MEDALLION FINANCIAL CORP

Previous wording

The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the three and nine months ended September 30, 2024 and the year ended December 31, 2023. This section is intended to provide management’s perspective of our financial condition and results of operations. In addition, this section contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results and conditions to differ materially from those projected in these forward-looking statements are described in the Risk Factors section in our Annual Report on Form 10-K.

Current wording

The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the three months ended March 31, 2025 and the year ended December 31, 2024. This section is intended to provide management’s perspective of our financial condition and results of operations. In addition, this section contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results and conditions to differ materially from those projected in these forward-looking statements are described in the Risk Factors section in our Annual Report on Form 10-K.

Previous wording

We are a specialty finance company whose focus and growth has been our consumer finance and commercial lending businesses operated by Medallion Bank, or the Bank, and Medallion Capital, Inc., or Medallion Capital. The Bank is a wholly-owned subsidiary that originates consumer loans for the purchase of recreational vehicles, boats, collector cars, and home improvements, and provides loan origination and other services to fintech partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business. As of September 30, 2024, our consumer loans represented 95% of our gross loan portfolio, and commercial loans represented 4%. Total assets were $2.9 billion and $2.6 billion as of September 30, 2024 and December 31, 2023.

Current wording

We are a specialty finance company whose focus and growth has been our consumer finance and commercial lending businesses operated by Medallion Bank, or the Bank, and Medallion Capital, Inc., or Medallion Capital. The Bank is a wholly-owned subsidiary that originates consumer loans for the purchase of recreational vehicles, boats, collector cars, and home improvements, and provides loan origination and other services to fintech partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business. As of March 31, 2025, our consumer loans represented 95% of our gross loan portfolio, inclusive of loans held for sale, and commercial loans represented 5%. Total assets were $2.85 billion and $2.87 billion as of March 31, 2025 and December 31, 2024.

Previous wording

Our loan-related earnings depend primarily on our level of net interest income. Net interest income is the difference between the total yield on our loan portfolio and the cost of borrowed funds. We fund our operations through a wide variety of interest-bearing sources, including bank certificates of deposit issued to consumers, debentures issued to and guaranteed by the SBA, privately placed notes, trust preferred securities, and Federal Reserve discount window and other borrowing arrangements. Net interest income fluctuates with changes in the yield on our loan portfolios and changes in the cost of borrowed funds, as well as changes in the amount of interest-earning assets and interest-bearing liabilities held by us. Net interest income is also affected by economic, regulatory, and competitive factors that influence interest rates, loan demand, and the availability of funding to finance our lending activities. We, like other financial institutions, are subject to interest rate risk to the degree that our interest-earning assets reprice, either due to inflation or other factors, on a different basis than our interest-bearing liabilities. We continue to monitor global supply chain disruptions, gas prices, labor shortages, unemployment, as well as other factors which contribute to competition and changes in the demand for our loan products. We have taken, and are taking further, steps in light of a potential economic downturn and the current inflationary environment to moderate the pace of our growth.

Current wording

Net interest income is also affected by economic, regulatory, and competitive factors that influence interest rates, loan demand, and the availability of funding to finance our lending activities. We, like other financial institutions, are subject to interest rate risk to the degree that our interest-earning assets reprice, either due to inflation or other factors, on a different basis than our interest-bearing liabilities. We continue to monitor global supply chain disruptions, the impact of tariffs, gas prices, labor shortages, unemployment, and other factors contributing to U.S. inflation, the risk of recession and economic health, as well as other factors which contribute to competition and changes in the demand for our loan products. We have been, and continue to take, steps in the event of a potential economic downturn and in light of the current uncertainties and inflationary environment to moderate the pace of our recent growth.

Previous wording

The Bank is an industrial bank regulated by the FDIC and the Utah Department of Financial Institutions that originates consumer loans, raises deposits, and conducts other banking activities. The Bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit. To take advantage of this low cost of funds, historically we referred a portion of our taxi medallion and commercial loans to the Bank, which originated these loans, and have since been serviced by Medallion Servicing Corp., or MSC. However, other than in connection with dispositions of existing taxi medallion and related assets, the Bank has not originated any new taxi medallion loans since 2014 (and Medallion Financial Corp. has not originated any new taxi medallion loans since 2015) and is working with MSC to service its remaining portfolio as it winds down.

