MEDALLION FINANCIAL CORP, 10-Q filed on 06 Nov 24
 | XBRL Documents
v3.24.3
Document and Entity Information - shares
 9 Months Ended
Sep. 30, 2024
Nov. 06, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Entity Registrant Name MEDALLION FINANCIAL CORP  
Entity Central Index Key 0001000209  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   23,067,748
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Shell Company 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 $0.01 per share  
Trading Symbol MFIN  
Security Exchange Name NASDAQ  
v3.24.3
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Assets    
Cash and cash equivalents $ 120,593 $ 52,591
Federal funds sold 67,336 97,254
Investment securities 56,754 54,282
Equity investments 9,897 11,430
Loans 2,485,279 2,215,886
Allowance for credit losses (96,518) [1] (84,235) [2]
Net loans receivable 2,388,761 2,131,651
Goodwill 150,803 150,803
Intangible assets, net 19,508 20,591
Property, equipment, and right-of-use lease asset, net 14,172 14,076
Accrued interest receivable 14,108 13,538
Loan collateral in process of foreclosure [3] 8,818 11,772
Income tax receivable 0 671
Other assets 29,302 29,168
Total assets 2,880,052 2,587,827
Liabilities    
Deposits [4] 2,108,132 1,866,657
Long-term debt [5] 232,037 235,544
Short-term borrowings 49,000 8,000
Deferred tax liabilities, net 20,598 21,207
Operating lease liabilities 5,534 7,019
Accrued interest payable 6,888 6,822
Income tax payable 232 0
Accounts payable and accrued expenses [6] 26,455 30,804
Total liabilities 2,448,876 2,176,053
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 - 29,256,835 shares at September 30, 2024 and 29,051,800 shares at December 31, 2023 issued) 293 291
Additional paid in capital 291,845 288,046
Treasury stock (6,172,558 shares at September 30, 2024 and 5,602,154 at December 31, 2023) (50,144) (45,538)
Accumulated other comprehensive loss (2,247) (3,696)
Retained earnings 122,641 103,883
Total stockholders’ equity 362,388 342,986
Non-controlling interest in consolidated subsidiaries 68,788 68,788
Total equity 431,176 411,774
Total liabilities and equity $ 2,880,052 $ 2,587,827
Number of shares outstanding 23,084,277 23,449,646
Book value per share $ 15.7 $ 14.63
[1] As of September 30, 2024 and 2023, there were no allowance for credit losses and net charge-offs related to the strategic partnership loans.
[2] 2023 beginning balance 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, of $4.6 million as of September 30, 2024 and $6.2 million as of December 31, 2023.
[4] Includes $4.7 million and $4.3 million of deferred financing costs as of September 30, 2024 and December 31, 2023. Refer to Note 5 for more details.
[5] Includes $3.7 million and $4.2 million of deferred financing costs as of September 30, 2024 and December 31, 2023. Refer to Note 5 for more details.
[6] Includes the short-term portion of lease liabilities of $2.3 million and $2.5 million as of September 30, 2024 and December 31, 2023. Refer to Note 6 for more details.
v3.24.3
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2024
Dec. 31, 2023
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 29,256,835 29,051,800
Treasury stock,shares 6,172,558 5,602,154
Loan collateral in process of foreclosure, financed sales collateral to third parties $ 4.6 $ 6.2
Short term lease liabilities 2.3 2.5
Deposits [Member]    
Deferred financing costs 4.7 4.3
Long-Term Debt [Member]    
Deferred financing costs $ 3.7 $ 4.2
v3.24.3
Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Interest and fees on loans $ 74,538 $ 64,608 $ 208,620 $ 179,407
Interest and dividends on investment securities 1,871 1,278 5,563 4,048
Total interest income [1] 76,409 65,886 214,183 183,455
Interest on deposits 19,191 13,432 50,466 33,360
Interest on long-term debt 4,356 2,901 12,793 8,694
Interest on short-term borrowings 125 769 402 2,325
Total interest expense 23,672 17,102 63,661 44,379
Net interest income (loss) 52,737 48,784 150,522 139,076
Provision for credit losses 20,151 14,532 55,929 27,045
Net interest income after provision for credit losses 32,586 34,252 94,593 112,031
Other income (loss)        
(Loss) gain on equity investments (519) 2,180 3,136 2,189
Gain on sale of loans and taxi medallions 340 1,417 1,170 4,578
Write-down of loan collateral in process of foreclosure (19) (30) (19) (303)
Other income 785 739 2,802 1,868
Total other income, net 587 4,306 7,089 8,332
Other expenses        
Salaries and employee benefits 9,456 9,630 28,347 27,805
Loan servicing fees 2,790 2,501 7,951 7,084
Collection costs 1,673 1,583 4,799 4,729
Regulatory fees 961 1,021 2,826 2,484
Professional fees 818 1,148 3,434 4,223
Rent expense 664 629 2,019 1,855
Amortization of intangible assets 361 361 1,084 1,084
Other expenses 2,272 2,216 6,755 7,220
Total other expenses 18,995 19,089 57,215 56,484
Income before income taxes 14,178 19,469 44,467 63,879
Income tax provision 4,055 6,727 14,196 18,582
Net income after taxes 10,123 12,742 30,271 45,297
Less: income attributable to the non-controlling interest 1,512 1,512 4,535 4,536
Total net income attributable to Medallion Financial Corp. $ 8,611 $ 11,230 $ 25,736 $ 40,761
Basic net income per share $ 0.38 $ 0.5 $ 1.14 $ 1.81
Diluted net income per share $ 0.37 $ 0.48 $ 1.09 $ 1.77
Weighted average common shares outstanding        
Basic 22,490,792 22,596,982 22,576,446 22,469,968
Diluted 23,447,929 23,392,901 23,555,065 23,067,944
[1] Included in interest income is $0.6 million and $1.9 million of paid-in-kind interest for the three and nine months ended September 30, 2024 and $0.4 million and $1.1 million for the three and nine months ended September 30, 2023.
v3.24.3
Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Interest paid in kind $ 0.6 $ 0.4 $ 1.9 $ 1.1
v3.24.3
Consolidated Statements of Other Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Statement of Comprehensive Income [Abstract]        
Net income $ 10,123 $ 12,742 $ 30,271 $ 45,297
Other comprehensive income (loss), net of tax 1,497 (1,211) 1,449 (1,611)
Total comprehensive income 11,620 11,531 31,720 43,686
Less comprehensive income attributable to the non-controlling interest 1,512 1,512 4,535 4,536
Total comprehensive income attributable to Medallion Financial Corp. $ 10,108 $ 10,019 $ 27,185 $ 39,150
v3.24.3
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, 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
Balance (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2022 (9,935)       (9,935)   (9,935)                  
Balance, shares at Dec. 31, 2022   28,663,827   (5,602,154)           28,663,827   (5,602,154)        
Net income 16,873       15,361   15,361 1,512                
Distributions to non-controlling interest (1,512)             (1,512)                
Stock-based compensation expense 1,036 $ 2 1,034       1,036                  
Issuance of restricted stock, net, shares   304,749                            
Withheld restricted stock for employees' tax obligations, shares   (91,169)                            
Withheld restricted stock for employees' tax obligations, value (768)   (768)       (768)                  
Forfeiture of restricted stock, net, shares   (9,843)                            
Exercise of stock options, value 292   292       292                  
Exercise of stock options, shares   44,583                            
Dividends paid on common stock (1,863)       (1,863)   (1,863)                  
Other comprehensive income (loss), net of tax 506         506 506                  
Ending balance at Mar. 31, 2023 375,153 $ 289 284,221 $ (45,538) 70,236 (2,843) 306,365 68,788                
Ending balance, shares at Mar. 31, 2023   28,912,147   (5,602,154)                        
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
Balance (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2022 (9,935)       (9,935)   (9,935)                  
Balance, shares at Dec. 31, 2022   28,663,827   (5,602,154)           28,663,827   (5,602,154)        
Net income 45,297                              
Other comprehensive income (loss), net of tax (1,611)                              
Ending balance at Sep. 30, 2023 397,262 $ 290 286,782 $ (45,538) 91,900 (4,960) 328,474 68,788                
Ending balance, shares at Sep. 30, 2023   28,965,885   (5,602,154)                        
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
Balance (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2022 $ (9,935)       (9,935)   (9,935)                  
Balance, shares at Dec. 31, 2022   28,663,827   (5,602,154)           28,663,827   (5,602,154)        
Exercise of stock options, shares [1] 68,945                              
Net change in unrealized gains on investments, net of tax $ (300)                              
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)                        
Balance at Mar. 31, 2023 $ 375,153 $ 289 284,221 $ (45,538) 70,236 (2,843) 306,365 68,788                
Balance, shares at Mar. 31, 2023   28,912,147   (5,602,154)                        
Net income 15,682       14,170   14,170 1,512                
Distributions to non-controlling interest (1,512)             (1,512)                
Stock-based compensation expense 1,214   1,214       1,214                  
Issuance of restricted stock, net, shares   11,734                            
Forfeiture of restricted stock, net, shares   (204)                            
Issuance in connection with vesting of restricted stock unit, Shares   23,211                            
Exercise of stock options, shares   283                            
Dividends paid on common stock (1,867)       (1,867)   (1,867)                  
Other comprehensive income (loss), net of tax (906)         (906) (906)                  
Ending balance at Jun. 30, 2023 387,764 $ 289 285,435 $ (45,538) 82,539 (3,749) 318,976 68,788                
Ending balance, shares at Jun. 30, 2023   28,947,171   (5,602,154)                        
Net income 12,742       11,230   11,230 1,512                
Distributions to non-controlling interest (1,512)             (1,512)                
Stock-based compensation expense 1,232   1,232       1,232                  
Forfeiture of restricted stock, net, shares   (126)                            
Exercise of stock options, value 116 $ 1 115       116                  
Exercise of stock options, shares   18,840                            
Dividends paid on common stock (1,869)       (1,869)   (1,869)                  
Other comprehensive income (loss), net of tax (1,211)         (1,211) (1,211)                  
Ending balance at Sep. 30, 2023 397,262 $ 290 286,782 $ (45,538) 91,900 (4,960) 328,474 68,788                
Ending balance, shares at Sep. 30, 2023   28,965,885   (5,602,154)                        
Balance at Dec. 31, 2023 $ 411,774 $ 291 288,046 $ (45,538) 103,883 (3,696) 342,986 68,788                
Balance, shares at Dec. 31, 2023 23,449,646 29,051,800   (5,602,154)                        
Net income $ 11,536       10,024   10,024 1,512                
Distributions to non-controlling interest (1,512)             (1,512)                
Stock-based compensation expense 1,496 $ 1 1,495       1,496                  
Issuance of restricted stock, net, shares   296,178                            
Withheld restricted stock for employees' tax obligations, shares   (116,275)                            
Withheld restricted stock for employees' tax obligations, value (944)   (944)       (944)                  
Forfeiture of restricted stock, net, shares   (1,208)                            
Exercise of stock options, value $ 88   88       88                  
Exercise of stock options, shares 13,383 [1] 13,383                            
Purchase of common stock (in Shares)       (264,160)                        
Purchase of common stock $ (2,126)     $ (2,126)     (2,126)                  
Dividends paid on common stock (2,338)       (2,338)   (2,338)                  
Other comprehensive income (loss), net of tax (150)         (150) (150)                  
Ending balance at Mar. 31, 2024 417,824 $ 292 288,685 $ (47,664) 111,569 (3,846) 349,036 68,788                
Ending balance, shares at Mar. 31, 2024   29,243,878   (5,866,314)                        
Balance at Dec. 31, 2023 $ 411,774 $ 291 288,046 $ (45,538) 103,883 (3,696) 342,986 68,788                
Balance, shares at Dec. 31, 2023 23,449,646 29,051,800   (5,602,154)                        
Net income $ 30,271                              
Other comprehensive income (loss), net of tax 1,449                              
Ending balance at Sep. 30, 2024 $ 431,176 $ 293 291,845 $ (50,144) 122,641 (2,247) 362,388 68,788                
Ending balance, shares at Sep. 30, 2024 23,084,277 29,256,835   (6,172,558)                        
Balance at Mar. 31, 2024 $ 417,824 $ 292 288,685 $ (47,664) 111,569 (3,846) 349,036 68,788                
Balance, shares at Mar. 31, 2024   29,243,878   (5,866,314)                        
Net income 8,613       7,101   7,101 1,512                
Distributions to non-controlling interest (1,512)             (1,512)                
Stock-based compensation expense 1,596 $ 1 1,595       1,596                  
Forfeiture of restricted stock, net, shares   (1,696)                            
Issuance in connection with vesting of restricted stock unit, Shares   17,155                            
Exercise of stock options, value $ 18   18       18                  
Exercise of stock options, shares 2,867 [1] 2,867                            
Purchase of common stock (in Shares)       (183,900)                        
Purchase of common stock $ (1,515)     $ (1,515)     (1,515)                  
Dividends paid on common stock (2,337)       (2,337)   (2,337)                  
Other comprehensive income (loss), net of tax 102         102 102                  
Ending balance at Jun. 30, 2024 422,789 $ 293 290,298 $ (49,179) 116,333 (3,744) 354,001 68,788                
Ending balance, shares at Jun. 30, 2024   29,262,204   (6,050,214)                        
Net income 10,123       8,611   8,611 1,512                
Distributions to non-controlling interest (1,512)             (1,512)                
Stock-based compensation expense 1,509   1,509       1,509                  
Forfeiture of restricted stock, net, shares   (11,221)                            
Exercise of stock options, value $ 38   38       38                  
Exercise of stock options, shares 5,852 [1] 5,852                            
Purchase of common stock (in Shares)       (122,344)                        
Purchase of common stock $ (965)     $ (965)     (965)                  
Dividends paid on common stock (2,303)       (2,303)   (2,303)                  
Other comprehensive income (loss), net of tax 1,497         1,497 1,497                  
Net change in unrealized gains on investments, net of tax 1,500                              
Ending balance at Sep. 30, 2024 $ 431,176 $ 293 $ 291,845 $ (50,144) $ 122,641 $ (2,247) $ 362,388 $ 68,788                
Ending balance, shares at Sep. 30, 2024 23,084,277 29,256,835   (6,172,558)                        
[1] The aggregate intrinsic value of exercised options, 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 less than $0.1 million for the three and nine months ended September 30, 2024 and was $0.1 million for the year ended December 31, 2023.
v3.24.3
Consolidated Statement of Changes in Stockholders' Equity (Parenthetical) - $ / shares
 3 Months Ended
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Statement of Stockholders' Equity [Abstract]            
Common Stock, Dividends payable, amount per share $ 0.1 $ 0.1 $ 0.1 $ 0.08 $ 0.08 $ 0.08
v3.24.3
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income resulting from operations $ 30,271 $ 45,297
Adjustments to reconcile net income resulting from operations to net cash provided by operating activities:    
Provision for credit losses 55,929 27,045
Paid-in-kind interest income (1,910) (1,086)
Depreciation and amortization 4,365 3,878
Amortization of origination fees, net 6,628 7,279
Increase in deferred and other tax liabilities, net 294 5,116
Net change in value of loan collateral in process of foreclosure (98) 6,673
Net (gains) loss on investments (3,136) 3,136
Stock-based compensation expense 4,601 3,482
Increase in accrued interest receivable (570) (980)
Increase in other assets (3,431) (13,033)
(Decrease) increase in accounts payable and accrued expenses (5,861) 7,500
Increase (decrease) in accrued interest payable 66 (166)
Net cash provided by operating activities 87,148 94,141
CASH FLOWS FROM INVESTING ACTIVITIES    
Loans originated (771,501) (805,048)
Proceeds from principal receipts, sales, maturities, and recoveries of loans 446,865 471,917
Purchases of investments (6,191) (10,169)
Proceeds from principal receipts, sales, and maturities of investments 9,810 467
Proceeds from the sale and principal payments on loan collateral in process of foreclosure 9,931 14,607
Net cash used for investing activities (311,086) (328,226)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from time deposits and funds borrowed 1,027,961 683,568
Repayments of time deposits and funds borrowed (749,047) (417,084)
Cash dividend paid on common stock (6,951) (5,459)
Distributions to non-controlling interests (4,535) (4,536)
Payment of withholding taxes on net settlement of vested stock (944) (768)
Treasury stock repurchased (4,606) 0
Proceeds from the exercise of stock options 144 408
Net cash provided by financing activities 262,022 256,129
NET INCREASE IN CASH AND CASH EQUIVALENTS 38,084 22,044
Cash, and cash equivalents beginning of period [1] 149,845 105,598
Cash and cash equivalents, end of period (1) [1] 187,929 127,642
SUPPLEMENTAL INFORMATION    
Cash paid during the period for interest 60,631 42,054
Cash paid during the period for income taxes 14,227 12,822
NON-CASH INVESTING    
Loans transferred to loan collateral in process of foreclosure, net $ 17,703 $ 15,384
[1] Includes federal funds sold.
v3.24.3
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure        
Net Income (Loss) $ 8,611 $ 11,230 $ 25,736 $ 40,761
v3.24.3
Insider Trading Arrangements
 3 Months Ended
Sep. 30, 2024
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
Non Rule 10b5-1 Arrangement Modified false
Rule 10b5-1 Arrangement Modified false
v3.24.3
Organization of Medallion Financial Corp. and its Subsidiaries
 9 Months Ended
Sep. 30, 2024
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, collector cars, 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 Medallion Capital, a Small Business Investment Company, or SBIC, which conducts a mezzanine financing business; Medallion Funding LLC, or MFC, an SBIC, which historically was the Company's primary taxi medallion lending company; and Freshstart Venture Capital Corp., or FSVC, which historically originated and serviced taxi medallion and commercial loans and was an SBIC through 2023. Medallion Capital and MFC, as SBICs, are regulated by the Small Business Administration, or SBA. Medallion Capital is financed in part by the SBA.

