MEDALLION FINANCIAL CORP (MFIN)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 2026 and the year ended December 31, 2025. 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.

COMPANY BACKGROUND

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 financial technology, or fintech, partners. Medallion Capital is a wholly-owned subsidiary that originates commercial loans through its mezzanine financing business. As of March 31, 2026, our consumer loans represented 95% of our gross loan portfolio and commercial loans represented 5%. Total assets were $2.95 billion and $2.96 billion as of March 31, 2026 and December 31, 2025.

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 average cost of borrowed funds. We fund our operations through a wide variety of interest-bearing sources, including bank certificates of deposit issued to consumers, privately placed notes, debentures issued to and guaranteed by the SBA, trust preferred securities, and preferred stock of the Bank. 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, the impact of tariffs, the impact of geopolitical events, including the conflict with Iran, 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, seek borrowers with strong credit ratings and moderate the pace of our recent growth in the event of a potential economic downturn and in light of the current uncertainties and inflationary environment.

We also provide debt, mezzanine, and equity investment capital to companies in a variety of commercial industries. These investments may be venture capital style investments which may not be fully collateralized. Our investments are typically in the form of secured debt instruments with fixed interest rates accompanied by an equity stake or warrants to purchase an equity interest for a nominal exercise price (such warrants are included in equity investments on the consolidated balance sheets). Interest income is earned on the debt instruments.

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. 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 in the fourth quarter of 2025 sold its remaining taxi medallion portfolio to one of our subsidiaries.

In 2019, the Bank launched a strategic partnership program to provide lending and other services to fintech companies. The Bank entered into an initial partnership in 2020 and began issuing its first loans. The Bank continues to evaluate and launch additional partnership programs with fintech companies.

We continue to consider various alternatives for the Bank, which may include an initial public offering of its common stock, the sale of all or part of the Bank, a spin-off or other potential transaction. We do not have a deadline for its consideration of these alternatives, and there can be no assurance that this process will result in any transaction being announced or consummated.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are fundamental to understanding management's discussion and analysis of its financial condition and results of operations. At March 31, 2026, 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, 2025, and there have been no material changes in such policies and estimates since the date of such report.

RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income - Expense Disaggregation of Income Statement Expenses. This update requires additional disaggregation of specific types of expenses within the notes to consolidated financial statements on an annual and interim basis. In January 2025, the FASB issued ASU 2025-01 to clarify that all public business entities are required to adopt ASU 2024-03 for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are assessing the impact of the update on the accompanying financial statements.

CONTROL STATUTES AND REGULATIONS

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.

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.

In addition to the regulations detailed above, our operations are subject to supervision and regulation by other federal, state, and local laws and regulations. Additionally, our operations may be subject to various laws and judicial and administrative decisions. This oversight may serve to:

•
regulate credit granting activities, including establishing licensing requirements, if any, in various jurisdictions;

•
establish maximum interest rates, finance charges and other charges;

•
require disclosures to customers;

•
govern secured transactions;

•
set collection, foreclosure, repossession, and claims handling procedures and other trade practices;

•
prohibit discrimination in the extension of credit and administration of loans; and

•
regulate the use and reporting of information related to a borrower’s credit experience and other data collection.

Changes to laws of states in which we do business could affect the operating environment in substantial and unpredictable ways. We cannot predict whether such changes will occur or, if they occur, the ultimate effect they would have upon our financial condition or results of operations.

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AVERAGE BALANCES AND RATES

The following 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, 2026 and 2025.

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[Excerpt truncated for page length; source filing is linked above.]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OBJECTIVE

The information contained in this section should be read in conjunction with the consolidated financial statements and the accompanying notes thereto for the years ended December 31, 2025, 2024, and 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 on page 18. Additionally, more information about our business activities can be found in “Business.”

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COMPANY BACKGROUND

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 December 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 $2.96 billion as of December 31, 2025 and $2.87 billion as of December 31, 2024.

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 average cost of borrowed funds. We fund our operations through a wide variety of interest-bearing sources, including bank certificates of deposit issued to consumers, debentures issued to and guaranteed by the SBA, privately placed notes, trust preferred securities, and preferred stock of the Bank. 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, 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, seek borrowers with strong credit ratings and moderate the pace of our recent growth in the event of a potential economic downturn and in light of the current uncertainties and inflationary environment.