Current wording

The Bank is an industrial bank regulated by the FDIC and the Utah Department of Financial Institutions that originates consumer loans, raises deposits, and conducts other banking activities. The Bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit. To take advantage of this low cost of funds, historically we referred a portion of our taxi medallion and commercial loans to the Bank, which originated these loans, and have since been serviced by Medallion Servicing Corp., or MSC. However, other than in connection with dispositions of existing taxi medallion assets, the Bank has not originated any new taxi medallion loans since 2014 (and Medallion Financial Corp. has not originated any new taxi medallion loans since 2015) and is working with MSC to service its remaining portfolio, as it winds down. MSC earns referral and servicing fees for these activities.

Previous wording

Our accounting policies are fundamental to understanding management's discussion and analysis of its financial condition and results of operations. At September 30, 2024, we identified our policies for the allowance for credit losses, goodwill and intangible assets, and deferred taxes, to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Our critical accounting policies are described in detail in Part I, Item 7 in Medallion Financial Corp.'s Annual Report on Form 10-K for the year ended December 31, 2023, and there have been no material changes in such policies and estimates since the date of such report.

Current wording

Our accounting policies are fundamental to understanding management's discussion and analysis of its financial condition and results of operations. At March 31, 2025, we identified our policies for the allowance for credit losses and goodwill and intangible assets to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Our critical accounting policies are described in detail in Part I, Item 7 in Medallion Financial Corp.'s Annual Report on Form 10-K for the year ended December 31, 2024, and there have been no material changes in such policies and estimates since the date of such report.

Previous wording

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. We are assessing the impact of the update on the accompanying financial statements.

Current wording

In December 2023, the FASB issued ASU 2023-09, Income Taxes, or Topic 740: Improvements to Income Tax Disclosures. The main objective of this update is to improve financial reporting disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for the annual periods beginning after December 15, 2024. We do not expect this update to have a material impact on the financial statements.

Previous wording

Because the Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act as well as Medallion Financial Corp. being a “financial institution holding company” within the meaning of the Utah Financial Institutions Act, federal and Utah law and regulations prohibit any person or company from acquiring control of the Bank or Medallion Financial Corp., without, in most cases, prior written approval of the FDIC or the Commissioner of the Utah Department of Financial Institutions, as applicable. Under the Change in Bank Control Act, control is conclusively presumed if, among other things, a person or company acquires 25% or more of any class of the Bank’s voting stock. A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to several specified “control factors” as set forth in the applicable regulations. Although the Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act, your investment in the Company is not insured or guaranteed by the FDIC, or any other agency, and is subject to loss.

Current wording

Because the Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act as well as Medallion Financial Corp. being a “financial institution holding company” within the meaning of the Utah Financial Institutions Act, federal and Utah law and regulations prohibit any person or company from acquiring control of the Bank or Medallion Financial Corp., without, in most cases, prior written approval of the FDIC or the Commissioner of the Utah Department of Financial Institutions, as applicable. Under the Change in Bank Control Act, control is conclusively presumed if, among other things, a person or company acquires 25% or more of any class of the Bank’s voting stock. A rebuttable presumption of control arises if a person or company acquires 10% or more of any class of voting stock and is subject to a number of specified “control factors” as set forth in the applicable regulations. Although the Bank is an “insured depository institution” within the meaning of the Federal Deposit Insurance Act and the Change in Bank Control Act, your investment in the Company is not insured or guaranteed by the FDIC, or any other agency, and is subject to loss.

Previous wording

Under the Utah Financial Institutions Act, control is defined as the power, directly or indirectly, or through or in concert with one or more persons to: (a) direct or exercise a controlling influence over (i) the management or policies of a financial institution or (ii) the election of a majority of the directors or trustees of an institution; or (b) to vote 25% or more of any class of voting securities of a financial institution. In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through or in concert with one or more persons, to vote more than 10% but not less than 25% of any class of voting securities of a financial institution. If any holder of any series of the Bank’s preferred stock is or becomes entitled to vote for the election of the Bank’s directors, such series will be deemed a class of voting stock, and any other person will be required to obtain the non-objection of the FDIC under the Change in Bank Control Act to acquire or maintain 10% or more of that series. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our common stock in excess of the amount which can be acquired without regulatory approval.