The Company established a wholly-owned subsidiary, Medallion Financing Trust I, or Fin Trust, for the purpose of issuing unsecured trust preferred securities to investors. Fin Trust is a separate legal and corporate entity with its own creditors who, in any liquidation of Fin Trust, will be entitled to be satisfied out of Fin Trust’s assets prior to any value in Fin Trust becoming available to Fin Trust’s equity holders. The assets of Fin Trust, aggregating $34.0 million at September 30, 2024, 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.
v3.24.3
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2024
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.

The Company’s investment in the Bank is consolidated for financial statement purposes. In the notes to the consolidated financial statements included in its Annual Report on Form 10-K, the Company presents its investment in the Bank.

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. Cash also includes $1.3 million of interest-bearing funds deposited in other banks with original terms of 5 to 6 years that cannot be withdrawn but are salable on an active secondary market without penalty.

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 12 and 13 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 $9.9 million and $11.4 million at September 30, 2024 and December 31, 2023, comprised mainly of nonmarketable stock and stock warrants, are recorded at cost less any impairment plus or minus observable price changes. Substantially all of these equity investments are held by Medallion Capital, our SBIC subsidiary, in connection with its mezzanine lending business. As of September 30, 2024, cumulative impairment of $4.7 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 September 30, 2024 and December 31, 2023, the fair value of these securities were $1.8 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.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

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

 

$

63

 

 

$

(54

)

 

$

37

 

 

$

(54

)

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

 

$

63

 

 

$

(54

)

 

$

37

 

 

$

(54

)

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 at both September 30, 2024 and December 31, 2023, and less than $0.1 million was amortized to interest income for each of the three and nine months ended September 30, 2024 and 2023. 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 costs paid to loan originators, and which are amortized to interest income over the life of the loan.

Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. At September 30, 2024 and December 31, 2023, net loan origination costs were $47.2 million and $40.0 million. Net amortization to income was $2.3 million and $6.6 million for the three and nine months ended September 30, 2024 and was $2.2 million and $6.5 million for the three and nine months ended September 30, 2023.

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 is typified by a larger number of smaller dollar loans that have similar characteristics. A loan is nonperforming when based on current information and events, it is unlikely the Company will be able to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be nonperforming. 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 $17.4 million at September 30, 2024, or 0.72% of the total loan portfolio, compared to $16.8 million, or 0.77%, at December 31, 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 nonperforming 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, or ASC, 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 both September 30, 2024 and December 31, 2023. 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 September 30, 2024 and December 31, 2023.

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 delinquent loan performance 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 presented 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

 

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 September 30, 2024 and December 31, 2023, the Company had goodwill of $150.8 million, all of which related to the Bank. As of September 30, 2024 and December 31, 2023, the Company had intangible assets of $19.5 million and $20.6 million. Amortization expense on the intangible assets for the three and nine months ended September 30, 2024 and 2023 was $0.4 million and $1.1 million. Management performed a qualitative assessment of goodwill and intangibles for impairment at December 31, 2023, concluding that there was no impairment of these assets.

The following table details the intangible assets as of the dates presented:

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Brand-related intellectual property

 

$

14,850

 

 

$

15,675

 

Home improvement contractor relationships

 

 

4,658

 

 

 

4,916

 

Total intangible assets

 

$

19,508

 

 

$

20,591

 

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 $0.1 million and $0.3 million for the three and nine months ended September 30, 2024 and the three and nine months ended September 30, 2023.

Deferred Costs

Deferred financing costs represent costs associated with obtaining the Company’s borrowing facilities, and are amortized on a straight-line basis over the lives of the related financing agreements and life of the respective pool. Amortization expense, included as Interest expense in the Consolidated Statements of Operations, was $1.2 million and $3.0 million for the three and nine months ended September 30, 2024 and was $0.8 million and $2.3 million for the three and nine months ended September 30, 2023. 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 $8.4 million and $8.5 million as of September 30, 2024 and December 31, 2023.

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 presents the calculation of basic and diluted EPS.

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income attributable to common stockholders

 

$

8,611

 

 

$

11,230

 

 

$

25,736

 

 

$

40,761

 

Weighted average common shares outstanding applicable to basic EPS

 

 

22,490,792

 

 

 

22,596,982

 

 

 

22,576,446

 

 

 

22,469,968

 

Effect of restricted stock grants

 

 

440,704

 

 

 

481,197

 

 

 

485,179

 

 

 

413,682

 

Effect of dilutive stock options

 

 

166,268

 

 

 

183,274

 

 

 

194,800

 

 

 

125,319

 

Effect of performance stock unit grants

 

 

350,165

 

 

 

131,448

 

 

 

298,640

 

 

 

58,975

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

 

 

23,447,929

 

 

 

23,392,901

 

 

 

23,555,065

 

 

 

23,067,944

 

Basic net income per share

 

$

0.38

 

 

$

0.50

 

 

$

1.14

 

 

$

1.81

 

Diluted net income per share

 

 

0.37

 

 

 

0.48

 

 

 

1.09

 

 

 

1.77

 

Potentially dilutive common shares excluded from the above calculations aggregated 9,000 shares as of both September 30, 2024 and 2023.

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 nine months ended September 30, 2024 and 2023, the Company issued 296,178 and 316,483 restricted shares of stock-based compensation awards, 215,687 and 296,444 performance stock units, and 92,350 and 83,158 restricted stock units. The Company recognized $1.5 million and $4.6 million, or $0.06 and $0.20 per common share, for the three and nine months ended September 30, 2024, and $1.2 million, and $3.5 million or $0.05 and $0.15 per share per common share for the three and nine months ended September 30, 2023, of non-cash stock-based compensation expense related to the grants. As of September 30, 2024, the total remaining unrecognized compensation cost related to unvested stock options, restricted stock, restricted stock units, and performance share units was $6.8 million, which is expected to be recognized over the next 10 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 affect the Bank's ability to pay dividends to the Company, and that an adequate allowance for credit losses be maintained. As of September 30, 2024, the Bank’s Tier 1 leverage ratio was 15.7%. The Bank’s actual capital amounts and ratios and the regulatory minimum ratios are presented in the following table.

 

Regulatory

 

 

 

 

 

 

 

(Dollars in thousands)

 

Minimum

 

 

Well-Capitalized

 

 

September 30, 2024

 

 

December 31, 2023

 

Common equity tier 1 capital

 

 

 

 

 

 

 

$

314,153

 

 

$

293,774

 

Tier 1 capital

 

 

 

 

 

 

 

 

382,940

 

 

 

362,561

 

Total capital

 

 

 

 

 

 

 

 

413,973

 

 

 

390,153

 

Average assets

 

 

 

 

 

 

 

 

2,444,674

 

 

 

2,232,816

 

Risk-weighted assets

 

 

 

 

 

 

 

 

2,422,854

 

 

 

2,155,641

 

Leverage ratio (1)

 

 

4.0

%

 

 

5.0

%

 

 

15.7

%

 

 

16.2

%

Common equity tier 1 capital ratio (2)

 

 

7.0

 

 

 

6.5

 

 

 

13.0

 

 

 

13.6

 

Tier 1 capital ratio (3)

 

 

8.5

 

 

 

8.0

 

 

 

15.8

 

 

 

16.8

 

Total capital ratio (3)

 

 

10.5

 

 

 

10.0

 

 

 

17.1

 

 

 

18.1

 
(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 September 30, 2024 and December 31, 2023 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 September 30, 2024 and December 31, 2023.

Recently Issued and Adopted Accounting Standards

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 amendments in this update will be effective on the date on which the SEC’s removal of related disclosures from Regulation S-X or Regulation S-K become effective, with early adoption prohibited.

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 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 fiscal years beginning after December 15, 2023 and to be included in interim periods beginning after December 15, 2024. 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 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 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.
v3.24.3
Investment Securities
 9 Months Ended
Sep. 30, 2024
Schedule of Investments [Abstract]  
Investment Securities

(3) INVESTMENT SECURITIES

The following tables present details of fixed maturity securities available for sale as of September 30, 2024 and December 31, 2023:

September 30, 2024
(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

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

 

$

42,479

 

 

$

63

 

 

$

(3,448

)

 

$

39,094

 

State and municipalities

 

 

16,373

 

 

 

117

 

 

 

(1,004

)

 

 

15,486

 

Agency bonds

 

 

2,181

 

 

 

1

 

 

 

(8

)

 

 

2,174

 

Total

 

$

61,033

 

 

$

181

 

 

$

(4,460

)

 

$

56,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

The amortized cost and estimated market value of investment securities at September 30, 2024 by contractual maturity are presented below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2024
(Dollars in thousands)

 

Amortized
Cost

 

 

Fair
Value

 

Due in one year or less

 

$

2,992

 

 

$

2,964

 

Due after one year through five years

 

 

2,758

 

 

 

2,660

 

Due after five years through ten years

 

 

11,639

 

 

 

10,813

 

Due after ten years

 

 

43,644

 

 

 

40,317

 

Total

 

$

61,033

 

 

$

56,754

 

The following tables present information pertaining to securities with gross unrealized losses at September 30, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous loss position.

 

 

Less than Twelve Months

 

 

Twelve Months and Over

 

September 30, 2024
(Dollars in thousands)

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

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

 

$

—

 

 

$

—

 

 

$

(3,448

)

 

$

31,359

 

State and municipalities

 

 

(94

)

 

 

3,106

 

 

 

(910

)

 

 

10,280

 

Agency bonds

 

 

—

 

 

 

—

 

 

 

(8

)

 

 

176

 

Total

 

$

(94

)

 

$

3,106

 

 

$

(4,366

)

 

$

41,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

As of September 30, 2024 and December 31, 2023, the Company had 53 and 60 securities with unrealized losses that have not been recognized in income. The investments are mortgage-backed securities and similar instruments with lower risk characteristics. The Company regularly reviews investment securities for impairment resulting from credit loss using both qualitative and quantitative criteria, as necessary based on the composition of the portfolio at period end. Based on our assessment, no material impairments for credit losses were recognized during the period. The Company does not intend to sell its investment securities that are in an unrealized loss position and believes that it is unlikely that it will be required to sell these securities before recovery of the amortized cost. As of September 30, 2024 and December 31, 2023, the Company did not hold investments in any single issuer with an aggregate book value that exceeded 10% of the Company's equity, other than U.S. Government agency residential mortgage-backed securities issued by the Federal National Mortgage Association.

v3.24.3
Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2024
Text Block [Abstract]  
Loans and Allowance for Credit Losses

(4) LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table presents the major classification of loans, inclusive of capitalized loan origination costs, as of September 30, 2024 and December 31, 2023.

 

 

September 30, 2024

 

 

December 31, 2023

 

(Dollars in thousands)

 

Amount

 

 

As a
Percent of
Gross Loans

 

 

Amount

 

 

As a
Percent of
Gross Loans

 

Recreation

 

$

1,554,629

 

 

 

63

%

 

$

1,336,226

 

 

 

60

%

Home improvement

 

 

814,071

 

 

 

33

 

 

 

760,617

 

 

 

34

 

Commercial

 

 

110,143

 

 

 

4

 

 

 

114,827

 

 

 

5

 

Taxi medallion

 

 

3,243

 

 

*

 

 

 

3,663

 

 

*

 

Strategic partnership

 

 

3,193

 

 

*

 

 

 

553

 

 

*

 

Total gross loans

 

 

2,485,279

 

 

 

100

%

 

 

2,215,886

 

 

 

100

%

Allowance for credit losses

 

 

(96,518

)

 

 

 

 

 

(84,235

)

 

 

 

Total net loans

 

$

2,388,761

 

 

 

 

 

$

2,131,651

 

 

 

 

(*) Less than 1%.

The following tables present the activity of the gross loans for the three and nine months ended September 30, 2024 and 2023.