We also provide debt, mezzanine, and equity investment capital to companies in a variety of commercial industries. These investments may be venture capital style investments which may not be fully collateralized. Our investments are typically in the form of secured debt instruments with fixed interest rates accompanied by an equity stake or warrants to purchase an equity interest for a nominal exercise price (such warrants are included in equity investments on the consolidated balance sheets). Interest income is earned on the debt instruments.

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.

In 2019, the Bank launched a strategic partnership program to provide lending and other services to fintech companies. The Bank entered into an initial partnership in 2020 and began issuing its first loans. The Bank continues to evaluate and launch additional partnership programs with fintech companies.

We continue to consider various alternatives for the Bank, which may include an initial public offering of its common stock, the sale of all or part of the Bank, a spin-off or other potential transaction. We do not have a deadline for its consideration of these alternatives, and there can be no assurance that this process will result in any transaction being announced or consummated.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We follow financial accounting and reporting policies that are in accordance with Generally Accepted Accounting Principles, or GAAP. Some of these significant accounting policies require management to make difficult, subjective or complex judgments. The policies noted below, however, are deemed to be our “critical accounting policies” under the definition given to this term by the SEC. According to the SEC, “critical accounting policies” mean those policies that are most important to the presentation of a company’s financial condition and results of operations, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

The judgments used by management in applying the critical accounting policies may be affected by deterioration in the economic environment, which may result in changes to future financial results. Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes to the allowance for credit losses in future periods, and the inability to collect on outstanding loans could result in increased credit losses.

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Provision and Allowance for Credit Losses

The consumer loan allowance for credit losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. In analyzing the adequacy of the allowance for credit losses for recreation and home improvement loans, we segment our consumer loan portfolio by risk pool to reach what we believe to be an appropriate level of homogeneity and use a probability of default, or PD/loss given default, or LGD, model to calculate the allowance. For each loan, PD and LGD values are assigned based on the risk pool and delinquency status of the loan. Those values are determined by historical delinquent loan performance for the respective loan pool and actual loss rates within that pool, including the history of recoveries. The PD value time series for each loan is then modified using a model that incorporates statistically significant macroeconomic factors, such as unemployment rate and consumer spending, to predict increases or decreases in expected default rates. Those modifications are applied over a twelve-month reasonable and supportable forecast period followed by a six-month reversion period. As a final step, qualitative factors may be added to each loan pool based on management judgment, increasing or decreasing the size of the allowance for a particular loan pool. Performing loans are recorded at book value and the general reserve maintained to absorb expected losses is consistent with GAAP.

Management is primarily responsible for the overall adequacy of the allowance. The allowance is evaluated on a regular basis, at least quarterly, by management and is based upon management’s periodic review of the factors noted above. In addition, allowance adequacy is subject to independent credit reviews and a review of the allowance model. Regulators, as an integral part of their supervisory functions, periodically review our consumer loan portfolio and related allowance for credit losses. These regulatory agencies may require us to increase our allowance for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. An increase in the allowance for credit losses required by these regulatory agencies could materially adversely affect our financial condition and results of operations.

Under the CECL lifetime loss standard in effect since January 1, 2023, we calculate the allowance for credit losses using both quantitative and qualitative factors. The quantitative loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in credit characteristics of our loans, loan prepayment and other cash flow-related behaviors, and macroeconomic factors. Periodically, we update our allowance model assumptions based on prior experience. In the fourth quarter of 2025, we updated our prepayment speed assumptions and calculation method, transitioning from a pooled analysis to a loan-level approach, which increased modeled prepayment speeds and had the effect of decreasing the allowance for credit losses for both recreation and home improvement loans. Earlier in 2025, we revised our assumptions to include a redevelopment of our macroeconomic factor model, which increased the allowance's sensitivity to unemployment, the consumer price index, and labor force participation. We also further segmented the recreation loan portfolio by credit risk and further segmented the home improvement portfolio by product type. These adjustments had the effect of increasing the allowance for credit losses for both recreation and home improvement loans.