Current wording

Under the Utah Financial Institutions Act, control is defined as the power, directly or indirectly, or through or in concert with one or more persons to: (a) direct or exercise a controlling influence over (i) the management or policies of a financial institution or (ii) the election of a majority of the directors or trustees of an institution; or (b) to vote 25% or more of any class of voting securities of a financial institution. In addition, under Utah law, there is a rebuttable presumption that a person has control of a Utah financial institution if the person has the power, directly or indirectly, or through or in concert with one or more persons, to vote more than 10% but less than 25% of any class of voting securities of a financial institution. If any holder of any series of the Bank’s preferred stock is or becomes entitled to vote for the election of the Bank’s directors, such series will be deemed a class of voting stock, and any other person will be required to obtain the non-objection of the FDIC under the Change in Bank Control Act to acquire or maintain 10% or more of that series. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our common stock in excess of the amount which can be acquired without regulatory approval.

Previous wording

Thefollowing table presents our consolidated average balance sheet, interest income and expense, and the average interest earning/bearing assets and liabilities, and which reflects the average yield on assets and average costs on liabilities for the three months ended September 30, 2024 and 2023.

Current wording

Thefollowing table presents our consolidated average balance sheets, interest income and expense, and the average interest earning/bearing assets and liabilities, and which reflect the average yield on assets and average costs on liabilities as of and for the three months ended March 31, 2025 and 2024.

Previous wording

For the three months ended September 30, 2024, our loans receivable yielded 12.12%, as compared to 11.73% for the three months ended September 30, 2023. The 39 basis point increase reflects a higher yield on our consumer and commercial loan portfolios, as we have increased the rates charged on new originations over the past year as prevailing market interest rates remained high. Similarly, for the nine months ended September 30, 2024, our loans receivable yielded 12.02%, as compared to 11.62% for the nine months ended September 30, 2023. We have used the higher interest rate environment as an opportunity to both increase the rates on newly issued recreation and home improvement loans, which is expected to continue to increase the yield on these portfolios over time. Additionally, we have used the higher interest rate environment as an opportunity to increase the credit quality of our new issuances all while receiving a yield higher than what would typically be attainable in a lower interest rate environment. This is particularly the case in our recreation segment, with the average FICO scores, measured at origination, of our recreation loans outstanding being 685 as of September 30, 2024 compared to 682 as of September 30, 2023. We use weighted average FICO scores as an indicator of portfolio risk.

Current wording

For the three months ended March 31, 2025, our total loans yielded 12.04%, as compared to 11.84% for the three months ended March 31, 2024. The 20 basis point increase reflects a higher yield on our loan portfolios, as we have increased the rates charged on new consumer originations over the past year as prevailing market interest rates have remained high. We have continued to use the higher interest rate environment as an opportunity to increase the rates on both newly issued recreation and home improvement loans, as well as seek to increase the credit quality of our new issuances, particularly in our recreation segment, with the weighted average FICO scores, measured at origination, of our outstanding recreation loans being 685 (683 exclusive of loans held for sale) as of March 31, 2025 compared to 684 as of March 31, 2024. We use weighted average FICO scores as an indicator of portfolio risk.

Previous wording

Our debt, with certificates of deposits being our largest source, funds our growing lending business. Our average interest cost for the three and nine months ended September 30, 2024 of 4.05% and 3.86% increased 77 and 84 basis points from the three and nine months ended September 30, 2023, attributable to the current higher interest rate environment, particularly the higher cost associated with our deposits. To the extent that prevailing market interest rates remain at current levels, we expect our cost of funds to continue to increase as we issue new certificates of deposit to replace maturing certificates of deposit and fund our growth. During the three months ended September 30, 2024, we issued deposits for three-month certificates at rates as high as 4.95%, 4.65% for 36 month certificates, and 4.25% for 60 month certificates, with the most recent 36 month and 60 month issuances being at rates of 3.80%. As described above, we have taken, and continue to take, steps to pass along a portion of the interest rate increases on newly originated loans, the process for which is slower than the pace of funding cost increases, thereby compressing our net interest margins.

Current wording

Our debt, with certificates of deposits being our largest source, funds our growing lending business. Our average interest cost for the three months ended March 31, 2025 of 4.16% increased 49 basis points from the three months ended March 31, 2024, attributable to the current higher interest rate environment, particularly the higher cost associated with our deposits. To the extent that prevailing market interest rates remain at current levels, we expect our cost of funds to continue to increase as we issue new certificates of deposit to replace maturing certificates of deposit and fund our growth. During the three months ended March 31, 2025, we issued deposits at rates up to 4.45% and 4.33% for three and five year certificates of deposit, with the most recent three and five year issuances being at rates of 4.15%. As described above, we have taken, and continue to take, steps to pass along a portion of the interest rate increases on newly originated loans, the process for which is slower than the pace of funding cost increases, thereby compressing our net interest margins.

