 

 

 

11,163

 

 

 

114,827

 

 

 

9.72

 

Taxi medallion

 

 

—

 

 

 

3,663

 

 

 

3,663

 

 

 

100.00

 

Strategic partnership

 

 

553

 

 

 

—

 

 

 

553

 

 

 

—

 

Total

 

$

2,189,912

 

 

$

25,974

 

 

$

2,215,886

 

 

 

1.17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,173,846

 

 

$

9,666

 

 

$

1,183,512

 

 

 

0.82

%

Home improvement

 

 

625,820

 

 

 

579

 

 

 

626,399

 

 

 

0.09

 

Commercial

 

 

84,165

 

 

 

8,734

 

 

 

92,899

 

 

 

9.40

 

Taxi medallion

 

 

—

 

 

 

13,571

 

 

 

13,571

 

 

 

100.00

 

Strategic partnership

 

 

572

 

 

 

—

 

 

 

572

 

 

 

—

 

Total

 

$

1,884,403

 

 

$

32,550

 

 

$

1,916,953

 

 

 

1.70

%
Summary of Attributes of Nonperforming Loan Portfolio

The following tables provide additional information on attributes of the nonperforming loan portfolio as of December 31, 2023 and 2022, all of which had an allowance recorded against the principal balance.

 

 

December 31,

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

$

9,655

 

 

$

9,655

 

 

$

416

 

 

$

9,666

 

 

$

9,666

 

 

$

343

 

Home improvement

 

 

1,493

 

 

 

1,493

 

 

 

41

 

 

 

579

 

 

 

579

 

 

 

10

 

Commercial

 

 

11,163

 

 

 

11,301

 

 

 

1,897

 

 

 

8,734

 

 

 

8,823

 

 

 

963

 

Taxi medallion

 

 

3,663

 

 

 

4,347

 

 

 

1,536

 

 

 

13,571

 

 

 

14,686

 

 

 

9,490

 

Total nonperforming loans with an allowance

 

$

25,974

 

 

$

26,796

 

 

$

3,890

 

 

$

32,550

 

 

$

33,754

 

 

$

10,806

 

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Average
Investment
Recorded

 

 

Interest Income
Recognized

 

 

Average
Investment
Recorded

 

 

Interest Income
Recognized

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

$

9,048

 

 

$

16

 

 

$

9,093

 

 

$

401

 

Home improvement

 

 

1,382

 

 

 

1

 

 

 

514

 

 

 

4

 

Commercial

 

 

7,368

 

 

 

—

 

 

 

13,381

 

 

 

—

 

Taxi medallion

 

 

4,607

 

 

 

—

 

 

 

16,019

 

 

 

—

 

Total nonperforming loans with an allowance

 

$

22,405

 

 

$

17

 

 

$

39,007

 

 

$

405

 

 
Summary of Aging of Loans

The following tables show the aging of all loans as of December 31, 2023 and 2022.

December 31, 2023

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total

 

 

Current

 

 

Total (1)

 

 

Accruing

 

Recreation

 

$

40,282

 

 

$

15,039

 

 

$

9,095

 

 

$

64,416

 

 

$

1,228,175

 

 

$

1,292,591

 

 

$

—

 

Home improvement

 

 

3,936

 

 

 

2,562

 

 

 

1,502

 

 

 

8,000

 

 

 

756,069

 

 

 

764,069

 

 

 

—

 

Commercial

 

 

—

 

 

 

2,156

 

 

 

6,240

 

 

 

8,396

 

 

 

107,140

 

 

 

115,536

 

 

 

—

 

Taxi medallion

 

 

201

 

 

 

—

 

 

 

—

 

 

 

201

 

 

 

3,462

 

 

 

3,663

 

 

 

—

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

553

 

 

 

553

 

 

 

—

 

Total

 

$

44,419

 

 

$

19,757

 

 

$

16,837

 

 

$

81,013

 

 

$

2,095,399

 

 

$

2,176,412

 

 

$

—

 
(1)
Excludes $40.0 million of capitalized loan origination costs.