All taxi medallion loans are deemed impaired and have a specific allowance for each loan, such that the underlying net loan has a value no greater than collateral value. The determination of taxi medallion collateral fair value is derived quarterly for each jurisdiction. For taxi medallion loans, delinquent nonperforming loans are valued at collateral value for the most recent quarter. Collateral value for the taxi medallion loans is generally determined utilizing factors deemed relevant under the circumstances of the market including but not limited to: actual transfers, pending transfers, median and average sales prices, discounted cash flows, market direction and sentiment, and general economic trends for the industry and economy. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. We deem a loan impaired when, based on current information and events, it is probable that we will be unable to collect the amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. We charge-off loans in the period that such loans are deemed uncollectible or when they reach 120 days delinquent regardless of whether the loan is a recreation, home improvement, or taxi medallion loan.

Goodwill and Intangible Assets

Goodwill assets arose as a result of the excess of fair value over book value for several of our previously unconsolidated portfolio investment companies as of April 2, 2018. This fair value was brought forward under our 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.

Through December 31, 2024, we evaluated goodwill for impairment on an annual basis at December 31 of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. On October 1, 2025, we changed the annual goodwill impairment testing date from December 31 to October 1 to better align with the timing of our annual long-term planning process. This change was not material to the consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge.

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Other intangible assets with finite useful lives are amortized either on an accelerated or straight-line basis over their estimated useful lives. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

As of December 31, 2025 and 2024, we had goodwill of $150.8 million, all of which related to the recreation and home improvement lending segments. As of December 31, 2025 and 2024, we had intangible assets of $17.7 million and $19.1 million. We recognized $1.4 million of amortization expense on the intangible assets for each of the years ended December 31, 2025, 2024 and 2023.

Management engaged an independent third-party expert to perform a quantitative assessment of goodwill for impairment at October 1, 2025. The third-party expert’s assessment determined that it was more likely than not that the fair value of both the recreation lending and home improvement lending segments individually were not less than the carrying value of each of these segments. Based upon inputs and analysis deemed appropriate by the third-party expert, the third-party expert concluded that a fair value premium existed in excess of carrying value with respect to the recreation and home improvement lending segments.

In evaluating both segments, a combination of an income approach (weighted 50%), an earnings-based market approach (weighted 25%), and a book value-based market approach (weighted 25%) were employed by the third-party expert. For the income approach, a discounted cash flow analysis was used. Key inputs and assumptions used in the discounted cash flow analysis included future projected cash flows, risk-adjusted discount rates, capital requirements, and future economic and market conditions. For both segments, a discount rate was estimated using the risk-free interest rate adjusted for specific risk and size premiums, resulting in a discount rate of 16.2% for each of the recreation and home improvement lending segments. For both segments, growth rates consistent with our plan were employed by the third-party expert for a five year period, and a long-term growth rate of 3% was utilized in determining the terminal fair value.

Determining the fair value of a lending segment or an indefinite-lived intangible asset involves the use of significant estimates and assumptions. We believe that the fair value estimates determined by the third-party expert were based on reasonable assumptions and appropriate for the purpose of assessing goodwill for impairment. However, as these estimates and assumptions are unpredictable and inherently uncertain, actual future results may differ from these estimates. In addition, we also make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. To the extent that we are unable to grow either the recreation lending or home improvement lending segment at the levels forecasted, if we were unable to issue new consumer loans at rates and terms consistent with current practices, and if our cost of borrowings were to increase significantly from current levels without the ability to pass along those rate increases to new borrowers, the fair value of these segments could deteriorate to a level which would require an impairment of goodwill.

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AVERAGE BALANCES AND RATES

The following 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 years ended December 31, 2025, 2024, and 2023.

(1)
Includes deferred financing costs of $8.4 million, $8.2 million, and $8.5 million as of December 31, 2025, 2024, and 2023.

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For the year ended December 31, 2025, our total loans yielded 12.26% as compared to 12.01% for the year ended December 31, 2024. The 25 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. We have used the higher interest rate environment as an opportunity to increase the rates on both newly issued recreation and home improvement loans, which has increased the yield on these portfolios over time, as well as increased the credit quality of our new issuances, particularly in our recreation lending segment, with the average FICO scores, measured at origination, of our total recreation loans outstanding being 686 and 685 as of December 31, 2025 and 2024. We use weighted average FICO scores as an indicator of portfolio risk.

Our debt, with certificates of deposits being our largest source, funds our growing lending business. Our average interest cost for the year ended December 31, 2025 of 4.22% increased 29 basis points from 3.93% for the year ended December 31, 2024, attributable to the current higher interest rate environment, particularly the higher cost associated with issuing certificates of deposit. 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 year ended December 31, 2025, we issued deposits for three-month certificates at rates as high as 4.15% and 4.35% for both 36 month and 60 month certificates, with the most recent 36 month and 60 month issuances in 2025 both at rates of 3.70%. 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.