Previous wording

The following table presents the change in interest income and expense due to changes in the average balances (volume) and average yield/cost, calculated for the periods indicated.

Current wording

The following table presents the change in interest income and expense due to changes in the average balances (volume) and average rates, calculated for the periods indicated.

Previous wording

During the three and nine months ended September 30, 2024, the increase in interest income was mainly driven by the increase in the size of the consumer loan portfolios, as well as an increase in overall yield on interest-earning assets as we issue new loans at interest rates greater than the weighted average rates of our current portfolio. For the same periods, the increase in interest expense was driven by an increase in borrowing costs, primarily due to the increases in deposits and growth of our total borrowings which fund our growing loan portfolio, and in interest rates.

Current wording

During the three months ended March 31, 2025, the increase in interest income was mainly driven by the increase in the size of the consumer loan portfolios, as well as an increase in overall yield on interest-earning assets as we issue new loans at interest rates greater than the weighted average rates of our current portfolio. The increase in interest expense was driven by an increase in borrowing costs, primarily due to the increases in deposits as older deposits mature and are replaced at current market rates, as well as an overall increase in borrowings.

Previous wording

Our interest expense is driven by the interest rates payable on our bank certificates of deposit, privately placed notes, fixed-rate, long-term debentures issued to the SBA, trust preferred securities, and has historically included credit facilities with banks and other short-term notes payable. The Bank issues brokered time certificates of deposit, which are, on average, our lowest borrowing costs. The Bank is able to bid on these deposits at a variety of maturity options, which allows for more flexible interest rate management strategies. As further described below, in September 2023, we issued and sold $39.0 million aggregate principal amount of 9.25% senior notes due in September 2028, in June 2024, we amended our senior notes previously issued in December 2023, increasing the aggregate principal amount from $12.5 million to $17.5 million, reducing the interest rate to 8.875% from 9.0%, and extending the maturity date from December 2033 to June 2039, and in August 2024, we issued and sold $5.0 million aggregate principal amount of 8.625% senior notes due in August 2039. The net proceeds were used, in large part, to repurchase and settle, in full, $36.0 million aggregate principal amount of our 8.25% senior notes issued in 2019 and which matured in March 2024, as well as for general corporate purposes.

Current wording

Our interest expense is driven by the interest rates payable on our bank certificates of deposit, privately placed notes, fixed-rate, long-term debentures issued to the SBA, trust preferred securities, and has historically included credit facilities with banks and other short-term notes payable. The Bank issues brokered time certificates of deposit, which are, on average, our lowest borrowing costs. The Bank is able to bid on these deposits at a variety of maturity options, which allows for more flexible interest rate management strategies. In September 2023, we issued and sold $39.0 million aggregate principal amount of 9.25% senior notes due in September 2028, in June 2024, we amended our senior notes previously issued in December 2023, increasing the aggregate principal amount from $12.5 million to $17.5 million, reducing the interest rate to 8.875% from 9.0%, and extending the maturity date from December 2033 to June 2039, and in August 2024, we issued and sold $5.0 million aggregate principal amount of 8.625% senior notes due in August 2039. The net proceeds were used, in large part, to repurchase and settle, in full, $36.0 million aggregate principal amount of our 8.25% senior notes issued in 2019 and which matured in March 2024, as well as for general corporate purposes.

Previous wording

We measure our borrowing costs as our aggregate interest expense for all of our interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period. The above table presents the average borrowings and related borrowing costs for the three and nine months ended September 30, 2024 and 2023. We expect our borrowing costs to further increase as we take deposits and borrow other funds at the currently higher prevailing rates.

Current wording

We measure our borrowing costs as our aggregate interest expense for all of our interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period. The above table presents the average borrowings and related borrowing costs for the three months ended March 31, 2025 and 2024. We expect our borrowing costs to further increase as we take deposits and borrow other funds at the currently higher prevailing rates.

Previous wording

We continue to seek SBA funding through Medallion Capital to the extent it offers attractive rates. SBA financing subjects its recipients to limits on the amount of secured bank debt they may incur. We use SBA funding to fund loans that qualify under the Small Business Investment Act of 1985, as amended, or the SBIA, and SBA regulations. In July 2023, we obtained a $20.0 million commitment from the SBA, $9.8 million of which has been utilized as of September 30, 2024, with $10.2 million currently drawable. In February 2024, we obtained an $18.5 million commitment from the SBA, with $0.3 million currently drawable, and the balance of $18.2 million drawable upon the infusion of $9.1 million of capital.