Three Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Taxi
Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – June 30, 2024

 

$

1,497,428

 

 

$

773,184

 

 

$

110,197

 

 

$

3,482

 

 

$

1,299

 

 

$

2,385,590

 

Loan originations

 

 

139,105

 

 

 

96,545

 

 

 

—

 

 

 

—

 

 

 

39,918

 

 

 

275,568

 

Principal receipts, sales, and maturities

 

 

(61,563

)

 

 

(51,409

)

 

 

(713

)

 

 

(239

)

 

 

(38,024

)

 

 

(151,948

)

Charge-offs

 

 

(16,242

)

 

 

(4,258

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(20,500

)

Transfer to loan collateral in process of foreclosure, net

 

 

(6,609

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(6,609

)

Amortization of origination fees and costs, net

 

 

(3,549

)

 

 

1,206

 

 

 

13

 

 

 

—

 

 

 

—

 

 

 

(2,330

)

Origination fees and costs, net

 

 

6,059

 

 

 

(1,197

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

4,861

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

647

 

 

 

—

 

 

 

—

 

 

 

647

 

Gross loans – September 30, 2024

 

$

1,554,629

 

 

$

814,071

 

 

$

110,143

 

 

$

3,243

 

 

$

3,193

 

 

$

2,485,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – December 31, 2023

 

$

1,336,226

 

 

$

760,617

 

 

$

114,827

 

 

$

3,663

 

 

$

553

 

 

$

2,215,886

 

Loan originations

 

 

454,433

 

 

 

216,111

 

 

 

7,000

 

 

 

250

 

 

 

79,952

 

 

 

757,746

 

Principal receipts, sales, and maturities

 

 

(177,152

)

 

 

(148,818

)

 

 

(13,546

)

 

 

(670

)

 

 

(77,312

)

 

 

(417,498

)

Charge-offs

 

 

(48,970

)

 

 

(13,219

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(62,189

)

Transfer to loan collateral in process of foreclosure, net

 

 

(17,703

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(17,703

)

Amortization of origination fees and costs, net

 

 

(9,715

)

 

 

3,057

 

 

 

30

 

 

 

—

 

 

 

—

 

 

 

(6,628

)

Origination fees and costs, net

 

 

17,510

 

 

 

(3,677

)

 

 

(78

)

 

 

—

 

 

 

—

 

 

 

13,755

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

1,910

 

 

 

—

 

 

 

—

 

 

 

1,910

 

Gross loans – September 30, 2024

 

$

1,554,629

 

 

$

814,071

 

 

$

110,143

 

 

$

3,243

 

 

$

3,193

 

 

$

2,485,279

 

 

Three Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Taxi
Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – June 30, 2023

 

$

1,331,114

 

 

$

728,468

 

 

$

92,637

 

 

$

3,448

 

 

$

1,331

 

 

$

2,156,998

 

Loan originations

 

 

92,603

 

 

 

79,333

 

 

 

8,900

 

 

 

100

 

 

 

36,457

 

 

 

217,393

 

Principal receipts, sales, and maturities

 

 

(61,885

)

 

 

(53,095

)

 

 

(1,657

)

 

 

(281

)

 

 

(35,947

)

 

 

(152,865

)

Charge-offs

 

 

(11,684

)

 

 

(3,890

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,574

)

Transfer to loan collateral in process of foreclosure, net

 

 

(4,730

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,730

)

Amortization of origination fees and costs, net

 

 

(3,259

)

 

 

647

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,612

)

Origination fees and costs, net

 

 

4,281

 

 

 

(955

)

 

 

—

 

 

 

660

 

 

 

—

 

 

 

3,986

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

442

 

 

 

—

 

 

 

—

 

 

 

442

 

Gross loans – September 30, 2023

 

$

1,346,440

 

 

$

750,508

 

 

$

100,322

 

 

$

3,927

 

 

$

1,841

 

 

$

2,203,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – December 31, 2022

 

$

1,183,512

 

 

$

626,399

 

 

$

92,899

 

 

$

13,571

 

 

$

572

 

 

$

1,916,953

 

Loan originations

 

 

384,291

 

 

 

291,349

 

 

 

16,650

 

 

 

2,023

 

 

 

96,637

 

 

 

790,950

 

Principal receipts, sales, and maturities

 

 

(181,565

)

 

 

(158,300

)

 

 

(9,413

)

 

 

(6,207

)

 

 

(95,368

)

 

 

(450,853

)

Charge-offs

 

 

(33,440

)

 

 

(8,379

)

 

 

(900

)

 

 

(3,814

)

 

 

—

 

 

 

(46,533

)

Transfer to loan collateral in process of foreclosure, net

 

 

(13,078

)

 

 

—

 

 

 

—

 

 

 

(2,306

)

 

 

—

 

 

 

(15,384

)

Amortization of origination fees and costs, net

 

 

(9,177

)

 

 

1,898

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,279

)

Origination fees and costs, net

 

 

15,897

 

 

 

(2,459

)

 

 

—

 

 

 

660

 

 

 

—

 

 

 

14,098

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

1,086

 

 

 

—

 

 

 

—

 

 

 

1,086

 

Gross loans – September 30, 2023

 

$

1,346,440

 

 

$

750,508

 

 

$

100,322

 

 

$

3,927

 

 

$

1,841

 

 

$

2,203,038

 

 

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2024 and 2023.

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Allowance for credit losses – beginning balance

 

$

89,788

 

 

$

74,971

 

 

$

84,235

 

(1)

$

63,845

 

CECL transition amount upon ASU 2016-13 adoption

 

 

—

 

 

 

—

 

 

 

—

 

 

 

13,712

 

Charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

 

(16,242

)

 

 

(11,684

)

 

 

(48,970

)

 

 

(33,440

)

Home improvement

 

 

(4,258

)

 

 

(3,890

)

 

 

(13,219

)

 

 

(8,379

)

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(900

)

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,814

)

Total charge-offs

 

 

(20,500

)

 

 

(15,574

)

 

 

(62,189

)

 

 

(46,533

)

Recoveries

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

 

3,991

 

 

 

2,651

 

 

 

11,501

 

 

 

8,705

 

Home improvement

 

 

745

 

 

 

882

 

 

 

2,899

 

 

 

2,141

 

Commercial

 

 

—

 

 

 

—

 

 

 

20

 

 

 

10

 

Taxi medallion

 

 

2,343

 

 

 

1,671

 

 

 

4,123

 

 

 

10,208

 

Total recoveries

 

 

7,079

 

 

 

5,204

 

 

 

18,543

 

 

 

21,064

 

Net charge-offs (2)

 

 

(13,421

)

 

 

(10,370

)

 

 

(43,646

)

 

 

(25,469

)

Provision for credit losses

 

 

20,151

 

 

 

14,532

 

 

 

55,929

 

 

 

27,045

 

Allowance for credit losses – ending balance (3)

 

$

96,518

 

 

$

79,133

 

 

$

96,518

 

 

$

79,133

 
(1)
2023 beginning balance represents allowance prior to the adoption of ASU 2016-13.
(2)
As of September 30, 2024, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion loan portfolio were $166.2 million, including $99.2 million related to loans secured by New York City taxi medallions, some of which may represent collection opportunities for the Company.
(3)
As of September 30, 2024 and 2023, there were no allowance for credit losses and net charge-offs related to the strategic partnership loans.

The following tables present the gross charge-offs for the three and nine months ended September 30, 2024, by the year of origination:

Three Months Ended September 30, 2024
(Dollars in thousands)

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Total

 

Recreation

 

$

921

 

 

$

4,717

 

 

$

5,167

 

 

$

2,354

 

 

$

956

 

 

$

2,127

 

 

$

16,242

 

Home improvement

 

 

148

 

 

 

1,275

 

 

 

1,583

 

 

 

787

 

 

 

209

 

 

 

256

 

 

 

4,258

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

1,069

 

 

$

5,992

 

 

$

6,750

 

 

$

3,141

 

 

$

1,165

 

 

$

2,383

 

 

$

20,500

 

 

Nine Months Ended September 30, 2024
(Dollars in thousands)

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Total

 

Recreation

 

$

1,020

 

 

$

12,579

 

 

$

17,034

 

 

$

7,841

 

 

$

3,231

 

 

$

7,265

 

 

$

48,970

 

Home improvement

 

 

188

 

 

 

4,307

 

 

 

4,857

 

 

 

2,457

 

 

 

615

 

 

 

795

 

 

 

13,219

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

1,208

 

 

$

16,886

 

 

$

21,891

 

 

$

10,298

 

 

$

3,846

 

 

$

8,060

 

 

$

62,189

 

The following tables present the gross charge-offs for the three and nine months ended September 30, 2023, by the year of origination:

Three Months Ended September 30, 2023
(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total

 

Recreation

 

$

890

 

 

$

4,587

 

 

$

2,250

 

 

$

1,175

 

 

$

1,273

 

 

$

1,509

 

 

$

11,684

 

Home improvement

 

 

964

 

 

 

1,783

 

 

 

733

 

 

 

158

 

 

 

106

 

 

 

146

 

 

 

3,890

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

1,854

 

 

$

6,370

 

 

$

2,983

 

 

$

1,333

 

 

$

1,379

 

 

$

1,655

 

 

$

15,574

 

 

Nine Months Ended September 30, 2023
(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total

 

Recreation

 

$

934

 

 

$

11,763

 

 

$

7,664

 

 

$

3,631

 

 

$

3,745

 

 

$

5,703

 

 

$

33,440

 

Home improvement

 

 

1,003

 

 

 

4,235

 

 

 

1,834

 

 

 

459

 

 

 

328

 

 

 

520

 

 

 

8,379

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

900

 

 

 

—

 

 

 

900

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,814

 

 

 

3,814

 

Total

 

$

1,937

 

 

$

15,998

 

 

$

9,498

 

 

$

4,090

 

 

$

4,973

 

 

$

10,037

 

 

$

46,533

 

 

The following tables present the allowance for credit losses by type as of September 30, 2024 and December 31, 2023.

September 30, 2024
(Dollars in thousands)

 

Amount

 

 

Percentage
of Allowance (1)

 

 

Allowance as
a Percent of
Loan Category

 

 

Allowance as
a Percent of
Nonaccrual

 

Recreation

 

$

70,383

 

 

 

73

%

 

 

4.53

%

 

 

293.45

%

Home improvement

 

 

19,731

 

 

 

21

 

 

 

2.42

 

 

 

82.26

 

Commercial

 

 

5,114

 

 

 

5

 

 

 

4.64

 

 

 

21.32

 

Taxi medallion

 

 

1,290

 

 

 

1

 

 

 

39.78

 

 

 

5.38

 

Total

 

$

96,518

 

 

 

100

%

 

 

3.88

%

 

 

402.41

%
(1)
Percentages may not foot due to rounding.

December 31, 2023
(Dollars in thousands)

 

Amount

 

 

Percentage
of Allowance (1)

 

 

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

%
(1)
Percentages may not foot due to rounding.

The following table presents total nonaccrual loans and foregone interest. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Total nonaccrual loans

 

$

23,985

 

 

$

25,974

 

Interest foregone quarter to date

 

 

419

 

 

 

417

 

Amount of foregone interest applied to principal in the quarter

 

 

70

 

 

 

59

 

Interest foregone year to date

 

 

983

 

 

 

928

 

Amount of foregone interest applied to principal for the year

 

 

199

 

 

 

238

 

Interest foregone life-to-date

 

 

3,483

 

 

 

2,119

 

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

 

 

880

 

 

 

822

 

Percentage of nonaccrual loans to gross loan portfolio

 

 

1.0

%

 

 

1.2

%

Percentage of allowance for credit losses to nonaccrual loans

 

 

402.4

%

 

 

324.3

%

The following tables present the performance status of loans as of September 30, 2024 and December 31, 2023.

September 30, 2024
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,546,412

 

 

$

8,217

 

 

$

1,554,629

 

 

 

0.53

%

Home improvement

 

 

812,509

 

 

 

1,562

 

 

 

814,071

 

 

 

0.19

 

Commercial

 

 

99,180

 

 

 

10,963

 

 

 

110,143

 

 

 

9.95

 

Taxi medallion

 

 

—

 

 

 

3,243

 

 

 

3,243

 

 

 

100.00

 

Strategic partnership

 

 

3,193

 

 

 

—

 

 

 

3,193

 

 

 

—

 

Total

 

$

2,461,294

 

 

$

23,985

 

 

$

2,485,279

 

 

 

0.97

%

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,326,567

 

 

$

9,659

 

 

$

1,336,226

 

 

 

0.72

%

Home improvement

 

 

759,128

 

 

 

1,489

 

 

 

760,617

 

 

 

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

%

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 present the aging of all loans as of September 30, 2024 and December 31, 2023.

September 30, 2024

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total
Past Due

 

 

Current

 

 

Total (1)

 

 

Accruing

 

Recreation

 

$

41,431

 

 

$

15,657

 

 

$

7,475

 

 

$

64,563

 

 

$

1,438,636

 

 

$

1,503,199

 

 

$

—

 

Home improvement

 

 

4,742

 

 

 

2,000

 

 

 

1,564

 

 

 

8,306

 

 

 

809,838

 

 

 

818,144

 

 

 

—

 

Commercial

 

 

—

 

 

 

—

 

 

 

8,396

 

 

 

8,396

 

 

 

101,950

 

 

 

110,346

 

 

 

—

 

Taxi medallion

 

 

148

 

 

 

200

 

 

 

—

 

 

 

348

 

 

 

2,895

 

 

 

3,243

 

 

 

—

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,193

 

 

 

3,193

 

 

 

—

 

Total

 

$

46,321

 

 

$

17,857

 

 

$

17,435

 

 

$

81,613

 

 

$

2,356,512

 

 

$

2,438,125

 

 

$

—

 
(1)
Excludes $47.2 million of capitalized loan origination costs.

December 31, 2023

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total
Past Due

 

 

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.

The Company estimates that the weighted average loan-to-value ratio of the taxi medallion loans was approximately 171% and 183% as of September 30, 2024 and December 31, 2023.

The following tables present the activity of loan collateral in process of foreclosure, which relate only to the recreation and taxi medallion loans, for the three and nine months ended September 30, 2024.