RATE/VOLUME ANALYSIS

The following table presents the change in interest income and expense due to changes in the average balances (volume) and average rates, calculated for the years ended December 31, 2025, 2024, and 2023.

For the year ended December 31, 2025, the increase in interest income over the prior year periods was mainly driven by the increase in the size of the consumer loan portfolios, particularly recreation loans, as well as an increase in overall yield on interest-earning assets as we continued to issue new consumer 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.

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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.

Our cost of funds is primarily driven by the rates paid on our various borrowings and changes in the levels of average borrowings outstanding. See Note 5 to the consolidated financial statements for details on the terms of our outstanding debt.

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 years ended December 31, 2025, 2024, and 2023. We expect our borrowing costs to further increase as we take deposits and borrow other funds at current prevailing rates.

We have sought 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 have used SBA funding to fund loans that qualify under the SBIA and SBA regulations. As of December 31, 2025 SBA borrowings were less than 4% of total borrowed funds. In February 2024, we obtained an $18.5 million commitment from the SBA, all of which had been utilized as of December 31, 2025. We do not currently have any commitments available from the SBA. Further SBA commitments for additional debenture financing are subject to the successful completion of an SBA review of Medallion Capital’s management team as further discussed under Item 1A. Risk Factors of this Annual Report on Form 10-K.

At December 31, 2025 and 2024, adjustable rate debt constituted less than 2% of total debt, and was comprised solely of our trust preferred securities borrowings.

LOANS

Loans are reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, which are amortized to interest income over the life of the loan. For the year ended December 31, 2025, there was continued growth in the recreation lending segment, as well as a small increase in the commercial lending segment, but a small decline in the home improvement lending segment, as compared to the prior year, as we intentionally managed origination volumes to align portfolio growth with capital. The following tables present the activity of the loan portfolio, inclusive of loans held for sale and loans held for investment.

(1)
Includes loans held for sale and loans held for investment.

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

(1)
Excludes deferred costs.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at a level estimated by management to absorb expected future losses in the portfolios. As of December 31, 2025 and 2024, the allowance totaled $114.8 million and $97.4 million, which represented 4.50% and 4.12% of total loans held for investment, respectively. The provision for credit losses was $89.8 million for the year ended December 31, 2025 compared to $76.5 million for the year ended December 31, 2024 as a result of rising loss rates, fluctuation in delinquencies, and higher expected losses in our recreation loan portfolio and lower recoveries on taxi medallion loans.

During the year ended December 31, 2025, we recognized provisions of $9.0 million related to specific commercial loans, compared to $1.1 million in 2024. Provisions and the correlated allowance for credit losses of commercial loans are assessed on specific indicators, such as, the underlying borrower not performing as expected and consideration of the current economic environment and economic policies which impact, or are likely to impact, the borrower's underlying business operations.

The following table presents the activity in the allowance for credit losses for December 31, 2025 and 2024.

(1)
As of December 31, 2025, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $171.1 million, including $106.3 million related to loans secured by New York taxi medallions, some of which may represent collection opportunities for us.

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

The following tables present the allowance for credit losses for loans held for investment, by type, as of December 31, 2025 and 2024:

(1)
Does not include loans held for sale which are carried at the lower of amortized cost or fair value for which an allowance for credit loss is not established.

(2)
As of December 31, 2025, total allowance for credit losses as a percentage of nonaccrual loans was 281%.

(*) Less than 0.1%.

(1)
Does not include loans held for sale which are carried at the lower of amortized cost or fair value for which an allowance for credit loss is not established.

(2)
As of December 31, 2024, total allowance for credit losses as a percentage of nonaccrual loans was 292%.

The following table presents the trend in loans 90 days or more past due as of the dates indicated.

(1)
Percentages are calculated against the total loan portfolio.

(*) Less than 0.1%.

As of December 31, 2025 taxi medallion loans in the process of foreclosure included 281 taxi medallions in the New York market, 186 taxi medallions in the Chicago market, 22 taxi medallions in the Newark market, and 31 taxi medallions in various other markets.