Current wording

We continue to seek SBA funding through Medallion Capital to the extent it offers attractive rates. SBA financing subjects recipients to limits on the amount of secured bank debt they may incur. We use SBA funding to fund loans that qualify under the Small Business Investment Act of 1985, as amended, or the SBIA, and SBA regulations. In July 2023, we obtained a $20.0 million commitment from the SBA, all of which has been utilized as of March 31, 2025. In February 2024, we obtained an $18.5 million commitment from the SBA, with $10.3 million currently drawable, and the balance of $8.2 million drawable upon the infusion of $4.1 million of capital.

Previous wording

Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to or received from loan originators, and which are amortized to interest income over the life of the loan. During the three and nine months ended September 30, 2024, there was continued growth in the recreation segment, growing 12% from December 31, 2023, while home improvement loans increased 2% from December 31, 2023.

Current wording

Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, which are amortized to interest income over the life of the loan. For the three months ended March 31, 2025, there was continued growth in the recreation and home improvement lending segments as compared to the prior year quarter. The tables below present the activity of the loan portfolio, inclusive of loans held for sale and loans held for investment.

Previous wording

The following table presents the approximate maturities and sensitivity to changes in interest rates for our loans as of September 30, 2024.

Current wording

The following table presents the approximate maturities and sensitivity to change in interest rates for our loans as of March 31, 2025.

Previous wording

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

Current wording

The following tables present the activity in the allowance for credit losses for the three months ended March 31, 2025 and 2024.

Previous wording

As of September 30, 2024, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion 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.

Current wording

As of March 31, 2025, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $161.7 million, including $95.2 million related to loans secured by New York City taxi medallions, some of which may represent collection opportunities for the Company.

Previous wording

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

Current wording

The following tables present the gross charge-offs for the three months ended March 31, 2025 and 2024, by the year of origination:

Previous wording

As of September 30, 2024, the total allowance for credit losses as a percent of loans decreased 8 basis points from December 31, 2023.

Current wording

As of March 31, 2025, the total allowance for credit losses as a percent of loans increased 13 basis points from December 31, 2024.

Previous wording

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 other markets.

Current wording

As of March 31, 2025, taxi medallion loans in the process of foreclosure included 307 taxi medallions in the New York City market, 187 taxi medallions in the Chicago market, 24 taxi medallions in the Newark market, and 31 taxi medallions in various other markets.

Previous wording

Recreation lending is a growth business focused on originating prime and non-prime recreation loans which is a significant source of income for us, accounting for 67% of our interest income for both the three and nine months ended September 30, 2024 and the three and nine months ended September 30, 2023.

Current wording

Recreation lending is a return-oriented business focused on originating prime and non-prime recreation loans which is a significant source of income for us, accounting for 67% of our interest income for the three months ended March 31, 2025 and 65% for the three months ended March 31, 2024.

Previous wording

We maintain relationships with approximately 3,300 dealers and financial service providers, or FSPs, not all of which are active at any one time. FSPs are entities that provide finance and insurance services to small dealers that do not have the desire or ability to provide such services themselves. The ability of FSPs to aggregate the financing and relationship management for many small dealers makes them valuable. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten dealer and FSP relationships were responsible for 39% of recreation lending’s new loan originations for the nine months ended September 30, 2024 and 41% for the nine months ended September 30, 2023. The percentage of new loan originations by the top ten dealer and FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.

Current wording

We maintain relationships with approximately 3,300 dealers and financial service providers, or FSPs, not all of which are active at any one time. FSPs are entities that provide finance and insurance, or F&I, services to small dealers that do not have the desire or ability to provide F&I services themselves. The ability of FSPs to aggregate the financing and relationship management for many small dealers makes them valuable to us. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten dealer and FSP relationships were responsible for 39% of recreation lending’s new loan originations for the three months ended March 31, 2025 and 46% for the three months ended March 31, 2024. The percentage of new loan originations by the top ten dealer and FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.

Previous wording

The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $21,000 as of September 30, 2024. The loans are fixed rate with an average term at origination for loans originated in the current year of approximately 14 years. The weighted average maturity of our loans outstanding as of September 30, 2024 is approximately 11 years.