December 31, 2022

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total

 

 

Current

 

 

Total (1)

 

 

Accruing

 

Recreation

 

$

31,781

 

 

$

11,877

 

 

$

7,365

 

 

$

51,023

 

 

$

1,095,072

 

 

$

1,146,095

 

 

$

—

 

Home improvement

 

 

3,266

 

 

 

1,256

 

 

 

579

 

 

 

5,101

 

 

 

623,776

 

 

 

628,877

 

 

 

—

 

Commercial

 

 

—

 

 

 

—

 

 

 

74

 

 

 

74

 

 

 

93,396

 

 

 

93,470

 

 

 

—

 

Taxi medallion

 

 

142

 

 

 

393

 

 

 

885

 

 

 

1,420

 

 

 

12,151

 

 

 

13,571

 

 

 

—

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

572

 

 

 

572

 

 

 

—

 

Total

 

$

35,189

 

 

$

13,526

 

 

$

8,903

 

 

$

57,618

 

 

$

1,824,967

 

 

$

1,882,585

 

 

$

—

 
(1)
Excludes $34.9 million of capitalized loan origination costs.
Summary of TDRs

The following table shows the TDRs, which the Company entered into during the year ended December 31, 2022.

(Dollars in thousands)

 

Number of Loans

 

 

Pre-
Modification
Investment

 

 

Post-
Modification
Investment

 

Recreation loans

 

 

80

 

 

 

1,203

 

 

 

1,203

 

Taxi medallion loans

 

 

2

 

 

 

252

 

 

 

252

 
Summary of Activities of the Loan Collateral Process of Foreclosure Related to Recreation and Medallion Loans

The following tables show the activity of the loan collateral in process of foreclosure, which relates only to the recreation and taxi medallion loans, for the years ended December 31, 2023 and 2022.

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, 2022
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion (1)

 

 

Total

 

Loan collateral in process of foreclosure – December 31, 2021

 

$

1,720

 

 

$

35,710

 

 

$

37,430

 

Transfer from loans, net

 

 

12,444

 

 

 

347

 

 

 

12,791

 

Sales

 

 

(7,707

)

 

 

(2,668

)

 

 

(10,375

)

Cash payments received

 

 

—

 

 

 

(12,289

)

 

 

(12,289

)

Collateral valuation adjustments

 

 

(5,081

)

 

 

(657

)

 

 

(5,738

)

Loan collateral in process of foreclosure – December 31, 2022

 

$

1,376

 

 

$

20,443

 

 

$

21,819

 
(1)
As of December 31, 2022, taxi medallion loans in the process of foreclosure included 452 taxi medallions in the New York market, 335 taxi medallions in the Chicago market, 54 taxi medallions in the Newark market, and 39 taxi medallions in various other markets.
v3.24.0.1
Funds Borrowed (Tables)
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Schedule of Outstanding Balances of Funds Borrowed

The following table presents outstanding balances of funds borrowed as of December 31, 2023.

 

Payments Due for the Year Ending December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

2028

 

 

Thereafter

 

 

December 31, 2023 (1)

 

 

December 31, 2022 (1)

 

 

Interest
Rate (2)

 

Deposits (3)

 

$

678,846

 

 

$

533,405

 

 

$

325,498

 

 

$

184,458

 

 

$

147,232

 

 

$

—

 

 

$

1,869,439

 

 

$

1,609,672

 

 

 

3.07

%

Privately placed notes

 

 

3,000

 

 

 

—

 

 

 

31,250

 

 

 

53,750

 

 

 

39,000

 

 

 

12,500

 

 

 

139,500

 

 

 

121,000

 

 

 

8.08

 

SBA debentures and borrowings

 

 

5,000

 

 

 

14,000

 

 

 

14,000

 

 

 

2,000

 

 

 

1,250

 

 

 

39,000

 

 

 

75,250

 

 

 

68,512

 

 

 

3.69

 

Trust preferred securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33,000

 

 

 

33,000

 

 

 

33,000

 

 

 

7.75

 

Total

 

$

686,846

 

 

$

547,405

 

 

$

370,748

 

 

$

240,208

 

 

$

187,482

 

 

$

84,500

 

 

$

2,117,189

 

 

$

1,832,184

 

 

 

3.50

%
(1)
Excludes deferred financing costs of $8.5 million and $7.0 million as of December 31, 2023 and 2022.
(2)
Weighted average contractual rate as of December 31, 2023.
(3)
Balance excludes $1.5 million and $1.3 million of strategic partner reserve deposits as of December 31, 2023 and 2022.
Summary of Maturity of Broker Pools, Excluding Strategic Partner Reserve Deposits

(Dollars in thousands)

 

December 31, 2023

 

Three months or less

 

$

191,715

 

Over three months through six months

 

 

190,494

 

Over six months through one year

 

 

296,637

 

Over one year

 

 

1,190,593

 

Deposits

 

 

1,869,439

 

 Strategic partner collateral deposits

 

 

1,500

 

Total deposits

 

$

1,870,939

 
v3.24.0.1
Leases (Tables)
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Schedule of Operating Lease Costs and Additional Information

The following table presents the operating lease costs and additional information for the years ended December 31, 2023, 2022, and 2021.