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SEGMENT RESULTS

We manage our financial results under four operating segments; recreation lending, home improvement lending, commercial lending, and taxi medallion lending. We also present results for a non-operating segment, corporate and other investments.

Recreation Lending

Recreation lending is a return-oriented business focused on originating prime and non-prime recreation loans which is a significant source of income for us, accounting for 66%, 67%, and 67% of our interest income for the years ended December 31, 2025, 2024, and 2023.

We maintain relationships with approximately 3,400 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. We receive approximately half of our loan volume from dealers and the other half from FSPs. Our top ten relationships were responsible for 39% of recreation lending’s new loan originations for the year ended December 31, 2025. The percentage of new loan originations by the top ten dealers and/or 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.

The recreation loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $22,000 as of December 31, 2025, with an average loan size originated in 2025 of approximately $29,000. 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 December 31, 2025 is 11 years.

The loans are secured primarily by RVs, boats, collector cars, and trailers, with RV loans making up 54% of the portfolio, boat loans making up 21%, and collector cars making up 13% of the portfolio as of December 31, 2025, compared to 55%, 20%, and 11% as of December 31, 2024. Recreation loans are made to borrowers residing nationwide, with the highest concentrations in Texas and Florida, at 17% and 10% of loans outstanding with no other states at or above 10%. As of December 31, 2025, 2024, and 2023, the weighted average FICO, measured at origination, scores of all recreation loans outstanding were 686, 685 (683 exclusive of loans held for sale), and 683. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, and 2023 were 688, 685 (686 exclusive of loans held for sale), and 686.

During the year ended December 31, 2025, the recreation portfolio grew 5% from $1.5 billion to $1.6 billion, with the average coupon rate at origination increasing 9 basis points to 15.16% from a year ago. Additionally, during the year ended December 31, 2025, the allowance for credit losses increased 21% from December 31, 2024, with the increase reflecting the 5% growth in the portfolio we experienced as well as rising loss rates and various economic factors resulting in a higher allowance.

During the year ended December 31, 2025, we originated $468.5 million in recreation loans, a decrease from the $526.6 million originated in 2024. The lower origination volumes during the year reflects our focus on originating loans that we believe will perform better during economic downturns, as well as our efforts to maintain origination volumes that align with our capital levels. The following table presents quarterly originations for the years ended December 31, 2025, 2024, and 2023.

As of December 31, 2025, 36% 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 years ended December 31, 2025, 2024, and 2023.

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The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.

(1)
Inclusive of both loans held for investment and loans held for sale.

(2)
Allowance for credit losses as a percent of loans held for investment and excludes loans held for sale.

(3)
Loans 90 days or more past due as a percent of total loans.

(4)
Net charge-offs as a percent of annual average gross loans. Charge-off ratio for the year ended December 31, 2025 was 3.95% when excluding loans held for sale.

Home Improvement Lending

The home improvement lending segment works with contractors and financial service providers to finance home improvements and is concentrated in swimming pools, roofs, and windows at 32%, 28%, and 11% of total loans outstanding as of December 31, 2025, as compared to 27%, 36%, and 13% as of December 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 at 14% and 12% of loans outstanding December 31, 2025, with no other states at or above 10%. As of December 31, 2025, 2024, and 2023, the weighted average FICO scores, measured at origination, of our home improvement loans outstanding were 767, 767, and 764. The weighted average FICO scores at the time of origination for the loans funded in the years ended December 31, 2025, 2024, and 2023 were 779, 781, and 771.

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 700 contractors and FSPs. Our top ten contractors and/or FSP relationships were responsible for 61% of home improvement lending’s new loan originations for the year ended December 31, 2025. The percentage of new loan originations by the top ten contractors and/or 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.

The home improvement loan portfolio consists of thousands of geographically distributed loans with an average loan size of approximately $22,000 as of December 31, 2025, with an average loan size originated in 2025 of $31,000. 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 December 31, 2025 is 13 years.

As of the year ended December 31, 2025, the home improvement portfolio totaled $810.2 million, with the allowance for credit losses decreasing 5% from a year ago reflecting primarily improvement in credit performance and various other economic factors. The average interest rate charged on our loans increased 6 basis points to 9.87% from the prior year.