Current wording

The recreation loan portfolio consists of tens of thousands of geographically distributed loans with an average loan size of approximately $21,000 as of March 31, 2025. The loans are fixed rate with an average term at origination of approximately 15 years. The weighted average maturity of our loans outstanding as of March 31, 2025 is approximately 11 years.

Previous wording

The loans are secured primarily by RVs, boats, collector cars, and trailers, with RV loans making up 55% of the portfolio, boat loans making up 20%, and collector cars making up 11% of the portfolio as of September 30, 2024, compared to 58%, 20%, and 9% as of September 30, 2023. Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida at 16% and 10% of loans outstanding, compared to 15% and 10% as of September 30, 2023, and with no other states at or above 10%. As of September 30, 2024 and 2023, the weighted average FICO scores, measured at origination, of our recreation loans outstanding were 685 and 682. The weighted average FICO scores at the time of origination for the loans funded in the nine months ended September 30, 2024 and 2023 were 686 and 682.

Current wording

The loans are secured primarily by RVs, boats, collector cars, and trailers, with RV loans making up 55% of the portfolio, boat loans making up 19%, and collector cars making up 11% of the portfolio as of March 31, 2025, compared to 54%, 19%, and 10% as of March 31, 2024. Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida at 16% and 10% of loans outstanding, compared to 16% and 10% as of March 31, 2024, and with no other states at or above 10%. As of March 31, 2025 and 2024, the weighted average FICO scores, measured at origination, of our recreation loans outstanding were 685 (683 exclusive of loans held for sale) and 684. The weighted average FICO scores at the time of origination for the loans funded in the three months ended March 31, 2025 and 2024 were 683 and 692.

Previous wording

During the nine months ended September 30, 2024, we originated $454.4 million in recreation loans, compared to $384.3 million in the prior year period. Originations increased despite restrictive underwriting standards and management's efforts to mitigate concentration risks. The following table presents quarterly originations for 2024, 2023, and 2022.

Current wording

During the three months ended March 31, 2025, we originated $86.8 million in recreation loans, compared to $105.8 million in the prior year quarter. The lower origination volumes reflect our restrictive underwriting standards and management's efforts to mitigate concentration risks. The following table presents quarterly originations for 2025, 2024, and 2023.

Previous wording

As of September 30, 2024, 35.1% of the recreation loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history. The following table presents non-prime originations in comparison to total originations for the nine months ended September 30, 2024 and years ended December 31, 2023 and 2022.

Current wording

As of March 31, 2025, 37.0% of the recreation loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history. The following table presents non-prime originations in comparison to total originations for the three months ended March 31, 2025 and years ended December 31, 2024 and 2023.

Previous wording

The home improvement lending segment works with contractors and FSPs to finance home improvements and is concentrated in roofs, swimming pools, and windows at 38%, 24%, and 13% of total loans outstanding as of September 30, 2024, as compared to 40%, 19%, and 13% as of September 30, 2023, with no other collateral types over 10%. Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, each representing 11% of loans outstanding as of September 30, 2024 and with each state representing 10% as of September 30, 2023, with no other states at or above 10%. As of September 30, 2024 and 2023, the weighted average FICO scores of our home improvement loans outstanding, measured at origination, were 766 and 763. The weighted average FICO scores at the time of origination for the loans funded in the nine months ended September 30, 2024 and 2023 were 781 and 755.

Current wording

The home improvement lending segment works with contractors and FSPs to finance home improvements and is concentrated in roofs, swimming pools, and windows at 35%, 29%, and 13% of total home improvement loans outstanding as of March 31, 2025, as compared to 40%, 20%, and 13% as of March 31, 2024, with no other collateral types at or above 10%. Home improvement loans are made to borrowers residing nationwide, with the highest concentrations in Florida and Texas representing 13% and 11% of loans outstanding as of March 31, 2025, with each state representing 10% as of March 31, 2024 and no other states at or above 10%. As of March 31, 2025 and 2024, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding, measured at origination, were 767 and 764. The weighted average FICO scores at the time of origination for the loans funded in the three months ended March 31, 2025 and 2024 were 783 and 776.

Previous wording

A large proportion of our home improvement-financed sales are facilitated by contractor salespeople with limited financing backgrounds rather than by contractor employees who provide financing services. The result is contractor demand for financing services that facilitate an in-home transaction (e.g., digital tools, including mobile applications for phone or tablet, support for E-SIGN compliant electronic signatures, and extended operating hours), and additional resources for the salesperson throughout the financing process. We currently maintain relationships with approximately 900 contractors and FSPs. Our top ten contractors and FSP relationships were responsible for 35% of home improvement lending’s new loan originations during the nine months ended September 30, 2024. The percentage of new loan originations by the top ten contractor and FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.