Three Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – June 30, 2024

 

$

1,441

 

 

$

7,918

 

 

$

9,359

 

Transfer from loans, net

 

 

6,609

 

 

 

—

 

 

 

6,609

 

Sales

 

 

—

 

 

 

—

 

 

 

—

 

Cash payments received

 

 

(2,059

)

 

 

(1,007

)

 

 

(3,066

)

Collateral valuation adjustments (1)

 

 

(4,064

)

 

 

(20

)

 

 

(4,084

)

Loan collateral in process of foreclosure – September 30, 2024

 

$

1,927

 

 

$

6,891

 

 

$

8,818

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – December 31, 2023

 

$

1,779

 

 

$

9,993

 

 

$

11,772

 

Transfer from loans, net

 

 

17,703

 

 

 

—

 

 

 

17,703

 

Sales

 

 

—

 

 

 

(39

)

 

 

(39

)

Cash payments received

 

 

(6,731

)

 

 

(3,161

)

 

 

(9,892

)

Collateral valuation adjustments (1)

 

 

(10,824

)

 

 

98

 

 

 

(10,726

)

Loan collateral in process of foreclosure – September 30, 2024

 

$

1,927

 

 

$

6,891

 

 

$

8,818

 
(1)
Collateral valuation adjustments for recreational loans are generally the result of the liquidation of collateral through a repossession process. Due to the short-term nature of the liquidation process, collateral valuation adjustments on recreational loans are recorded as charge-offs to the allowance for credit losses on loans as this is an adjustment to the initial estimate on the fair value, less estimated costs to sell that was initially estimated in the preliminary charge off and amount transferred to collateral in the process of foreclosure.

 

 

 

The following tables present the activity of loan collateral in process of foreclosure, which relate only to the recreation and taxi medallion loans, for the three and nine months ended September 30, 2023.

Three Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – June 30, 2023

 

$

729

 

 

$

16,074

 

 

$

16,803

 

Transfer from loans, net

 

 

4,730

 

 

 

—

 

 

 

4,730

 

Sales

 

 

(1,080

)

 

 

(117

)

 

 

(1,197

)

Cash payments received

 

 

(163

)

 

 

(1,939

)

 

 

(2,102

)

Collateral valuation adjustments (1)

 

 

(2,281

)

 

 

(30

)

 

 

(2,311

)

Loan collateral in process of foreclosure – September 30, 2023

 

$

1,935

 

 

$

13,988

 

 

$

15,923

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – December 31, 2022

 

$

1,376

 

 

$

20,443

 

 

$

21,819

 

Transfer from loans, net

 

 

13,078

 

 

 

2,306

 

 

 

15,384

 

Sales

 

 

(5,858

)

 

 

(685

)

 

 

(6,543

)

Cash payments received

 

 

(291

)

 

 

(7,773

)

 

 

(8,064

)

Collateral valuation adjustments (1)

 

 

(6,370

)

 

 

(303

)

 

 

(6,673

)

Loan collateral in process of foreclosure – September 30, 2023

 

$

1,935

 

 

$

13,988

 

 

$

15,923

 
(1)
Collateral valuation adjustments for recreational loans are generally the result of the liquidation of collateral through a repossession process. Due to the short-term nature of the liquidation process, collateral valuation adjustments on recreational loans are recorded as charge-offs to the allowance for credit losses on loans as this is an adjustment to the initial estimate on the fair value, less estimated costs to sell that was initially estimated in the preliminary charge off and amount transferred to collateral in the process of foreclosure.

As of September 30, 2024, taxi medallion loans in the process of foreclosure included 315 taxi medallions in the New York City market, 188 taxi medallions in the Chicago market, 23 taxi medallions in the Newark market, and 31 taxi medallions in various other markets.
v3.24.3
Funds Borrowed
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Funds Borrowed

(5) FUNDS BORROWED

The following table presents outstanding balances of funds borrowed.

 

Payments Due for the Twelve Months Ending September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

2025

 

 

2026

 

 

2027

 

 

2028

 

 

2029

 

 

Thereafter

 

 

September 30, 2024 (1)

 

 

December 31, 2023(1)

 

 

Interest
Rate (2)

 

Deposits (3)

 

$

957,570

 

 

$

387,112

 

 

$

434,280

 

 

$

141,074

 

 

$

190,567

 

 

$

—

 

 

$

2,110,603

 

 

$

1,869,439

 

 

 

3.68

%

Retail and privately placed notes

 

 

—

 

 

 

31,250

 

 

 

53,750

 

 

 

39,000

 

 

 

—

 

 

 

22,500

 

 

 

146,500

 

 

 

139,500

 

 

 

8.12

 

SBA debentures and borrowings

 

 

14,000

 

 

 

14,000

 

 

 

2,000

 

 

 

1,250

 

 

 

1,250

 

 

 

37,750

 

 

 

70,250

 

 

 

75,250

 

 

 

3.53

 

Trust preferred securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33,000

 

 

 

33,000

 

 

 

33,000

 

 

 

7.38

 

Federal reserve and other borrowings

 

 

35,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

35,000

 

 

 

—

 

 

 

5.00

 

Total

 

$

1,006,570

 

 

$

432,362

 

 

$

490,030

 

 

$

181,324

 

 

$

191,817

 

 

$

93,250

 

 

$

2,395,353

 

 

$

2,117,189

 

 

 

4.01

%
(1)
Excludes deferred financing costs of $8.4 million and $8.5 million as of September 30, 2024 and December 31, 2023.
(2)
Weighted average contractual rate as of September 30, 2024.
(3)
Balance excludes $2.3 million and $1.5 million of strategic partner reserve deposits as of September 30, 2024 and December 31, 2023.

(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. Additionally, the Bank raises deposits through listing services and, as of September 30, 2024 and December 31, 2023, the Bank had $10.9 million and $11.8 million in listing service deposit balances from other financial institutions. In April 2023, the Bank began to originate retail savings deposits through a third-party service provider and, as of September 30, 2024 and December 31, 2023, the Bank had $33.4 million and $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 September 30, 2024.

(Dollars in thousands)

 

September 30, 2024

 

Three months or less

 

$

209,515

 

Over three months through six months

 

 

231,435

 

Over six months through one year

 

 

516,620

 

Over one year

 

 

1,153,033

 

Deposits

 

 

2,110,603

 

 Strategic partner collateral deposits

 

 

2,250

 

Total deposits

 

$

2,112,853

 

 

(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 September 30, 2024, the Bank had $110.1 million in home improvement loans pledged as collateral to the Federal Reserve. The current advance rate on the pledged securities is approximately 45.1% of book value, for a total of approximately $49.7 million in secured borrowing capacity, of which $35.0 million was utilized as of September 30, 2024.

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 September 30, 2024, there were no outstanding amounts with respect to these arrangements.

(C) PRIVATELY PLACED NOTES

In August 2024, the Company completed a private placement to certain institutional investors of $5.0 million aggregate principal amount of 8.625% unsecured senior notes due August 2039, with interest payable semiannually. The Company intends to use the net proceeds from the offering for general corporate purposes.

In June 2024, the Company amended the notes previously issued in a private placement to certain institutional investors in December 2023, increasing the principal amount from $12.5 million to $17.5 million, reducing the interest rate to 8.875% from 9.0%, and extending the maturity date from December 2033 to June 2039. The Company used, and intends to use, the net proceeds from the offering for general corporate purposes, which included the repayment of the remaining 8.25% notes that matured in March 2024 described below.

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. The remaining $3.0 million principal amount outstanding was repaid in March 2024 at maturity.

(D) SBA DEBENTURES AND BORROWINGS

Over the years, the SBA has approved commitments for Medallion Capital and FSVC, typically for a four and a 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, Medallion Capital accepted a commitment from the SBA for $20.0 million in debenture financing. Medallion Capital can draw funds under the commitment, in whole or in part, until September 30, 2027. In connection with the commitment, Medallion Capital paid the SBA a leverage fee of $0.2 million, with an additional $0.4 million fee to be paid pro-rata as Medallion Capital draws under the commitment. As of September 30, 2024, $9.8 million of the commitment had been drawn, and $10.2 million was drawable.

On February 28, 2024, Medallion Capital accepted a commitment from the SBA for $18.5 million in debenture financing with a ten-year term. Medallion Capital can draw funds under the commitment, in whole or in part, until September 30, 2028. In connection with the commitment, Medallion Capital paid the SBA a leverage fee of $0.2 million, with the remaining $0.4 million of the fee to be paid pro rata as Medallion Capital draws under the commitment. As of September 30, 2024, none of the commitment had been drawn, $0.3 million was drawable, with the balance of $18.2 million drawable upon the infusion of $9.1 million of capital from either the capitalization of retained earnings or a capital infusion into Medallion Capital 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. 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 September 30, 2024, $33.0 million was outstanding on the trust preferred securities.

(F) OTHER BORROWINGS

In January 2024, Medallion Capital entered into a $7.5 million revolving credit facility with a regional bank. The facility allows Medallion Capital to finance, on a short-term basis, investments for which it anticipates receiving financing from the SBA. The facility bears interest at a rate of 2.75% plus one month SOFR, has an annual facility fee of 0.1%, matures on January 1, 2025, and requires that Medallion Capital have total commitments available from the SBA of at least the total requested advance. As of September 30, 2024, the facility had no outstanding borrowings.

(G) 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 September 30, 2024, the Company was in compliance with all such covenants.
v3.24.3
Leases
 9 Months Ended
Sep. 30, 2024
Leases [Abstract]  
Leases

(6) LEASES

The Company has leased premises that expire at various dates through February 28, 2031 subject to various operating leases.

The following table presents the operating lease costs and additional information for the three and nine months ended September 30, 2024 and 2023.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Operating lease costs

 

$

607

 

 

$

597

 

 

$

1,817

 

 

$

1,792

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

 

664

 

 

 

629

 

 

 

2,019

 

 

 

1,855

 

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

 

 

(58

)

 

 

(56

)

 

 

(176

)

 

 

(167

)

The following table presents the breakout of the operating leases as of September 30, 2024 and December 31, 2023.

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Operating lease right-of-use assets

 

$

7,259

 

 

$

8,785

 

Other current liabilities

 

 

2,281

 

 

 

2,472

 

Operating lease liabilities

 

 

5,534

 

 

 

7,019

 

Total operating lease liabilities

 

 

7,815

 

 

 

9,491

 

Weighted average remaining lease term

 

4.4 years

 

 

4.9 years

 

Weighted average discount rate

 

 

5.56

%

 

 

5.47

%

At September 30, 2024, maturities of the lease liabilities were as follows:

(Dollars in thousands)

 

 

 

Remainder of 2024

 

$

634

 

2025

 

 

2,546

 

2026

 

 

2,567

 

2027

 

 

1,342

 

2028

 

 

573

 

Thereafter

 

 

1,139

 

Total lease payments

 

 

8,801

 

Less imputed interest

 

 

986

 

Total operating lease liabilities

 

$

7,815

 
v3.24.3
Income Taxes
 9 Months Ended
Sep. 30, 2024
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 presents the significant components of the Company's deferred and other tax assets and liabilities as of September 30, 2024 and December 31, 2023.

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Goodwill and other intangibles

 

$

42,762

 

 

$

43,034

 

Provision for credit losses

 

 

(13,931

)

 

 

(13,032

)

Net operating loss carryforwards (1)

 

 

(3,805

)

 

 

(3,802

)

Accrued expenses, compensation, and other assets

 

 

(6,151

)

 

 

(6,976

)

Unrealized losses on other investments

 

 

(2,227

)

 

 

(1,877

)

Total deferred tax liability

 

 

16,648

 

 

 

17,347

 

Valuation allowance

 

 

3,950

 

 

 

3,860

 

Deferred tax liability, net

 

$

20,598

 

 

$

21,207

 
(1)
As of September 30, 2024, 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 as of September 30, 2024.

The following table presents the components of the Company's tax provision for the three and nine months ended September 30, 2024 and 2023:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

4,899

 

 

$

5,893

 

 

$

11,421

 

 

$

12,349

 

State

 

 

1,533

 

 

 

1,753

 

 

 

3,652

 

 

 

3,717

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,798

)

 

 

(689

)

 

 

(598

)

 

 

1,761

 

State

 

 

(579

)

 

 

(230

)

 

 

(279

)

 

 

755

 

Net provision for income taxes

 

$

4,055

 

 

$

6,727

 

 

$

14,196

 

 

$

18,582

 

The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax provision reported for the three and nine months ended September 30, 2024 and 2023.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Statutory Federal income tax provision at 21%

 

$

2,977

 

 

$

4,088

 

 

$

9,338

 

 

$

13,414

 

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

 

 

583

 

 

 

800

 

 

 

1,827

 

 

 

2,624

 

Non-deductible expenses

 

 

427

 

 

 

624

 

 

 

2,582

 

 

 

1,701

 

Valuation allowance against deferred tax assets

 

 

—

 

 

 

1,138

 

 

 

—

 

 

 

1,138

 

Other

 

 

68

 

 

 

77

 

 

 

449

 

 

 

(295

)

Total income tax provision

 

$

4,055

 

 

$

6,727

 

 

$

14,196

 

 

$

18,582

 

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 September 30, 2024.

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.
v3.24.3
Stock Options and Restricted Stock
 9 Months Ended
Sep. 30, 2024
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 share 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 1,375,031 remained issuable as of September 30, 2024. 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 September 30, 2024, 935,456 options on the Company’s common stock were outstanding under the Company’s plans, of which 848,069 options were vested. Additionally, as of September 30, 2024, there were 876,444 unvested shares of restricted stock, 512,131 unvested performance stock units, 93,486 unvested restricted stock units, and 237,215 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 nine months ended September 30, 2024 and 2023.

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 PSU activity for the first, second, and third quarters of 2024 and the 2023 full year. The PSUs have vesting conditions based upon certain levels of total pre-tax income as well as return on common equity attained over a three-year period. The PSUs cliff vest after three years based upon the performance of the Company. Dividend equivalent PSUs accumulate and convert to additional shares for the benefit of the grantee at the vesting date or are forfeited if the performance conditions are not met.

 

Number of
Shares

 

 

 

Grant
Price Per
Share

 

 

Weighted
Average
Grant Price

 

Outstanding at December 31, 2022

 

 

—

 

 

$

 

—

 

 

$

—

 

Granted

 

 

296,444

 

 

 

 

6.08

 

 

 

6.08

 

Cancelled

 

 

—

 

 

 

 

—

 

 

 

—

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at December 31, 2023

 

 

296,444

 

 

$

 

6.08

 

 

$

6.08

 

Granted

 

 

215,687

 

 

 

 

8.97

 

 

 

8.97

 

Cancelled

 

 

—

 

 

 

 

—

 

 

 

—

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at March 31, 2024

 

 

512,131

 

 

$

6.08 - 8.97

 

 

$

7.30

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

—

 

 

 

 

—

 

 

 

—

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at June 30, 2024

 

 

512,131

 

 

$

6.08 - 8.97

 

 

$

7.30

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

—

 

 

 

 

—

 

 

 

—

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at September 30, 2024

 

 

512,131

 

 

$

6.08 - 8.97

 

 

$

7.30

 

The following table presents the activity for the restricted stock programs for the first, second, and third quarters of 2024 and the 2023 full year.