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Operating lease costs

 

$

2,390

 

 

$

2,216

 

 

$

2,287

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

 

2,472

 

 

 

2,378

 

 

 

2,454

 

Right-of-use asset obtained in exchange for lease liability

 

 

(226

)

 

 

(187

)

 

 

(118

)

 
Schedule of Breakout of Operating leases

The following table presents the breakout of the operating leases as of December 31, 2023 and 2022.

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Operating lease right-of-use assets

 

$

8,785

 

 

$

9,723

 

Other current liabilities

 

 

2,472

 

 

 

2,239

 

Operating lease liabilities

 

 

7,019

 

 

 

8,408

 

Total operating lease liabilities

 

 

9,491

 

 

 

10,647

 

Weighted average remaining lease term

 

4.9 years

 

 

5.5 years

 

Weighted average discount rate

 

 

5.47

%

 

 

5.66

%
Schedule of Maturities of the Lease Liabilities .

(Dollars in thousands)

 

 

 

2024

 

$

2,536

 

2025

 

 

2,546

 

2026

 

 

2,567

 

2027

 

 

1,342

 

2028

 

 

573

 

Thereafter

 

 

1,139

 

Total lease payments

 

 

10,703

 

Less imputed interest

 

 

1,212

 

Total operating lease liabilities

 

$

9,491

 
v3.24.0.1
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Summary of Components of Deferred and Other Tax Assets and Liabilities

The following table sets forth the significant components of the Company's deferred and other tax assets and liabilities as of December 31, 2023 and 2022.

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Goodwill and other intangibles

 

$

43,034

 

 

$

43,397

 

Provision for credit losses

 

 

(13,032

)

 

 

(9,945

)

Net operating loss carryforwards (1)

 

 

(3,802

)

 

 

(3,730

)

Accrued expenses, compensation, and other assets

 

 

(6,976

)

 

 

(3,819

)

Unrealized gains on other investments

 

 

(1,877

)

 

 

(1,445

)

Total deferred tax liability

 

 

17,347

 

 

 

24,458

 

Valuation allowance

 

 

3,860

 

 

 

2,295

 

Deferred tax liability, net

 

$

21,207

 

 

$

26,753

 
(1)
As of December 31, 2023, the Company had an estimated $11.1 million of net operating loss carryforwards, $1.7 million of which expires at various dates between December 31, 2026 and December 31, 2035, which had a net carrying value of $1.2 million of December 31, 2023.
Summary of Components of Tax Provision

The following table shows the components of the Company's tax provision for the years ended December 31, 2023, 2022, and 2021.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

18,634

 

 

$

5,213

 

 

$

3,550

 

State

 

 

6,014

 

 

 

560

 

 

 

1,563

 

Deferred

 

0

 

 

0

 

 

0

 

Federal

 

 

(52

)

 

 

8,090

 

 

 

13,686

 

State

 

 

314

 

 

 

4,100

 

 

 

5,418

 

Net provision for income taxes

 

$

24,910

 

 

$

17,963

 

 

$

24,217

 
Summary of Reconciliation of Statutory Federal Income Tax Provision to Consolidated Actual Income Tax (Provision) Benefit

The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax (provision) benefit reported for the years ended December 31, 2023, 2022, and 2021.

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Statutory Federal income tax provision at 21%

 

$

18,068

 

 

$

14,249

 

 

$

17,193

 

State and local income taxes, net of federal income tax benefit

 

 

3,534

 

 

 

2,787

 

 

 

3,363

 

Valuation allowance against deferred tax assets

 

 

1,565

 

 

 

—

 

 

 

1,833

 

Change in effective state income tax rates and accrual

 

 

(222

)

 

 

(811

)

 

 

1,691

 

Income attributable to non-controlling interest

 

 

—

 

 

 

—

 

 

 

(628

)

Non-deductible expenses

 

 

2,024

 

 

 

1,987

 

 

 

178

 

Other

 

 

(59

)

 

 

(249

)

 

 

587

 

Total income tax provision

 

$

24,910

 

 

$

17,963

 

 

$

24,217

 

 
v3.24.0.1
Stock Options and Restricted Stock (Tables)
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Summary of Assumption Categories Used to Determine Value of Option Grants The following assumption categories are used to determine the value of any option grants.