Current wording

A large proportion of our home improvement-financed sales are facilitated by contractor salespeople with limited financing backgrounds rather than by contractor employees who provide F&I services. The result is contractor demand for financing services that facilitate an in-home transaction (e.g., digital tools, including mobile applications for phone or tablet, support for E-SIGN compliant electronic signatures, and extended operating hours), and additional resources for the salesperson throughout the financing process. We currently maintain relationships with approximately 900 contractors and FSPs. Our top ten contractors and FSP relationships were responsible for 57% of home improvement lending’s new loan originations for the three months ended March 31, 2025. The percentage of new loan originations by the top ten contractor and FSP relationships is a measure of concentration, which management uses to determine whether to undertake diversification efforts, and which provides investors with information about origination concentration.

Previous wording

The home improvement loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $21,000 as of September 30, 2024. The loans are fixed rate with an average term at origination, for loans originated in the current year of approximately 15 years. The weighted average maturity of our loans outstanding as of September 30, 2024 is approximately 12 years.

Current wording

The home improvement loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $22,000 as of March 31, 2025. The loans are fixed rate with an average term at origination, for loans originated in the current year of approximately 15 years. The weighted average maturity of our loans outstanding as of March 31, 2025 is approximately 13 years.

Previous wording

During the nine months ended September 30, 2024, the home improvement portfolio increased 7% to $814.1 million, with reserve coverage rates increasing 12 basis points to 2.42% from a year ago reflecting higher delinquency and potential losses. The average interest rate increased 38 basis points to 9.76% at September 30, 2024 from a year ago.

Current wording

As of March 31, 2025, the home improvement portfolio totaled $812.4 million, with allowance for credit losses increasing 11 basis points to 2.49% from a year ago reflecting higher delinquency and potential losses. The average interest rate charged on our loans increased 23 basis points to 9.83% at March 31, 2025 from a year ago.

Previous wording

During the nine months ended September 30, 2024, we originated $216.1 million in home improvement loans, compared to $291.3 million in the prior year period. The decrease was driven in part by ongoing restrictive underwriting standards in 2024 and management's efforts to mitigate concentration risks. The following table presents quarterly originations for 2024, 2023, and 2022.

Current wording

During the three months ended March 31, 2025, we originated $48.8 million in home improvement loans, compared to $51.6 million in the prior year quarter. Origination volumes were somewhat lower due in part to ongoing restrictive underwriting standards and management's continued efforts to mitigate concentration risks. The following table presents quarterly originations for 2025, 2024, and 2023.

Previous wording

As of September 30, 2024, 1% of the home improvement loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history. The following table presents non-prime originations in comparison to total originations for the nine months ended September 30, 2024 and years ended December 31, 2023 and 2022.

Current wording

As of March 31, 2025, less than 1% of the home improvement loan portfolio were non-prime receivables with obligors who do not qualify for conventional consumer finance products as a result of, among other things, adverse credit history. The following table presents non-prime originations in comparison to total originations for the three months ended March 31, 2025 and years ended December 31, 2024 and 2023.

Previous wording

We originate both senior and subordinated loans nationwide to businesses in a variety of industries, with California, Wisconsin, and Texas each having 30%, 11%, and 10% of the segment portfolio, and no other states having a concentration at or above 10%. These mezzanine loans are primarily secured by a second position on all assets of the businesses and generally range in amount from $2.5 million to $6.0 million at origination, and typically include an equity component as part of the financing. These equity components, although a small portion of the overall financing, have the potential to generate significant yield enhancement when the underlying portfolio company enters a capital transaction. During the nine months ended September 30, 2024, net gains of $3.1 million were recognized with respect to these equity investments. The commercial lending business has concentrations in manufacturing, construction, and wholesale trade making up 55%, 14%, and 11%, of the loans outstanding as of September 30, 2024. During the nine months ended September 30, 2024, we originated $7.0 million in new commercial loans, compared to $16.7 million in the 2023 period.