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During the year ended December 31, 2025, we originated $224.5 million home improvement loans, compared to $298.6 million in the prior year. The lower origination volumes reflect our focus on originating loans that we believe will perform better during economic downturns, as well as our efforts to maintain origination volumes that align with our capital levels. The following table presents quarterly originations for the years ended December 31, 2025, 2024, and 2023.

As of December 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 years ended December 31, 2025, 2024, and 2023.

(*) Less than 1%.

The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.

(1)
Allowance for credit losses as a percent of gross loans.

(2)
Loans 90 days or more past due as a percent of total loans.

(3)
Net charge-offs as a percent of annual average gross loans.

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Commercial Lending

We originate both senior and subordinated loans nationwide to businesses in a variety of industries, with California, Wisconsin, and New York having 20%, 12%, and 11% 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 year ended December 31, 2025, net gains of $24.6 million were recognized with respect to these equity investments. The commercial lending business has concentrations in manufacturing, wholesale trade, and construction, that make up 63%, 11%, and 10% of total loans outstanding as of December 31, 2025, as compared to 57%, 12%, and 12% as of December 31, 2024. During the year ended December 31, 2025, we originated $40.6 million of loans, compared to $14.3 million in originations in 2024. As of December 31, 2025, commercial loans totaled $123.1 million.

The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 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.

(1)
Allowance for credit losses as a percent of gross loans.

(2)
Loans 90 days or more past due as a percent of total loans.

(3)
Net charge-offs as a percent of annual average gross loans.

(1)
Includes 11 other states, which were all under 10% as of December 31, 2025, and 12 other states, which were all under 10% as of December 31, 2024.

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Taxi Medallion Lending

The taxi medallion lending segment operates in the New York City metropolitan area. During the year ended December 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 year. We continued to not recognize interest income with all loans being 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.

During the year ended December 31, 2025, we collected $13.6 million related to taxi medallion assets, which resulted in net recoveries and gains of $7.9 million, and collected $12.1 million related to taxi medallion assets in the prior year, which resulted in net recoveries and gains of $6.9 million. 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 levels experienced in recent years.

The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.

(1)
Recovery for credit losses as a percent of gross loans.

(2)
Loans 90 days or more past due as a percent of total loans.

(3)
Net recoveries as a percent of annual average gross loans.

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Corporate and Other Investments

This non-operating segment relates to our equity and investment securities as well as our legacy commercial business, and other assets, liabilities, revenues, and expenses, which are not specifically allocated to the operating segments. Additionally, we historically and continue to account for goodwill in this non-operating segment. All goodwill relates to the Bank, specifically the recreation and home improvement lending 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 partnership loans were $15.1 million and $7.4 million in net loans as of December 31, 2025 and December 31, 2024, with originations of $771.6 million and $203.6 million during the years ended December 31, 2025 and December 31, 2024.

The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.

Summary Consolidated Financial Ratios

The following table presents selected financial data and ratios as of and for the years ended December 31, 2025, 2024, and 2023.

(1)
Includes $99.4 million, related to non-controlling interests in consolidated subsidiaries as of December 31, 2025, and $68.8 million as of December 31, 2024 and 2023.

(2)
Excludes deferred financing costs of $8.4 million, $8.2 million, and $8.5 million as of December 31, 2025, 2024, and 2023.

(3)
Net charge-offs as a percent of annual average gross loans.

(4)
Allowance for credit losses as a percentage of loans held for investment. Loans held for sale are carried at the lesser of amortized cost or fair value, do not have an allowance for credit losses, and are excluded from this calculation.

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CONSOLIDATED RESULTS OF OPERATIONS

For the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

Net income attributable to shareholders was $43.0 million, or $1.78 per diluted share, for the year ended December 31, 2025, compared to $35.9 million, or $1.52 per diluted share, for the year ended December 31, 2024.

Total interest income was $315.3 million for the year ended December 31, 2025, compared to $290.7 million for the year ended December 31, 2024. The increase in interest income reflects the continued growth in our lending segments, particularly recreation lending, as well as increased weighted average interest rates charged on loans. As of December 31, 2025, the weighted average coupon rates at origination of our recreation, home improvement, and commercial loans were 15.16%, 9.87%, and 14.22% compared to 15.07%, 9.81%, and 12.97% as of December 31, 2024. The yield on interest earning assets was 11.74% for the year ended December 31, 2025, compared to 11.56% for the year ended December 31, 2024, which reflects higher interest rates on new originations in our recreation and home improvement lending segments, with segment-specific yields anticipated to remain near these levels as older loans, written at lower rates, amortize and newer originations at the higher current rates continue to become a larger portion of our portfolios.