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

Risk free interest rate

 

 

—

 

 

 

—

 

 

 

0.97

%

Expected dividend yield

 

 

—

 

 

 

—

 

 

 

—

 

Expected life of option in years (1)

 

 

—

 

 

 

—

 

 

 

6.25

 

Expected volatility (2)

 

 

—

 

 

 

—

 

 

 

53.98

%
(1)
Expected life is calculated using the simplified method.
(2)
The Company determines its expected volatility based on the Company's historical volatility.
Summary of Activity for Stock Option Programs

The following table presents the activity for the stock option programs for the years ended December 31, 2023, 2022, and 2021.

 

Number of
Options

 

 

 

Exercise
Price Per
Share

 

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2020 (2)

 

 

951,669

 

 

 

2.14 - 12.55

 

 

 

6.41

 

Granted

 

 

317,398

 

 

 

 

6.79

 

 

 

6.79

 

Cancelled

 

 

(113,310

)

 

 

4.89 - 11.53

 

 

 

6.64

 

Exercised (1)

 

 

(44,070

)

 

 

5.21 - 7.25

 

 

 

5.58

 

Outstanding at December 31, 2021 (2)

 

 

1,111,687

 

 

 

2.14-12.55

 

 

 

6.41

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(26,093

)

 

 

4.89 - 12.55

 

 

 

7.08

 

Exercised (1)

 

 

(23,745

)

 

 

4.89 - 7.25

 

 

 

6.51

 

Outstanding at December 31, 2022 (2)

 

 

1,061,849

 

 

 

2.14 - 9.38

 

 

 

6.51

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(33,382

)

 

 

4.89 - 9.38

 

 

 

6.80

 

Exercised (1)

 

 

(68,945

)

 

 

4.89 - 7.25

 

 

 

6.44

 

Outstanding at December 31, 2023 (2)

 

 

959,522

 

 

$

2.14 - 9.38

 

 

$

6.51

 

Options exercisable at

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

320,922

 

 

 

2.14-12.55

 

 

$

6.53

 

December 31, 2022

 

 

548,426

 

 

 

2.14 - 9.38

 

 

 

6.51

 

December 31, 2023

 

 

697,647

 

 

 

2.14 - 9.38

 

 

 

6.51

 
(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 $0.1 million, $0.1 million, and $0.2 million for the years ended December 31, 2023, 2022, and 2021.
(2)
The aggregate intrinsic value, which represents the difference between the price of the Company’s common stock at December 31, 2023 and the related exercise price of the underlying options, was $3.2 million for outstanding options and $2.3 million for exercisable options as of December 31, 2023. The remaining contractual life was 6.1 years for outstanding options and 5.9 years for exercisable options at December 31, 2023.
Summary of Activity for Unvested Options Outstanding

The following table presents the activity for the unvested options outstanding under the plans for the year ended December 31, 2023.

 

Number of
Options

 

 

 

Exercise Price
Per Share

 

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2022

 

 

513,423

 

 

$

4.89 - 7.25

 

 

$

6.52

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(3,336

)

 

 

4.89 - 7.25

 

 

 

5.51

 

Vested

 

 

(248,212

)

 

 

4.89 - 7.25

 

 

 

6.55

 

Outstanding at December 31, 2023

 

 

261,875

 

 

$

4.89 - 7.25

 

 

$

6.49

 
Summary of Activity for Restricted Stock Programs

The following table presents the activity for the restricted stock programs for the years ended December 31, 2023, 2022, and 2021.

 

Number of
Shares

 

 

 

Grant
Price Per
Share

 

Weighted
Average
Grant Price

 

Outstanding at December 31, 2020

 

 

416,140

 

 

 

4.39 - 7.25

 

$

6.24

 

Granted

 

 

258,120

 

 

 

6.79 - 8.40

 

 

7.38

 

Cancelled

 

 

(21,940

)

 

 

4.89 - 7.25

 

 

5.98

 

Vested (1)

 

 

(158,994

)

 

 

4.39 - 7.25

 

 

6.16

 

Outstanding at December 31, 2021 (2)

 

 

493,326

 

 

 

4.89 - 7.25

 

 

6.87

 

Granted

 

 

522,475

 

 

 

6.86 -7.68

 

 

7.46

 

Cancelled

 

 

(29,373

)

 

 

4.89 - 8.40

 

 

7.32

 

Vested (1)

 

 

(129,140

)

 

 

4.89 - 7.25

 

 

6.53

 

Outstanding at December 31, 2022 (2)

 

 

857,288

 

 

$

4.89 - 7.25

 

 

7.27

 

Granted

 

 

399,793

 

 

 