Current wording

We originate both senior and subordinated loans nationwide to businesses in a variety of industries, with California and Illinois having 31% and 10% of the segment portfolio, and no other states having a concentration at or above 10%. These mezzanine loans are primarily secured by a second position on all assets of the businesses and generally range in amount from $2.5 million to $6.0 million at origination, and typically include an equity component as part of the financing. These equity components, although a small portion of the overall financing, have the potential to generate significant yield enhancement when the underlying portfolio company enters a capital transaction. During the three months ended March 31, 2025, net gains of $9.4 million were recognized with respect to these equity investments. The commercial lending business has concentrations in manufacturing, construction, and wholesale trade making up 58%, 13%, and 12%, of the loans outstanding as of March 31, 2025. During the three months ended March 31, 2025, we originated $9.7 million of new commercial loans.

Previous wording

The following table presents certain financial data and ratios as of and for the three and nine months ended September 30, 2024 and 2023. The commercial segment encompasses the mezzanine lending business, and the other legacy commercial loans (immaterial to total) have been allocated to corporate and other investments.

Current wording

The following table presents selected financial data and ratios as of and for the three months ended March 31, 2025 and 2024. The commercial segment encompasses the mezzanine lending business, and the other legacy commercial loans (immaterial to total) have been allocated to corporate and other investments.

Previous wording

The taxi medallion lending segment operates in the New York City metropolitan area. During the three and nine months ended September 30, 2024, taxi medallion values remained consistent in the New York City and Newark markets with all other markets being valued at $0. We continued to not recognize interest income with all loans being placed on nonaccrual as of the third quarter 2020 (except for settled loans with interest being paid in excess of the loan balance), and by transferring underperforming loans from the portfolio to loan collateral in process of foreclosure with charge-offs to collateral value, once loans become more than 120 days past due. All the loans are secured by taxi medallions and enhanced by personal guarantees of the shareholders and owners.

Current wording

The taxi medallion lending segment operates in the New York City metropolitan area. During the three months ended March 31, 2025, we continued to utilize a taxi medallion value of $79,500 in the New York City and Newark markets despite fluctuating transfer prices that have exceeded that value, with all other markets being valued at $0 at the end of the quarter. We continued to not recognize interest income with all loans being placed on nonaccrual (except for settled loans with interest being paid in excess of the loan balance), and by transferring underperforming loans from the portfolio to loan collateral in process of foreclosure with charge-offs to collateral value, once loans become more than 120 days past due.

Previous wording

During the three and nine months ended September 30, 2024, we collected $4.1 million and $9.5 million related to taxi medallion and related assets, which resulted in net recoveries and gains of $2.8 million and $5.6 million in those periods. The amount of cash collected as well as recoveries recorded vary greatly from period to period due to a wide variety of circumstances surrounding each of the underlying assets, and while we continue to focus on collection and recovery efforts, it is unlikely that there will be future collections at the higher levels experienced in the prior year.

Current wording

During the three months ended March 31, 2025, we collected $2.6 million related to taxi medallion and related assets, which resulted in net recoveries and gains of $1.7 million in the quarter. The amount of cash collected as well as recoveries recorded vary greatly from period to period due to a wide variety of circumstances surrounding each of the underlying assets, and while we continue to focus on collection and recovery efforts, it is unlikely that there will be future collections at the higher levels experienced in prior years.

Previous wording

This non-operating segment includes our equity and investment securities as well as our legacy commercial business, and other assets, liabilities, revenues, and expenses, including goodwill and intangible assets, which are not specifically allocated to the operating segments and are not used in evaluating performance of the operating segments. Commencing with the 2020 second quarter, the Bank began issuing loans related to the new strategic partnership business, which is included within this segment. The associated activities of the strategic partnership business are currently limited to originating loans or other receivables facilitated by our strategic partners and selling those loans or receivables to our strategic partners or other third parties, without recourse, within a specified time after origination, such as three business days. Strategic partnerships loans were $3.2 million as of September 30, 2024 and $1.8 million as of September 30, 2023, with originations of $39.9 million and $80.0 million during the three and nine months ended September 30, 2024 and $36.5 million and $96.6 million during the three and nine months ended September 30, 2023.

Current wording

This segment includes loans related to our strategic partnership program, which are issued by the Bank. The associated activities of the strategic partnership program are currently limited to originating loans or other receivables facilitated by our strategic partners and selling those loans or receivables to our strategic partners or other third parties, without recourse, within a specified time after origination, such as three business days. Strategic partnership loans were $10.5 million as of March 31, 2025 and $0.9 million as of March 31, 2024, with originations of $136.2 million during the three months ended March 31, 2025 and $15.8 million during the three months ended March 31, 2024.