Loans, inclusive of loans held for sale, were $2.567 billion as of December 31, 2025, comprised of recreation ($1.617 billion), home improvement ($810.2 million), commercial ($123.1 million), strategic partnership ($15.1 million), and taxi medallion ($1.2 million) loans. We had an allowance for credit losses as of December 31, 2025 of $114.8 million, attributable to the recreation (75%), home improvement (17%), commercial (8%), and taxi medallion (less than a percent) loan portfolios.

Loans increased $75.8 million, or 3%, to $2.567 billion as of December 31, 2025 from $2.491 billion as of December 31, 2024. Loan originations for the year ended December 31, 2025 were $1.505 billion, with $468.5 million of recreation loan originations, $224.5 million of home improvement originations, $771.6 million of strategic partnership loan originations, and $40.6 million of commercial loan originations. Comparatively, loan originations for the year ended December 31, 2024 included $526.6 million of recreation loan originations, $298.6 million of home improvement originations, $203.6 million of strategic partnership loan originations, and $14.3 million of commercial loan originations. Originations decreased in both of our consumer lending segments as we continued to focus on originating loans that we believe will perform better during economic downturns, as well as adjusting origination volumes to align with our capital requirements.

The provision for credit losses was $89.8 million for the year ended December 31, 2025 compared to $76.5 million for the year ended December 31, 2024. The current year provision included net charge-offs of $72.4 million, of which $59.1 million, $11.2 million and $5.2 million related to recreation, home improvement, and commercial loans. This compares to net-charge offs of $63.4 million, of which $54.4 million, $13.9 million, and less than $0.1 million related to recreation, home improvement, and commercial lending segments, for the year ended December 31, 2024. Additionally, the allowance for the year ended December 31, 2025 included net recoveries of taxi medallion loans of $3.0 million compared to $5.0 million for the year ended December 31, 2024. Charge-offs in the recreation loan portfolio continued to trend higher in 2025, a reflection of the broader economy. For the year ended December 31, 2025, net charge offs were 3.95% of recreation loans and 1.38% of home improvement loans, compared to 3.72% and 1.78% for the year ended December 31, 2024. As of December 31, 2025, current loans (those less than 30 days past due) were 94% and 99% of the recreation and home improvement loan portfolios, similar to December 31, 2024. Charge-off activity and loan delinquency are two of the more prominent indicators of future loss experience and thus have a significant impact on our determination of allowance for credit loss. As of December 31, 2025, the allowance for credit loss on loans held for investment was 5.32% and 2.41% for recreation and home improvement loans, compared to 5.00% and 2.48% a year ago. See Note 4 of the accompanying consolidated financial statements for additional information on loans and allowance for credit losses.

Interest expense was $98.4 million for the year ended December 31, 2025, compared to $88.2 million for the year ended December 31, 2024, reflecting both higher average borrowings and higher average borrowing costs in 2025. The average cost of borrowed funds was 4.22% for the year ended December 31, 2025, compared to 3.93% for the year ended December 31, 2024. The average cost of the certificates of deposit was 3.88% during the current year, 34 basis points higher than the 3.54% average cost in the prior year, reflecting a higher rate on newly issued deposits when compared to the maturing deposits which were issued at lower rates in previous years. As we replace upcoming deposit maturities with new issues, we expect our average cost of funds to further increase. During the year ended December 31, 2025, we issued deposits for 36 month certificates at rates as high as 4.15% and 4.35% for 36 month and 60 month certificates, with the most recent 36 month and 60 month issuances at the end of 2025 at rates up to 3.70%. Average debt outstanding was $2.330 billion for the year ended December 31, 2025, up from $2.241 billion for the year ended December 31, 2024, as we issued additional certificates of deposit to fund our loan growth. See page 38 for tables that show average balances and cost of funds for our funding sources.