7.67 - 9.37

 

 

8.34

 

Cancelled

 

 

(12,807

)

 

 

4.89 - 8.40

 

 

7.24

 

Vested (1)

 

 

(248,898

)

 

 

4.89 - 7.68

 

 

7.10

 

Outstanding at December 31, 2023 (2)

 

 

995,376

 

 

$

4.89 - 9.37

 

$

7.74

 
(1)
The aggregate fair value of the restricted stock vested was $2.1 million, $1.0 million, and $1.1 million for the years ended December 31, 2023, 2022, and 2021.
The aggregate fair value of the restricted stock was $9.8 million as of December 31, 2023. The remaining vesting period was 2.2 years at December 31, 2023.
v3.24.0.1
Segment Reporting (Tables)
 12 Months Ended
Dec. 31, 2023
Segment Reporting [Abstract]  
Schedule of Segment Data The following table presents segment data as of and for the year ended December 31, 2023.

Year Ended December 31, 2023

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

167,765

 

 

$

62,703

 

 

$

12,719

 

 

$

1,596

 

 

$

6,257

 

 

$

251,040

 

Total interest expense

 

 

31,436

 

 

 

18,137

 

 

 

3,597

 

 

 

72

 

 

 

9,704

 

 

 

62,946

 

Net interest income (loss)

 

 

136,329

 

 

 

44,566

 

 

 

9,122

 

 

 

1,524

 

 

 

(3,447

)

 

 

188,094

 

Provision (benefit) for credit losses

 

 

44,592

 

 

 

17,583

 

 

 

1,988

 

 

 

(26,318

)

 

 

(35

)

 

 

37,810

 

Net interest income (loss) after loss provision

 

 

91,737

 

 

 

26,983

 

 

 

7,134

 

 

 

27,842

 

 

 

(3,412

)

 

 

150,284

 

Other income

 

 

376

 

 

 

6

 

 

 

5,971

 

 

 

3,358

 

 

 

1,609

 

 

 

11,320

 

Operating expenses

 

 

(32,601

)

 

 

(16,752

)

 

 

(3,547

)

 

 

(7,256

)

 

 

(15,412

)

 

 

(75,568

)

Net income (loss) before taxes

 

 

59,512

 

 

 

10,237

 

 

 

9,558

 

 

 

23,944

 

 

 

(17,215

)

 

 

86,036

 

Income tax (provision) benefit

 

 

(17,231

)

 

 

(2,964

)

 

 

(2,767

)

 

 

(6,933

)

 

 

4,985

 

 

 

(24,910

)

Net income (loss) after taxes

 

 

42,281

 

 

 

7,273

 

 

 

6,791

 

 

 

17,011

 

 

 

(12,230

)

 

 

61,126

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,047

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

55,079

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

1,336,222

 

 

$

760,621

 

 

$

114,827

 

 

$

3,663

 

 

$

553

 

 

$

2,215,886

 

Total assets

 

 

1,297,870

 

 

 

744,904

 

 

 

110,850

 

 

 

12,247

 

 

 

421,956

 

 

 

2,587,827

 

Total funds borrowed

 

 

1,062,584

 

 

 

609,863

 

 

 

90,754

 

 

 

10,027

 

 

 

345,462

 

 

 

2,118,690

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

3.36

%

 

 

1.04

%

 

 

6.65

%

 

 

91.25

%

 

 

(3.13

)%

 

 

2.51

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

17.33

 

Return on average equity

 

 

21.24

 

 

 

6.60

 

 

 

41.51

 

 

 

574.86

 

 

 

(19.78

)

 

 

15.79

 

Interest yield

 

 

13.07

 

 

 

8.86

 

 

 

12.80

 

 

 

26.94

 

 

N/A

 

 

 

11.19

 

Net interest margin, gross

 

 

10.62

 

 

 

6.29

 

 

 

9.18

 

 

 

25.73

 

 

N/A

 

 

 

8.38

 

Net interest margin, net of allowance

 

 

11.09

 

 

 

6.45

 

 

 

9.45

 

 

 

61.60

 

 

N/A

 

 

 

8.68

 

Reserve coverage

 

 

4.31

 

 

 

2.76

 

 

 

3.61

 

 

 

41.93

 

 

N/A

 

 

 

3.80

 

Delinquency status (1)

 

 

0.70

 

 

 

0.20

 

 

 

5.40

 

 

 

—

 

 

N/A

 

 

 

0.77

 

Charge-off (recovery) ratio (2)

 

 

3.04

 

 

 

1.33

 

 

 

1.02