 

Number of
Shares

 

 

 

Grant
Price Per
Share

 

 

Weighted
Average
Grant Price

 

Outstanding at December 31, 2022

 

 

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

 

 

995,376

 

 

$

4.89 - 9.37

 

 

$

7.74

 

Granted

 

 

296,178

 

 

 

 

8.97

 

 

 

8.97

 

Cancelled

 

 

(1,208

)

 

 

6.86 - 9.37

 

 

 

8.13

 

Vested (1)

 

 

(400,985

)

 

 

4.89 - 8.40

 

 

 

7.69

 

Outstanding at March 31, 2024 (2)

 

 

889,361

 

 

$

4.89 - 9.37

 

 

$

8.18

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(1,696

)

 

 

4.89 - 9.37

 

 

 

7.88

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at June 30, 2024 (2)

 

 

887,665

 

 

$

4.89 - 9.37

 

 

$

8.18

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(11,221

)

 

 

4.89 - 9.37

 

 

 

7.74

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at September 30, 2024 (2)

 

 

876,444

 

 

$

4.89 - 9.37

 

 

$

8.18

 
(1)
The aggregate fair value of the restricted stock vested was $2.7 million for the nine months ended September 30, 2024 and $2.1 million for the year ended December 31, 2023.
(2)
The aggregate fair value of the restricted stock was $7.1 million as of September 30, 2024. The remaining vesting period was 2.4 years at September 30, 2024.

 

 

The following table presents the activity for the stock option programs for the first, second, and third quarters of 2024 and the 2023 full year.

 

Number of
Options

 

 

 

Exercise
Price Per
Share

 

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2022

 

 

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

 

 

959,522

 

 

$

2.14 - 9.38

 

 

$

6.51

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(85

)

 

 

 

4.89

 

 

 

4.89

 

Exercised (1)

 

 

(13,383

)

 

 

4.89 - 7.25

 

 

 

6.61

 

Outstanding at March 31, 2024 (2)

 

 

946,054

 

 

$

2.14 - 9.38

 

 

$

6.51

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(146

)

 

 

 

4.89

 

 

 

4.89

 

Exercised (1)

 

 

(2,867

)

 

 

4.89 - 7.25

 

 

 

6.14

 

Outstanding at June 30, 2024 (2)

 

 

943,041

 

 

$

2.14 - 9.38

 

 

$

6.51

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(1,733

)

 

 

 

—

 

 

 

—

 

Exercised (1)

 

 

(5,852

)

 

 

 

—

 

 

 

 

Outstanding at September 30, 2024 (2)

 

 

935,456

 

 

$

2.14 - 9.38

 

 

$

6.51

 

Options exercisable at:

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

697,647

 

 

$

2.14 - 9.38

 

 

$

6.51

 

September 30, 2024 (2)

 

 

848,069

 

 

$

2.14 - 9.38

 

 

$

6.52

 
(1)
The aggregate intrinsic value of exercised options, 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 less than $0.1 million for the three and nine months ended September 30, 2024 and was $0.1 million for the year ended December 31, 2023.
(2)
The aggregate intrinsic value of outstanding options, which represents the difference between the price of the Company’s common stock at September 30, 2024 and the related exercise price of the underlying options, was $1.5 million for outstanding options and $1.4 million for vested options. The remaining contractual life was 5.4 years for outstanding options and 5.3 years for vested options at September 30, 2024.

The following table presents the activity for the unvested options outstanding under the plans described above for the 2024 first, second, and third quarters.

 

Number of
Options

 

 

 

Exercise Price
Per Share

 

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2023

 

 

261,875

 

 

$

4.89 - 7.25

 

 

$

6.49

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

—

 

 

 

 

—

 

 

 

—

 

Vested (1)

 

 

(173,430

)

 

 

4.89 - 7.25

 

 

 

6.56

 

Outstanding at March 31, 2024

 

 

88,445

 

 

$

4.89 - 6.79

 

 

$

6.37

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(146

)

 

 

 

4.89

 

 

 

4.89

 

Vested (1)

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at June 30, 2024

 

 

88,299

 

 

$

4.89 - 6.79

 

 

$

6.37

 

Granted

 

 

—

 

 

 

 

—

 

 

 

—

 

Cancelled

 

 

(912

)

 

 

 

4.89

 

 

 

4.89

 

Vested

 

 

—

 

 

 

 

—

 

 

 

—

 

Outstanding at September 30, 2024

 

 

87,387

 

 

$

4.89 - 7.25

 

 

$

6.49

 
(1)
The intrinsic value of the options vested was $0.4 million for the nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company granted 92,350 restricted stock units, or RSUs, with a vesting date of June 11, 2025 at a grant price of $8.23 and during the year ended December 31, 2023, granted 83,158 RSUs which vested on June 22, 2024 at a grant price of $9.14. For the RSUs granted in 2024 and 2023, unit holders 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 September 30, 2024, there were 330,701 RSUs outstanding, including 237,215 which had previously vested.
v3.24.3
Segment Reporting
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
Segment Reporting

(9) SEGMENT REPORTING

The Company has five business segments, which include four lending segments and one non-operating segment, 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 lending. The recreation and home improvement lending segments are operated by the Bank and loans are made to borrowers residing nationwide. The recreation lending segment is a consumer finance business that works with third-party dealers and financial service providers for the purpose of financing RVs, boats, collector cars, and other consumer recreational equipment, of which RVs, boats, and collector cars make up 55%, 20%, and 11% of the segment portfolio, with no other product lines equal to or exceeding 10%, as of September 30, 2024. The highest concentrations of recreation loans are in Texas and Florida at 16% and 10% of loans outstanding and with no other states at or above 10% as of September 30, 2024. 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 38%, 24%, and 13% of total home improvement loans outstanding, and with no other product lines exceeding 10% as of September 30, 2024. The highest concentrations of home improvement loans are in Texas and Florida both at 11% of loans outstanding and with no other states at or above 10% as of September 30, 2024. The commercial lending segment focuses on serving a wide variety of industries, with concentrations in manufacturing, construction, and wholesale trade making up 55%, 14%, and 11% of the loans outstanding as of September 30, 2024, with no other product lines exceeding 10% as of September 30, 2024. The commercial lending segment invests across the United States with concentrations in California, Wisconsin, and Texas each having 30%, 11%, and 10% of the segment portfolio, and no other states having a concentration at or greater than 10% as of September 30, 2024. 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 September 30, 2024.

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.

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 tables present segment data as of and for the three and nine months ended September 30, 2024.

Three Months Ended September 30, 2024

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

51,443

 

 

$

19,008

 

 

$

3,761

 

 

$

184

 

 

$

2,013

 

 

$

76,409

 

Total interest expense

 

 

12,566

 

 

 

7,033

 

 

 

1,063

 

 

 

30

 

 

 

2,980

 

 

 

23,672

 

Net interest income (loss)

 

 

38,877

 

 

 

11,975

 

 

 

2,698

 

 

 

154

 

 

 

(967

)

 

 

52,737

 

Provision (benefit) for credit losses

 

 

17,494

 

 

 

4,855

 

 

 

252

 

 

 

(2,450

)

 

 

—

 

 

 

20,151

 

Net interest income (loss) after loss provision

 

 

21,383

 

 

 

7,120

 

 

 

2,446

 

 

 

2,604

 

 

 

(967

)

 

 

32,586

 

Other income (loss), net

 

 

200

 

 

 

2

 

 

 

(414

)

 

 

321

 

 

 

478

 

 

 

587

 

Operating (expenses) income

 

 

(11,853

)

 

 

(5,746

)

 

 

(1,235

)

 

 

(1,444

)

 

 

1,283

 

 

 

(18,995

)

Net income before taxes

 

 

9,730

 

 

 

1,376

 

 

 

797

 

 

 

1,481

 

 

 

794

 

 

 

14,178

 

Income tax provision

 

 

(2,810

)

 

 

(290

)

 

 

(159

)

 

 

(457

)

 

 

(339

)

 

 

(4,055

)

Net income after taxes

 

$

6,920

 

 

$

1,086

 

 

$

638

 

 

$

1,024

 

 

$

455

 

 

$

10,123

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,512

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

8,611

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

1,554,629

 

 

$

814,071

 

 

$

110,143

 

 

$

3,243

 

 

$

3,193

 

 

$

2,485,279

 

Total assets

 

 

1,505,400

 

 

 

798,261

 

 

 

105,232

 

 

 

6,208

 

 

 

464,951

 

 

 

2,880,052

 

Total funds borrowed

 

 

1,253,224

 

 

 

664,541

 

 

 

87,604

 

 

 

5,168

 

 

 

387,066

 

 

 

2,397,603

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.81

%

 

 

0.55

%

 

 

2.41

%

 

 

50.54

%

 

 

0.41

%

 

 

1.43

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

9.61

 

Return on average equity

 

 

13.35

 

 

 

3.86

 

 

 

16.38

 

 

 

302.61

 

 

 

2.57

 

 

 

9.46

 

Interest yield

 

 

13.34

 

 

 

9.51

 

 

 

13.57

 

 

 

21.96

 

 

NM

 

 

 

11.75

 

Net interest margin, gross

 

 

10.08

 

 

 

5.99

 

 

 

9.74

 

 

 

18.38

 

 

NM

 

 

 

8.11

 

Net interest margin, net of allowance

 

 

10.55

 

 

 

6.14

 

 

 

10.19

 

 

 

30.60

 

 

NM

 

 

 

8.42

 

Reserve coverage

 

 

4.53

 

 

 

2.42

 

 

 

4.64

 

 

 

39.78

 

 

NM

 

 

 

3.88

 

Delinquency status (1)

 

 

0.50

 

 

 

0.19

 

 

 

7.39

 

 

 

—

 

 

NM

 

 

 

0.72

 

Charge-off (recovery) ratio (2)

 

 

3.18

 

 

 

1.76

 

 

 

—

 

 

 

(279.58

)

 

NM

 

 

 

2.18

 

 

(1) Loans 90 days or more past due.

(2) Negative balances indicate net recoveries for the period.

(NM) Not meaningful.

(*) Line item is not applicable to segments.

Nine Months Ended September 30, 2024

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

142,860

 

 

$

54,106

 

 

$

10,944

 

 

$

514

 

 

$

5,759

 

 

$

214,183

 

Total interest expense

 

 

33,171

 

 

 

18,773

 

 

 

3,217

 

 

 

83

 

 

 

8,417

 

 

 

63,661

 

Net interest income (loss)

 

 

109,689

 

 

 

35,333

 

 

 

7,727

 

 

 

431

 

 

 

(2,658

)

 

 

150,522

 

Provision (benefit) for credit losses

 

 

50,319

 

 

 

9,032

 

 

 

946

 

 

 

(4,368

)

 

 

—

 

 

 

55,929

 

Net interest income (loss) after loss provision

 

 

59,370

 

 

 

26,301

 

 

 

6,781

 

 

 

4,799

 

 

 

(2,658

)

 

 

94,593

 

Other income, net

 

 

756

 

 

 

7

 

 

 

3,774

 

 

 

1,294

 

 

 

1,258

 

 

 

7,089

 

Operating expenses

 

 

(31,376

)

 

 

(15,317

)

 

 

(3,657

)

 

 

(3,560

)

 

 

(3,305

)

 

 

(57,215

)

Net income (loss) before taxes

 

 

28,750

 

 

 

10,991

 

 

 

6,898

 

 

 

2,533

 

 

 

(4,705

)

 

 

44,467

 

Income tax (provision) benefit

 

 

(9,178

)

 

 

(3,509

)

 

 

(2,202

)

 

 

(809

)

 

 

1,502

 

 

 

(14,196

)

Net income (loss) after taxes

 

$

19,572

 

 

$

7,482

 

 

$

4,696

 

 

$

1,724

 

 

$

(3,203

)

 

$

30,271

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,535

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

25,736

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

1,554,629

 

 

$

814,071

 

 

$

110,143

 

 

$

3,243

 

 

$

3,193

 

 

$

2,485,279

 

Total assets

 

 

1,505,400

 

 

 

798,261

 

 

 

105,232

 

 

 

6,208

 

 

 

464,951

 

 

 

2,880,052

 

Total funds borrowed

 

 

1,253,224

 

 

 

664,541

 

 

 

87,604

 

 

 

5,168

 

 

 

387,066

 

 

 

2,397,603

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.87

%

 

 

1.31

%

 

 

5.92

%

 

 

26.64

%

 

 

(0.96

)%

 

 

1.51

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

9.79

 

Return on average equity

 

 

12.78

 

 

 

8.69

 

 

 

38.63

 

 

 

155.33

 

 

 

(6.24

)

 

 

9.62

 

Interest yield

 

 

13.32

 

 

 

9.38

 

 

 

13.20

 

 

 

20.59

 

 

NM

 

 

 

11.54

 

Net interest margin, gross

 

 

10.23

 

 

 

6.12

 

 

 

9.32

 

 

 

16.65

 

 

NM

 

 

 

8.11

 

Net interest margin, net of allowance

 

 

10.65

 

 

 

6.26

 

 

 

9.69

 

 

 

27.99

 

 

NM

 

 

 

8.41

 

Reserve coverage

 

 

4.53

 

 

 

2.42

 

 

 

4.64

 

 

 

39.78

 

 

NM

 

 

 

3.88

 

Delinquency status(1)

 

 

0.50

 

 

 

0.19

 

 

 

7.39

 

 

 

—

 

 

NM

 

 

 

0.72

 

Charge-off (recovery) ratio(2)

 

 

3.48

 

 

 

1.78

 

 

 

(0.02

)

 

 

(159.26

)

 

NM

 

 

 

2.51

 

 

(1) Loans 90 days or more past due.

(2) Negative balances indicate net recoveries for the period.

(NM) Not meaningful.

(*) Line item is not applicable to segments.

The following tables present segment data as of and for the three and nine months ended September 30, 2023.