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Net interest income was $216.9 million for the year ended December 31, 2025, compared to $202.5 million for the year ended December 31, 2024. Net interest margin, excluding the impact of allowance for credit loss, was 8.06% for the year ended December 31, 2025, compared to 8.05%, for the year ended December 31, 2024, reflecting the above, particularly our higher yield over the prior year, largely offset by the rising cost of borrowings experienced. With the rates we charge on outstanding loans being fixed, and our average cost of funds increasing, our net interest margin had tightened in prior years, as we can only increase our yield through higher rates charged on new originations. Accordingly, during the year ended December 31, 2025, our net interest margins remained steady compared to the prior year. We expect this trend to continue, with fluctuations dependent upon how our loan portfolio mix changes in the coming years.

Net other income, which is comprised primarily of net gains related to equity investments, net gains associated with the disposition of taxi medallion assets and fees earned in our strategic partnership business, was $38.0 million and $11.3 million for the years ended December 31, 2025 and 2024. Net gains on equity investments were $24.6 million in 2025 and $6.9 million in 2024, while gains related to the taxi medallion assets were $4.6 million in 2025, compared to $0.9 million in 2024. Additionally, during 2025 we recognized a gain of $1.3 million on the sale of recreation loans held for sale.

Operating expenses were $85.2 million for the year ended December 31, 2025, up from $74.4 million for the year ended December 31, 2024. Salaries and benefits were $41.7 million for the year ended December 31, 2025, up from $38.3 million for the year ended December 31, 2024, with the increase attributable to a higher head count, annual cost of living increases, higher long-term performance based equity compensation, and higher incentive compensation at our subsidiaries. Professional fees were $5.0 million for the year ended December 31, 2025, compared to a net benefit of $1.4 million for the year ended December 31, 2024 which was due in large part to $5.5 million of benefits related to insurance coverage of costs associated with the SEC litigation.

During 2025, the Bank redeemed its Series F Preferred Stock, in its entirety, at an aggregate redemption price of $46.0 million. Upon redemption, we incurred a charge of approximately $3.5 million in calculating earnings attributable to common shareholders representing the excess of the redemption price over the carrying amount of $42.5 million.

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

For a comparison of the Company’s results of operations for the year ended December 31, 2024 to the year ended December 31, 2023, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission on March 13, 2025.

ASSET/LIABILITY MANAGEMENT

Interest Rate Sensitivity

We, like other financial institutions, are subject to interest rate risk to the extent that our interest-earning assets (consisting of consumer, commercial, and taxi medallion loans, and investment securities) reprice on a different basis over time in comparison to our interest-bearing liabilities (consisting primarily of bank certificates of deposit, historically credit facilities, and borrowings from banks and other lenders).

Having interest-bearing liabilities that mature or reprice more frequently on average than assets may be beneficial in times of declining interest rates, although such an asset/liability structure may result in declining net earnings during periods of rising interest rates. Abrupt increases in market rates of interest may have an adverse impact on our earnings until we are able to originate new consumer loans at the higher prevailing interest rates. Conversely, having interest-earning assets that mature or reprice more frequently on average than liabilities may be beneficial in times of rising interest rates, although this asset/liability structure may result in declining net earnings during periods of falling interest rates. This mismatch between maturities and interest rate sensitivities of our interest-earning assets and interest-bearing liabilities results in interest rate risk.

The effect of changes in interest rates is mitigated by regular turnover of the portfolios. We believe that the average life of our loan portfolios varies to some extent as a function of changes in interest rates. Borrowers are more likely to exercise prepayment rights in a decreasing interest rate environment because the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. Conversely, borrowers are less likely to prepay in a rising interest rate environment. However, borrowers may prepay for a variety of other reasons, such as to monetize increases in the underlying collateral values. In addition, we manage our exposure to increases in market rates of interest by incurring fixed-rate indebtedness and by setting repricing intervals on certificates of deposit, for terms of up to five years.

A relative measure of interest rate risk can be derived from our interest rate sensitivity gap. The interest rate sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities, which mature and/or reprice within specified intervals of time. The gap is considered to be positive when repriceable assets exceed repriceable liabilities, and negative when repriceable liabilities exceed repriceable assets. A relative measure of interest rate sensitivity is provided by the cumulative difference between interest sensitive assets and interest sensitive liabilities for a given time interval expressed as a percentage of total assets.

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The following table presents our interest rate sensitivity gap at December 31, 2025. The principal amounts of interest earning assets are assigned to the time frames in which such principal amounts are contractually obligated to be repriced. We do not reflect any prepayment assumptions in preparing the analysis, despite historical average life experience being significantly shorter than contractual terms.