Three Months September 30, 2023

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

44,341

 

 

$

16,578

 

 

$

3,248

 

 

$

342

 

 

$

1,377

 

 

$

65,886

 

Total interest expense (income)

 

 

8,770

 

 

 

5,187

 

 

 

921

 

 

 

(69

)

 

 

2,293

 

 

 

17,102

 

Net interest income (loss)

 

 

35,571

 

 

 

11,391

 

 

 

2,327

 

 

 

411

 

 

 

(916

)

 

 

48,784

 

Provision (benefit) for credit losses

 

 

11,877

 

 

 

3,860

 

 

 

621

 

 

 

(1,772

)

 

 

(54

)

 

 

14,532

 

Net interest income (loss) after loss provision

 

 

23,694

 

 

 

7,531

 

 

 

1,706

 

 

 

2,183

 

 

 

(862

)

 

 

34,252

 

Other income, net

 

 

128

 

 

 

1

 

 

 

2,322

 

 

 

1,404

 

 

 

451

 

 

 

4,306

 

Operating expenses

 

 

(8,637

)

 

 

(4,433

)

 

 

(1,129

)

 

 

(1,421

)

 

 

(3,469

)

 

 

(19,089

)

Net income (loss) before taxes

 

 

15,185

 

 

 

3,099

 

 

 

2,899

 

 

 

2,166

 

 

 

(3,880

)

 

 

19,469

 

Income tax (provision) benefit

 

 

(5,169

)

 

 

(1,051

)

 

 

(907

)

 

 

(955

)

 

 

1,355

 

 

 

(6,727

)

Net income (loss) after taxes

 

$

10,016

 

 

$

2,048

 

 

$

1,992

 

 

$

1,211

 

 

$

(2,525

)

 

$

12,742

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,512

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

11,230

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans, gross

 

$

1,346,440

 

 

$

750,508

 

 

$

100,322

 

 

$

3,927

 

 

$

1,841

 

 

$

2,203,038

 

Total assets

 

 

1,307,860

 

 

 

739,452

 

 

 

97,298

 

 

 

17,258

 

 

 

396,759

 

 

 

2,558,627

 

Total funds borrowed

 

 

1,074,592

 

 

 

607,565

 

 

 

79,944

 

 

 

14,180

 

 

 

323,638

 

 

 

2,099,919

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

3.01

%

 

 

1.11

%

 

 

8.12

%

 

 

26.70

%

 

 

(2.56

)%

 

 

2.01

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

13.80

 

Return on average equity

 

 

19.50

 

 

 

7.21

 

 

 

52.31

 

 

 

172.77

 

 

 

(16.56

)

 

 

12.89

 

Interest yield

 

 

13.12

 

 

 

8.88

 

 

 

13.05

 

 

 

35.22

 

 

NM

 

 

 

11.28

 

Net interest margin, gross

 

 

10.53

 

 

 

6.10

 

 

 

9.35

 

 

 

42.32

 

 

NM

 

 

 

8.35

 

Net interest margin, net of allowance

 

 

10.99

 

 

 

6.24

 

 

 

9.61

 

 

 

77.54

 

 

NM

 

 

 

8.64

 

Reserve coverage

 

 

4.24

 

 

 

2.31

 

 

 

3.10

 

 

 

42.97

 

 

NM

 

 

 

3.59

 

Delinquency status (1)

 

 

0.45

 

 

 

0.13

 

 

 

0.07

 

 

 

—

 

 

NM

 

 

 

0.32

 

Charge-off (recovery) ratio (2)

 

 

2.67

 

 

 

1.61

 

 

 

—

 

 

 

(172.06

)

 

NM

 

 

 

1.88

 

 

(1) Loans 90 days or more past due.

(2) Negative balances indicate net recoveries for the period.

(NM) Not meaningful.

(*) Line item is not applicable to segments.

 

Nine Months Ended September 30, 2023

 

Consumer Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial
Lending

 

 

Taxi Medallion
Lending

 

 

Corporate and Other Investments

 

 

Consolidated

 

Total interest income

 

$

123,349

 

 

$

45,519

 

 

$

8,763

 

 

$

1,439

 

 

$

4,385

 

 

$

183,455

 

Total interest expense

 

 

22,254

 

 

 

12,660

 

 

 

2,582

 

 

 

44

 

 

 

6,839

 

 

 

44,379

 

Net interest income (loss)

 

 

101,095

 

 

 

32,859

 

 

 

6,181

 

 

 

1,395

 

 

 

(2,454

)

 

 

139,076

 

Provision (benefit) for credit losses

 

 

29,763

 

 

 

10,680

 

 

 

835

 

 

 

(14,167

)

 

 

(66

)

 

 

27,045

 

Net interest income (loss) after loss provision

 

 

71,332

 

 

 

22,179

 

 

 

5,346

 

 

 

15,562

 

 

 

(2,388

)

 

 

112,031

 

Other income, net

 

 

128

 

 

 

4

 

 

 

2,936

 

 

 

4,327

 

 

 

937

 

 

 

8,332

 

Operating expenses

 

 

(24,884

)

 

 

(12,815

)

 

 

(2,696

)

 

 

(4,191

)

 

 

(11,898

)

 

 

(56,484

)

Net income (loss) before taxes

 

 

46,576

 

 

 

9,368

 

 

 

5,586

 

 

 

15,698

 

 

 

(13,349

)

 

 

63,879

 

Income tax (provision) benefit

 

 

(13,549

)

 

 

(2,725

)

 

 

(1,625

)

 

 

(4,567

)

 

 

3,884

 

 

 

(18,582

)

Net income (loss) after taxes

 

$

33,027

 

 

$

6,643

 

 

$

3,961

 

 

$

11,131

 

 

$

(9,465

)

 

$

45,297

 

Income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,536

 

Total net income attributable to Medallion Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

40,761

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans, gross

 

$

1,346,440

 

 

$

750,508

 

 

$

100,322

 

 

$

3,927

 

 

$

1,841

 

 

$

2,203,038

 

Total assets

 

 

1,307,860

 

 

 

739,452

 

 

 

97,298

 

 

 

17,258

 

 

 

396,759

 

 

 

2,558,627

 

Total funds borrowed

 

 

1,074,592

 

 

 

607,565

 

 

 

79,944

 

 

 

14,180

 

 

 

323,638

 

 

 

2,099,919

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

3.56

%

 

 

1.30

%

 

 

5.33

%

 

 

73.52

%

 

 

(3.31

)%

 

 

2.52

%

Return on average stockholders' equity

 

*

 

 

*

 

 

*

 

 

*

 

 

*

 

 

 

17.49

 

Return on average equity

 

 

22.56

 

 

 

8.21

 

 

 

33.61

 

 

 

463.36

 

 

 

(20.93

)

 

 

15.90

 

Interest yield

 

 

13.03

 

 

 

8.76

 

 

 

12.11

 

 

 

29.27

 

 

NM

 

 

 

11.10

 

Net interest margin, gross

 

 

10.68

 

 

 

6.32

 

 

 

8.55

 

 

 

28.38

 

 

NM

 

 

 

8.42

 

Net interest margin, net of allowance

 

 

11.14

 

 

 

6.46

 

 

 

8.79

 

 

 

72.66

 

 

NM

 

 

 

8.71

 

Reserve coverage

 

 

4.24

 

 

 

2.31

 

 

 

3.10

 

 

 

42.97

 

 

NM

 

 

 

3.59

 

Delinquency status(1)

 

 

0.45

 

 

 

0.13

 

 

 

0.07

 

 

 

—

 

 

NM

 

 

 

0.32

 

Charge-off (recovery) ratio (2)

 

 

2.61

 

 

 

1.20

 

 

 

1.23

 

 

 

(130.08

)

 

NM

 

 

 

1.65

 

 

(1) Loans 90 days or more past due.

(2) Negative balances indicate net recoveries for the period.

(NM) Not meaningful.

(*) Line item is not applicable to segments.
v3.24.3
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
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-, 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.

As of September 30, 2024, employment agreements expire at various dates through 2027, with future minimum payments under these agreements of approximately $8.8 million.

(B) OTHER COMMITMENTS

As of September 30, 2024, 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 anti-fraud, 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. On September 18, 2024, the Court largely denied the Company’s motion to dismiss, other than one claim that was dismissed. The deadline for the Company to file its answer to the amended complaint is November 15, 2024.

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 against 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.
v3.24.3
Related Party Transactions
 9 Months Ended
Sep. 30, 2024
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, Medallion Capital, FSVC, and the Bank, as well as other subsidiaries. Officer salaries are set by the Board of Directors of the Company.

Jeffrey Rudnick, the son of one of the Company’s directors, serves as the Company’s Senior Vice President at a salary of $260,988 per year, an increase from $250,950 per year in 2023. Mr. Rudnick received an annual cash bonus of $95,000 and $85,000 as well as an equity bonus in the amount of $52,000 and $50,000, during the nine months ended September 30, 2024 and 2023.
v3.24.3
Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2024
Investments, All Other Investments [Abstract]  
Fair Value of Financial Instruments

(12) 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 – A discounted cash flow method under the income approach is utilized to estimate the market value of the loan portfolio. The discounted cash flow method relies upon assumptions about the amount and timing of scheduled principal and interest payments, principal prepayments, and current market rates. The loan portfolio is aggregated into categories based on loan type and credit quality. For each loan category, weighted average statistics, such as coupon rate, age, and remaining term are calculated. These are Level 3 valuations. Prior to the second quarter of 2024, fair value was reported as approximating book 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 September 30, 2024 and December 31, 2023, the estimated fair value of these off-balance-sheet instruments was not material.

(g) Fixed rate borrowings – The fair value for certificates of deposit is estimated by using discounted cash flow analyses, based on market spreads to benchmark rates, and are considered Level 2 valuations. Prior to the second quarter of 2024, fair value was reported as approximating book value.

 

September 30, 2024

 

 

December 31, 2023

 

(Dollars in thousands)

 

Carrying
Amount

 

 

Fair
Value

 

 

Carrying
Amount

 

 

Fair
Value

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

187,929

 

 

$

187,929

 

 

$

149,845

 

 

$

149,845

 

Equity investments

 

 

9,897

 

 

 

9,897

 

 

 

11,430

 

 

 

11,430

 

Investment securities

 

 

56,754

 

 

 

56,754

 

 

 

54,282

 

 

 

54,282

 

Loans receivable

 

 

2,388,761

 

 

 

2,395,235

 

 

 

2,131,651

 

 

 

2,131,651

 

Accrued interest receivable (2)

 

 

14,108

 

 

 

14,108

 

 

 

13,538

 

 

 

13,538

 

Equity securities (3)

 

 

1,785

 

 

 

1,785

 

 

 

1,748

 

 

 

1,748

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Funds borrowed

 

 

2,397,603

 

 

 

2,428,246

 

 

 

2,118,689

 

 

 

2,118,689

 

Accrued interest payable (2)

 

 

6,888

 

 

 

6,888

 

 

 

6,822

 

 

 

6,822

 
(1)
Categorized as level 1 within the fair value hierarchy, excluding $1.3 million in interest bearing deposits categorized as level 2 as of both September 30, 2024 and December 31, 2023. See Note 13.
(2)
Categorized as level 3 within the fair value hierarchy. See Note 13.
(3)
Included within other assets on the balance sheet.
v3.24.3
Fair Value of Assets and Liabilities
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Assets and Liabilities

(13) 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.

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 September 30, 2024 and December 31, 2023.

September 30, 2024
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

—

 

 

$

1,250

 

 

$

—

 

 

$

1,250

 

Investment securities (1)

 

 

—

 

 

 

56,754

 

 

 

—

 

 

 

56,754

 

Equity securities

 

 

1,785

 

 

 

—

 

 

 

—

 

 

 

1,785

 

Total

 

$

1,785

 

 

$

58,004

 

 

$

—

 

 

$

59,789

 
(1)
Total unrealized gain of $1.5 million and unrealized loss of less than $1.4 million, net of tax, related to these assets was included in other comprehensive income for the three and nine months ended September 30, 2024.

December 31, 2023
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

—

 

 

$

1,250

 

 

$

—

 

 

$

1,250

 

Investment securities (1)

 

 

—

 

 

 

54,282

 

 

 

—

 

 

 

54,282

 

Equity securities

 

 

1,748

 

 

 

—

 

 

 

—

 

 

 

1,748

 

Total

 

$

1,748

 

 

$

55,532

 

 

$

—

 

 

$

57,280

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

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 September 30, 2024 and December 31, 2023.

September 30, 2024
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

—

 

 

$

—

 

 

$

9,897

 

 

$

9,897

 

Nonaccrual loans

 

 

—

 

 

 

—

 

 

 

23,985

 

 

 

23,985

 

Loan collateral in process of foreclosure

 

 

—

 

 

 

—

 

 

 

8,818

 

 

 

8,818

 

Total

 

$

—

 

 

$

—

 

 

$

42,700

 

 

$

42,700

 

 

December 31, 2023
(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

—

 

 

$

—

 

 

$

11,430

 

 

$

11,430

 

Nonaccrual loans

 

 

—

 

 

 

—

 

 

 

25,974

 

 

 

25,974

 

Loan collateral in process of foreclosure

 

 

—

 

 

 

—

 

 

 

11,772

 

 

 

11,772

 

Total

 

$

—

 

 

$

—

 

 

$

49,176

 

 

$

49,176

 

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 September 30, 2024 and December 31, 2023.

(Dollars in thousands except per share amounts)

 

Fair Value
at September 30, 2024

 

 

Valuation Techniques

 

Unobservable Inputs

 

Range
(Weighted Average)

Equity investments

 

$

9,624

 

 

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

Nonaccrual loans

 

 

23,985

 

 

Market approach

 

Historical and actual loss experience

 

0.00% - 58.96%

 

 

 

 

 

 

 

Transfer prices (2)

 

$0.0 - 79.5

 

 

 

 

 

 

 

Collateral value

 

N/A

Loan collateral in process of foreclosure

 

 

8,818

 

 

Market approach

 

Transfer prices (2)

 

$0.0 - 79.5

 

 

 

 

 

 

 

Collateral value (3)

 

$2.3 - $49.1
(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 loan portfolio.

(Dollars in thousands except per share amounts)

 

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

Nonaccrual loans

 

 

25,974

 

 

Market approach

 

Historical and actual loss experience

 

0.00% - 28.48%

 

 

 

 

 

 

 

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
(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 loan portfolio.
v3.24.3
Medallion Bank Preferred Stock (Non-controlling Interest)
 9 Months Ended
Sep. 30, 2024
Medallion Bank Preferred Stock (Non-controlling Interest)

(14) 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 the 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.
v3.24.3
Subsequent Events
 9 Months Ended
Sep. 30, 2024
Subsequent Events [Abstract]  
Subsequent Events

(15) SUBSEQUENT EVENTS

The Company has evaluated the effects of events that have occurred subsequent to September 30, 2024 through the date of financial statement issuance for potential recognition or disclosure. As of such date, there were no subsequent events that required recognition or disclosure.
v3.24.3
Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2024
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.

The Company’s investment in the Bank is consolidated for financial statement purposes. In the notes to the consolidated financial statements included in its Annual Report on Form 10-K, the Company presents its investment in the Bank.

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. Cash also includes $1.3 million of interest-bearing funds deposited in other banks with original terms of 5 to 6 years that cannot be withdrawn but are salable on an active secondary market without penalty.
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 12 and 13 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 $9.9 million and $11.4 million at September 30, 2024 and December 31, 2023, comprised mainly of nonmarketable stock and stock warrants, are recorded at cost less any impairment plus or minus observable price changes. Substantially all of these equity investments are held by Medallion Capital, our SBIC subsidiary, in connection with its mezzanine lending business. As of September 30, 2024, cumulative impairment of $4.7 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 September 30, 2024 and December 31, 2023, the fair value of these securities were $1.8 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.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

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

 

$

63

 

 

$

(54

)

 

$

37

 

 

$

(54

)

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

 

$

63

 

 

$

(54

)

 

$

37

 

 

$

(54

)
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 at both September 30, 2024 and December 31, 2023, and less than $0.1 million was amortized to interest income for each of the three and nine months ended September 30, 2024 and 2023. 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 costs paid to loan originators, and which are amortized to interest income over the life of the loan.

Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. At September 30, 2024 and December 31, 2023, net loan origination costs were $47.2 million and $40.0 million. Net amortization to income was $2.3 million and $6.6 million for the three and nine months ended September 30, 2024 and was $2.2 million and $6.5 million for the three and nine months ended September 30, 2023.

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 is typified by a larger number of smaller dollar loans that have similar characteristics. A loan is nonperforming when based on current information and events, it is unlikely the Company will be able to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be nonperforming. 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 $17.4 million at September 30, 2024, or 0.72% of the total loan portfolio, compared to $16.8 million, or 0.77%, at December 31, 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 nonperforming 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, or ASC, 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 both September 30, 2024 and December 31, 2023. 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 September 30, 2024 and December 31, 2023.

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 delinquent loan performance 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 presented 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

 
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 September 30, 2024 and December 31, 2023, the Company had goodwill of $150.8 million, all of which related to the Bank. As of September 30, 2024 and December 31, 2023, the Company had intangible assets of $19.5 million and $20.6 million. Amortization expense on the intangible assets for the three and nine months ended September 30, 2024 and 2023 was $0.4 million and $1.1 million. Management performed a qualitative assessment of goodwill and intangibles for impairment at December 31, 2023, concluding that there was no impairment of these assets.

The following table details the intangible assets as of the dates presented:

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Brand-related intellectual property

 

$

14,850

 

 

$

15,675

 

Home improvement contractor relationships

 

 

4,658

 

 

 

4,916

 

Total intangible assets

 

$

19,508

 

 

$

20,591

 
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 $0.1 million and $0.3 million for the three and nine months ended September 30, 2024 and the three and nine months ended September 30, 2023.
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, included as Interest expense in the Consolidated Statements of Operations, was $1.2 million and $3.0 million for the three and nine months ended September 30, 2024 and was $0.8 million and $2.3 million for the three and nine months ended September 30, 2023. 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 $8.4 million and $8.5 million as of September 30, 2024 and December 31, 2023.
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 presents the calculation of basic and diluted EPS.

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income attributable to common stockholders

 

$

8,611

 

 

$

11,230

 

 

$

25,736

 

 

$

40,761

 

Weighted average common shares outstanding applicable to basic EPS

 

 

22,490,792

 

 

 

22,596,982

 

 

 

22,576,446

 

 

 

22,469,968

 

Effect of restricted stock grants

 

 

440,704

 

 

 

481,197

 

 

 

485,179

 

 

 

413,682

 

Effect of dilutive stock options

 

 

166,268

 

 

 

183,274

 

 

 

194,800

 

 

 

125,319

 

Effect of performance stock unit grants

 

 

350,165

 

 

 

131,448

 

 

 

298,640

 

 

 

58,975

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

 

 

23,447,929

 

 

 

23,392,901

 

 

 

23,555,065

 

 

 

23,067,944

 

Basic net income per share

 

$

0.38

 

 

$

0.50

 

 

$

1.14

 

 

$

1.81

 

Diluted net income per share

 

 

0.37

 

 

 

0.48

 

 

 

1.09

 

 

 

1.77

 

Potentially dilutive common shares excluded from the above calculations aggregated 9,000 shares as of both September 30, 2024 and 2023.

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 nine months ended September 30, 2024 and 2023, the Company issued 296,178 and 316,483 restricted shares of stock-based compensation awards, 215,687 and 296,444 performance stock units, and 92,350 and 83,158 restricted stock units. The Company recognized $1.5 million and $4.6 million, or $0.06 and $0.20 per common share, for the three and nine months ended September 30, 2024, and $1.2 million, and $3.5 million or $0.05 and $0.15 per share per common share for the three and nine months ended September 30, 2023, of non-cash stock-based compensation expense related to the grants. As of September 30, 2024, the total remaining unrecognized compensation cost related to unvested stock options, restricted stock, restricted stock units, and performance share units was $6.8 million, which is expected to be recognized over the next 10 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 affect the Bank's ability to pay dividends to the Company, and that an adequate allowance for credit losses be maintained. As of September 30, 2024, the Bank’s Tier 1 leverage ratio was 15.7%. The Bank’s actual capital amounts and ratios and the regulatory minimum ratios are presented in the following table.

 

Regulatory

 

 

 

 

 

 

 

(Dollars in thousands)

 

Minimum

 

 

Well-Capitalized

 

 

September 30, 2024

 

 

December 31, 2023

 

Common equity tier 1 capital

 

 

 

 

 

 

 

$

314,153

 

 

$

293,774

 

Tier 1 capital

 

 

 

 

 

 

 

 

382,940

 

 

 

362,561

 

Total capital

 

 

 

 

 

 

 

 

413,973

 

 

 

390,153

 

Average assets

 

 

 

 

 

 

 

 

2,444,674

 

 

 

2,232,816

 

Risk-weighted assets

 

 

 

 

 

 

 

 

2,422,854

 

 

 

2,155,641

 

Leverage ratio (1)

 

 

4.0

%

 

 

5.0

%

 

 

15.7

%

 

 

16.2

%

Common equity tier 1 capital ratio (2)

 

 

7.0

 

 

 

6.5

 

 

 

13.0

 

 

 

13.6

 

Tier 1 capital ratio (3)

 

 

8.5

 

 

 

8.0

 

 

 

15.8

 

 

 

16.8

 

Total capital ratio (3)

 

 

10.5

 

 

 

10.0

 

 

 

17.1

 

 

 

18.1

 
(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 September 30, 2024 and December 31, 2023 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 September 30, 2024 and December 31, 2023.
Recently Issued and Adopted Accounting Standards

Recently Issued and Adopted Accounting Standards

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 amendments in this update will be effective on the date on which the SEC’s removal of related disclosures from Regulation S-X or Regulation S-K become effective, with early adoption prohibited.

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 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 fiscal years beginning after December 15, 2023 and to be included in interim periods beginning after December 15, 2024. 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 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 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.
v3.24.3
Summary of Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Summary of Unrealized Portion Related to Equity Securities

The following table presents the unrealized portion related to the equity securities held.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

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

 

$

63

 

 

$

(54

)

 

$

37

 

 

$

(54

)

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

 

$

63

 

 

$

(54

)

 

$

37

 

 

$

(54

)
Summary of Finalized Adoption Related to Allowance for Credit Losses on Loans The CECL methodology transition effects on the allowance for credit losses are presented 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 the intangible assets as of the dates presented:

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Brand-related intellectual property

 

$

14,850

 

 

$

15,675

 

Home improvement contractor relationships

 

 

4,658

 

 

 

4,916

 

Total intangible assets

 

$

19,508

 

 

$

20,591

 
Summary of the Calculation of Basic and Diluted EPS The table below presents the calculation of basic and diluted EPS.

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income attributable to common stockholders

 

$

8,611

 

 

$

11,230

 

 

$

25,736

 

 

$

40,761

 

Weighted average common shares outstanding applicable to basic EPS

 

 

22,490,792

 

 

 

22,596,982

 

 

 

22,576,446

 

 

 

22,469,968

 

Effect of restricted stock grants

 

 

440,704

 

 

 

481,197

 

 

 

485,179

 

 

 

413,682

 

Effect of dilutive stock options

 

 

166,268

 

 

 

183,274

 

 

 

194,800

 

 

 

125,319

 

Effect of performance stock unit grants

 

 

350,165

 

 

 

131,448

 

 

 

298,640

 

 

 

58,975

 

Adjusted weighted average common shares outstanding applicable to diluted EPS

 

 

23,447,929

 

 

 

23,392,901

 

 

 

23,555,065

 

 

 

23,067,944

 

Basic net income per share

 

$

0.38

 

 

$

0.50

 

 

$

1.14

 

 

$

1.81

 

Diluted net income per share

 

 

0.37

 

 

 

0.48

 

 

 

1.09

 

 

 

1.77

 
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

 

 

 

 

 

 

 

(Dollars in thousands)

 

Minimum

 

 

Well-Capitalized

 

 

September 30, 2024

 

 

December 31, 2023

 

Common equity tier 1 capital

 

 

 

 

 

 

 

$

314,153

 

 

$

293,774

 

Tier 1 capital

 

 

 

 

 

 

 

 

382,940

 

 

 

362,561

 

Total capital

 

 

 

 

 

 

 

 

413,973

 

 

 

390,153

 

Average assets

 

 

 

 

 

 

 

 

2,444,674

 

 

 

2,232,816

 

Risk-weighted assets

 

 

 

 

 

 

 

 

2,422,854

 

 

 

2,155,641

 

Leverage ratio (1)

 

 

4.0

%

 

 

5.0

%

 

 

15.7

%

 

 

16.2

%

Common equity tier 1 capital ratio (2)

 

 

7.0

 

 

 

6.5

 

 

 

13.0

 

 

 

13.6

 

Tier 1 capital ratio (3)

 

 

8.5

 

 

 

8.0

 

 

 

15.8

 

 

 

16.8

 

Total capital ratio (3)

 

 

10.5

 

 

 

10.0

 

 

 

17.1

 

 

 

18.1

 
(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.
v3.24.3
Investment Securities (Tables)
 9 Months Ended
Sep. 30, 2024
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 September 30, 2024 and December 31, 2023:

September 30, 2024
(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

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

 

$

42,479

 

 

$

63

 

 

$

(3,448

)

 

$

39,094

 

State and municipalities

 

 

16,373

 

 

 

117

 

 

 

(1,004

)

 

 

15,486

 

Agency bonds

 

 

2,181

 

 

 

1

 

 

 

(8

)

 

 

2,174

 

Total

 

$

61,033

 

 

$

181

 

 

$

(4,460

)

 

$

56,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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

The amortized cost and estimated market value of investment securities at September 30, 2024 by contractual maturity are presented below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2024
(Dollars in thousands)

 

Amortized
Cost

 

 

Fair
Value

 

Due in one year or less

 

$

2,992

 

 

$

2,964

 

Due after one year through five years

 

 

2,758

 

 

 

2,660

 

Due after five years through ten years

 

 

11,639

 

 

 

10,813

 

Due after ten years

 

 

43,644

 

 

 

40,317

 

Total

 

$

61,033

 

 

$

56,754

 
Summary of Securities with Gross Unrealized Losses

The following tables present information pertaining to securities with gross unrealized losses at September 30, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous loss position.

 

 

Less than Twelve Months

 

 

Twelve Months and Over

 

September 30, 2024
(Dollars in thousands)

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

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

 

$

—

 

 

$

—

 

 

$

(3,448

)

 

$

31,359

 

State and municipalities

 

 

(94

)

 

 

3,106

 

 

 

(910

)

 

 

10,280

 

Agency bonds

 

 

—

 

 

 

—

 

 

 

(8

)

 

 

176

 

Total

 

$

(94

)

 

$

3,106

 

 

$

(4,366

)

 

$

41,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 
v3.24.3
Loans and Allowance for Credit Losses (Tables)
 9 Months Ended
Sep. 30, 2024
Text Block [Abstract]  
Summary of Inclusive Capitalized Loans

The following table presents the major classification of loans, inclusive of capitalized loan origination costs, as of September 30, 2024 and December 31, 2023.

 

 

September 30, 2024

 

 

December 31, 2023

 

(Dollars in thousands)

 

Amount

 

 

As a
Percent of
Gross Loans

 

 

Amount

 

 

As a
Percent of
Gross Loans

 

Recreation

 

$

1,554,629

 

 

 

63

%

 

$

1,336,226

 

 

 

60

%

Home improvement

 

 

814,071

 

 

 

33

 

 

 

760,617

 

 

 

34

 

Commercial

 

 

110,143

 

 

 

4

 

 

 

114,827

 

 

 

5

 

Taxi medallion

 

 

3,243

 

 

*

 

 

 

3,663

 

 

*

 

Strategic partnership

 

 

3,193

 

 

*

 

 

 

553

 

 

*

 

Total gross loans

 

 

2,485,279

 

 

 

100

%

 

 

2,215,886

 

 

 

100

%

Allowance for credit losses

 

 

(96,518

)

 

 

 

 

 

(84,235

)

 

 

 

Total net loans

 

$

2,388,761

 

 

 

 

 

$

2,131,651

 

 

 

 

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

The following tables present the activity of the gross loans for the three and nine months ended September 30, 2024 and 2023.

Three Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Taxi
Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – June 30, 2024

 

$

1,497,428

 

 

$

773,184

 

 

$

110,197

 

 

$

3,482

 

 

$

1,299

 

 

$

2,385,590

 

Loan originations

 

 

139,105

 

 

 

96,545

 

 

 

—

 

 

 

—

 

 

 

39,918

 

 

 

275,568

 

Principal receipts, sales, and maturities

 

 

(61,563

)

 

 

(51,409

)

 

 

(713

)

 

 

(239

)

 

 

(38,024

)

 

 

(151,948

)

Charge-offs

 

 

(16,242

)

 

 

(4,258

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(20,500

)

Transfer to loan collateral in process of foreclosure, net

 

 

(6,609

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(6,609

)

Amortization of origination fees and costs, net

 

 

(3,549

)

 

 

1,206

 

 

 

13

 

 

 

—

 

 

 

—

 

 

 

(2,330

)

Origination fees and costs, net

 

 

6,059

 

 

 

(1,197

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

4,861

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

647

 

 

 

—

 

 

 

—

 

 

 

647

 

Gross loans – September 30, 2024

 

$

1,554,629

 

 

$

814,071

 

 

$

110,143

 

 

$

3,243

 

 

$

3,193

 

 

$

2,485,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – December 31, 2023

 

$

1,336,226

 

 

$

760,617

 

 

$

114,827

 

 

$

3,663

 

 

$

553

 

 

$

2,215,886

 

Loan originations

 

 

454,433

 

 

 

216,111

 

 

 

7,000

 

 

 

250

 

 

 

79,952

 

 

 

757,746

 

Principal receipts, sales, and maturities

 

 

(177,152

)

 

 

(148,818

)

 

 

(13,546

)

 

 

(670

)

 

 

(77,312

)

 

 

(417,498

)

Charge-offs

 

 

(48,970

)

 

 

(13,219

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(62,189

)

Transfer to loan collateral in process of foreclosure, net

 

 

(17,703

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(17,703

)

Amortization of origination fees and costs, net

 

 

(9,715

)

 

 

3,057

 

 

 

30

 

 

 

—

 

 

 

—

 

 

 

(6,628

)

Origination fees and costs, net

 

 

17,510

 

 

 

(3,677

)

 

 

(78

)

 

 

—

 

 

 

—

 

 

 

13,755

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

1,910

 

 

 

—

 

 

 

—

 

 

 

1,910

 

Gross loans – September 30, 2024

 

$

1,554,629

 

 

$

814,071

 

 

$

110,143

 

 

$

3,243

 

 

$

3,193

 

 

$

2,485,279

 

 

Three Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Taxi
Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – June 30, 2023

 

$

1,331,114

 

 

$

728,468

 

 

$

92,637

 

 

$

3,448

 

 

$

1,331

 

 

$

2,156,998

 

Loan originations

 

 

92,603

 

 

 

79,333

 

 

 

8,900

 

 

 

100

 

 

 

36,457

 

 

 

217,393

 

Principal receipts, sales, and maturities

 

 

(61,885

)

 

 

(53,095

)

 

 

(1,657

)

 

 

(281

)

 

 

(35,947

)

 

 

(152,865

)

Charge-offs

 

 

(11,684

)

 

 

(3,890

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,574

)

Transfer to loan collateral in process of foreclosure, net

 

 

(4,730

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,730

)

Amortization of origination fees and costs, net

 

 

(3,259

)

 

 

647

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,612

)

Origination fees and costs, net

 

 

4,281

 

 

 

(955

)

 

 

—

 

 

 

660

 

 

 

—

 

 

 

3,986

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

442

 

 

 

—

 

 

 

—

 

 

 

442

 

Gross loans – September 30, 2023

 

$

1,346,440

 

 

$

750,508

 

 

$

100,322

 

 

$

3,927

 

 

$

1,841

 

 

$

2,203,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Home
Improvement

 

 

Commercial

 

 

Medallion

 

 

Strategic
Partnership

 

 

Total

 

Gross loans – December 31, 2022

 

$

1,183,512

 

 

$

626,399

 

 

$

92,899

 

 

$

13,571

 

 

$

572

 

 

$

1,916,953

 

Loan originations

 

 

384,291

 

 

 

291,349

 

 

 

16,650

 

 

 

2,023

 

 

 

96,637

 

 

 

790,950

 

Principal receipts, sales, and maturities

 

 

(181,565

)

 

 

(158,300

)

 

 

(9,413

)

 

 

(6,207

)

 

 

(95,368

)

 

 

(450,853

)

Charge-offs

 

 

(33,440

)

 

 

(8,379

)

 

 

(900

)

 

 

(3,814

)

 

 

—

 

 

 

(46,533

)

Transfer to loan collateral in process of foreclosure, net

 

 

(13,078

)

 

 

—

 

 

 

—

 

 

 

(2,306

)

 

 

—

 

 

 

(15,384

)

Amortization of origination fees and costs, net

 

 

(9,177

)

 

 

1,898

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,279

)

Origination fees and costs, net

 

 

15,897

 

 

 

(2,459

)

 

 

—

 

 

 

660

 

 

 

—

 

 

 

14,098

 

Paid-in-kind interest

 

 

—

 

 

 

—

 

 

 

1,086

 

 

 

—

 

 

 

—

 

 

 

1,086

 

Gross loans – September 30, 2023

 

$

1,346,440

 

 

$

750,508

 

 

$

100,322

 

 

$

3,927

 

 

$

1,841

 

 

$

2,203,038

 

 
Summary of Activity in Allowance for Loan Losses

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2024 and 2023.

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Allowance for credit losses – beginning balance

 

$

89,788

 

 

$

74,971

 

 

$

84,235

 

(1)

$

63,845

 

CECL transition amount upon ASU 2016-13 adoption

 

 

—

 

 

 

—

 

 

 

—

 

 

 

13,712

 

Charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

 

(16,242

)

 

 

(11,684

)

 

 

(48,970

)

 

 

(33,440

)

Home improvement

 

 

(4,258

)

 

 

(3,890

)

 

 

(13,219

)

 

 

(8,379

)

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(900

)

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,814

)

Total charge-offs

 

 

(20,500

)

 

 

(15,574

)

 

 

(62,189

)

 

 

(46,533

)

Recoveries

 

 

 

 

 

 

 

 

 

 

 

 

Recreation

 

 

3,991

 

 

 

2,651

 

 

 

11,501

 

 

 

8,705

 

Home improvement

 

 

745

 

 

 

882

 

 

 

2,899

 

 

 

2,141

 

Commercial

 

 

—

 

 

 

—

 

 

 

20

 

 

 

10

 

Taxi medallion

 

 

2,343

 

 

 

1,671

 

 

 

4,123

 

 

 

10,208

 

Total recoveries

 

 

7,079

 

 

 

5,204

 

 

 

18,543

 

 

 

21,064

 

Net charge-offs (2)

 

 

(13,421

)

 

 

(10,370

)

 

 

(43,646

)

 

 

(25,469

)

Provision for credit losses

 

 

20,151

 

 

 

14,532

 

 

 

55,929

 

 

 

27,045

 

Allowance for credit losses – ending balance (3)

 

$

96,518

 

 

$

79,133

 

 

$

96,518

 

 

$

79,133

 
(1)
2023 beginning balance represents allowance prior to the adoption of ASU 2016-13.
(2)
As of September 30, 2024, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion loan portfolio were $166.2 million, including $99.2 million related to loans secured by New York City taxi medallions, some of which may represent collection opportunities for the Company.
(3)
As of September 30, 2024 and 2023, there were no allowance for credit losses and net charge-offs related to the strategic partnership loans.
Summary of Gross Charge Offs

The following tables present the gross charge-offs for the three and nine months ended September 30, 2024, by the year of origination:

Three Months Ended September 30, 2024
(Dollars in thousands)

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Total

 

Recreation

 

$

921

 

 

$

4,717

 

 

$

5,167

 

 

$

2,354

 

 

$

956

 

 

$

2,127

 

 

$

16,242

 

Home improvement

 

 

148

 

 

 

1,275

 

 

 

1,583

 

 

 

787

 

 

 

209

 

 

 

256

 

 

 

4,258

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

1,069

 

 

$

5,992

 

 

$

6,750

 

 

$

3,141

 

 

$

1,165

 

 

$

2,383

 

 

$

20,500

 

 

Nine Months Ended September 30, 2024
(Dollars in thousands)

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Total

 

Recreation

 

$

1,020

 

 

$

12,579

 

 

$

17,034

 

 

$

7,841

 

 

$

3,231

 

 

$

7,265

 

 

$

48,970

 

Home improvement

 

 

188

 

 

 

4,307

 

 

 

4,857

 

 

 

2,457

 

 

 

615

 

 

 

795

 

 

 

13,219

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

1,208

 

 

$

16,886

 

 

$

21,891

 

 

$

10,298

 

 

$

3,846

 

 

$

8,060

 

 

$

62,189

 

The following tables present the gross charge-offs for the three and nine months ended September 30, 2023, by the year of origination:

Three Months Ended September 30, 2023
(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total

 

Recreation

 

$

890

 

 

$

4,587

 

 

$

2,250

 

 

$

1,175

 

 

$

1,273

 

 

$

1,509

 

 

$

11,684

 

Home improvement

 

 

964

 

 

 

1,783

 

 

 

733

 

 

 

158

 

 

 

106

 

 

 

146

 

 

 

3,890

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

1,854

 

 

$

6,370

 

 

$

2,983

 

 

$

1,333

 

 

$

1,379

 

 

$

1,655

 

 

$

15,574

 

 

Nine Months Ended September 30, 2023
(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total

 

Recreation

 

$

934

 

 

$

11,763

 

 

$

7,664

 

 

$

3,631

 

 

$

3,745

 

 

$

5,703

 

 

$

33,440

 

Home improvement

 

 

1,003

 

 

 

4,235

 

 

 

1,834

 

 

 

459

 

 

 

328

 

 

 

520

 

 

 

8,379

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

900

 

 

 

—

 

 

 

900

 

Taxi medallion

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,814

 

 

 

3,814

 

Total

 

$

1,937

 

 

$

15,998

 

 

$

9,498

 

 

$

4,090

 

 

$

4,973

 

 

$

10,037

 

 

$

46,533

 

 
Summary of Allowance for Loan Losses by Type

The following tables present the allowance for credit losses by type as of September 30, 2024 and December 31, 2023.

September 30, 2024
(Dollars in thousands)

 

Amount

 

 

Percentage
of Allowance (1)

 

 

Allowance as
a Percent of
Loan Category

 

 

Allowance as
a Percent of
Nonaccrual

 

Recreation

 

$

70,383

 

 

 

73

%

 

 

4.53

%

 

 

293.45

%

Home improvement

 

 

19,731

 

 

 

21

 

 

 

2.42

 

 

 

82.26

 

Commercial

 

 

5,114

 

 

 

5

 

 

 

4.64

 

 

 

21.32

 

Taxi medallion

 

 

1,290

 

 

 

1

 

 

 

39.78

 

 

 

5.38

 

Total

 

$

96,518

 

 

 

100

%

 

 

3.88

%

 

 

402.41

%
(1)
Percentages may not foot due to rounding.

December 31, 2023
(Dollars in thousands)

 

Amount

 

 

Percentage
of Allowance (1)

 

 

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

%
(1)
Percentages may not foot due to rounding.
Summary of Total Nonaccrual Loans and Foregone Interest

The following table presents total nonaccrual loans and foregone interest. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.

(Dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Total nonaccrual loans

 

$

23,985

 

 

$

25,974

 

Interest foregone quarter to date

 

 

419

 

 

 

417

 

Amount of foregone interest applied to principal in the quarter

 

 

70

 

 

 

59

 

Interest foregone year to date

 

 

983

 

 

 

928

 

Amount of foregone interest applied to principal for the year

 

 

199

 

 

 

238

 

Interest foregone life-to-date

 

 

3,483

 

 

 

2,119

 

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

 

 

880

 

 

 

822

 

Percentage of nonaccrual loans to gross loan portfolio

 

 

1.0

%

 

 

1.2

%

Percentage of allowance for credit losses to nonaccrual loans

 

 

402.4

%

 

 

324.3

%
Summary of Performance Status of Loan

The following tables present the performance status of loans as of September 30, 2024 and December 31, 2023.

September 30, 2024
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,546,412

 

 

$

8,217

 

 

$

1,554,629

 

 

 

0.53

%

Home improvement

 

 

812,509

 

 

 

1,562

 

 

 

814,071

 

 

 

0.19

 

Commercial

 

 

99,180

 

 

 

10,963

 

 

 

110,143

 

 

 

9.95

 

Taxi medallion

 

 

—

 

 

 

3,243

 

 

 

3,243

 

 

 

100.00

 

Strategic partnership

 

 

3,193

 

 

 

—

 

 

 

3,193

 

 

 

—

 

Total

 

$

2,461,294

 

 

$

23,985

 

 

$

2,485,279

 

 

 

0.97

%

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023
(Dollars in thousands)

 

Performing

 

 

Nonperforming

 

 

Total

 

 

Percentage of
Nonperforming
to Total

 

Recreation

 

$

1,326,567

 

 

$

9,659

 

 

$

1,336,226

 

 

 

0.72

%

Home improvement

 

 

759,128

 

 

 

1,489

 

 

 

760,617

 

 

 

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

%
Summary of Aging of Loans

The following tables present the aging of all loans as of September 30, 2024 and December 31, 2023.

September 30, 2024

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total
Past Due

 

 

Current

 

 

Total (1)

 

 

Accruing

 

Recreation

 

$

41,431

 

 

$

15,657

 

 

$

7,475

 

 

$

64,563

 

 

$

1,438,636

 

 

$

1,503,199

 

 

$

—

 

Home improvement

 

 

4,742

 

 

 

2,000

 

 

 

1,564

 

 

 

8,306

 

 

 

809,838

 

 

 

818,144

 

 

 

—

 

Commercial

 

 

—

 

 

 

—

 

 

 

8,396

 

 

 

8,396

 

 

 

101,950

 

 

 

110,346

 

 

 

—

 

Taxi medallion

 

 

148

 

 

 

200

 

 

 

—

 

 

 

348

 

 

 

2,895

 

 

 

3,243

 

 

 

—

 

Strategic partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,193

 

 

 

3,193

 

 

 

—

 

Total

 

$

46,321

 

 

$

17,857

 

 

$

17,435

 

 

$

81,613

 

 

$

2,356,512

 

 

$

2,438,125

 

 

$

—

 
(1)
Excludes $47.2 million of capitalized loan origination costs.

December 31, 2023

 

Days Past Due

 

 

 

 

 

 

 

 

 

 

 

Recorded
Investment
90 Days and

 

(Dollars in thousands)

 

30-59

 

 

60-89

 

 

90 +

 

 

Total
Past Due

 

 

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

 

 

$

—

 
Excludes $40.0 million of capitalized loan origination costs.
Summary of Activities of the Loan Collateral Process of Foreclosure Related to Recreation and Medallion Loans

The following tables present the activity of loan collateral in process of foreclosure, which relate only to the recreation and taxi medallion loans, for the three and nine months ended September 30, 2024.

Three Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – June 30, 2024

 

$

1,441

 

 

$

7,918

 

 

$

9,359

 

Transfer from loans, net

 

 

6,609

 

 

 

—

 

 

 

6,609

 

Sales

 

 

—

 

 

 

—

 

 

 

—

 

Cash payments received

 

 

(2,059

)

 

 

(1,007

)

 

 

(3,066

)

Collateral valuation adjustments (1)

 

 

(4,064

)

 

 

(20

)

 

 

(4,084

)

Loan collateral in process of foreclosure – September 30, 2024

 

$

1,927

 

 

$

6,891

 

 

$

8,818

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2024
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – December 31, 2023

 

$

1,779

 

 

$

9,993

 

 

$

11,772

 

Transfer from loans, net

 

 

17,703

 

 

 

—

 

 

 

17,703

 

Sales

 

 

—

 

 

 

(39

)

 

 

(39

)

Cash payments received

 

 

(6,731

)

 

 

(3,161

)

 

 

(9,892

)

Collateral valuation adjustments (1)

 

 

(10,824

)

 

 

98

 

 

 

(10,726

)

Loan collateral in process of foreclosure – September 30, 2024

 

$

1,927

 

 

$

6,891

 

 

$

8,818

 
(1)
Collateral valuation adjustments for recreational loans are generally the result of the liquidation of collateral through a repossession process. Due to the short-term nature of the liquidation process, collateral valuation adjustments on recreational loans are recorded as charge-offs to the allowance for credit losses on loans as this is an adjustment to the initial estimate on the fair value, less estimated costs to sell that was initially estimated in the preliminary charge off and amount transferred to collateral in the process of foreclosure.

 

 

 

The following tables present the activity of loan collateral in process of foreclosure, which relate only to the recreation and taxi medallion loans, for the three and nine months ended September 30, 2023.

Three Months Ended September 30, 2023
(Dollars in thousands)

 

Recreation

 

 

Taxi
Medallion

 

 

Total

 

Loan collateral in process of foreclosure – June 30, 2023

 

$

729

 

 

$

16,074

 

 

$

16,803

 

Transfer from loans, net

 

 

4,730

 

 

 

—

 

 

 

4,730

 

Sales