MEDALLION FINANCIAL CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a—15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, and have concluded that they are effective as of December 31, 2023 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. 58 Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework (2013). Based on its assessment and those criteria, management believes that we maintained effective internal control over financial reporting as of December 31, 2023. We believe that the consolidated financial statements included in this report fairly represent our consolidated financial position and consolidated results of operations for all periods presented. Our Independent Registered Public Accounting Firm, Mazars USA LLP, has audited and issued a report on management’s assessment of our internal control over financial reporting. The report of Mazars USA LLP appears below. Changes in Internal Control over Financial Reporting As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated our internal control over financial reporting to determine whether any changes occurred during the 2023 fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, and have concluded that there have been no changes that occurred during the 2023 fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 59 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Medallion Financial Corp. Opinion on Internal Control over Financial Reporting We have audited Medallion Financial Corp. and subsidiaries’ (the “Company’s”) internal control over financial reporting as of December 31, 2023,based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. We also have audited,in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of Medallion Financial Corp. and subsidiaries (the “Company”) as of December 31, 2023 and 2022 and the related consolidated statements of operations, other comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2023, and our report dated March 7, 2024 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. /s/ Mazars USA LLP New York, New York March 7, 2024 60 ITEM 9B. OTHER INFORMATION None of our directors or officers adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during our fiscal quarter ended December 31, 2023, as such terms are defined under Item 408(a) of Regulation S-K. ITEM 9C . DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFF ICERS AND CORPORATE GOVERNANCE Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 29, 2024 for our 2024 Annual Meeting of Shareholders under the captions “Proposal No. 1 Election of Class I Directors", “Our Directors and Executive Officers", “Corporate Governance”, and "Executive Compensation". ITEM 11. EXECUTI VE COMPENSATION Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 29, 2024 for our 2024 Annual Meeting of Shareholders under the captions “Corporate Governance”, “Executive Compensation”, "Director Compensation", and “Compensation Committee Interlocks and Insider Participation.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWN ERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 29, 2024 for our 2024 Annual Meeting of Shareholders under the captions “Stock Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 29, 2024 for our 2024 Annual Meeting of Shareholders under the captions “Certain Relationships and Related Party Transactions”, “Our Directors and Executive Officers,” and “Corporate Governance.” ITEM 14. PRINCIPAL ACCOU NTANT FEES AND SERVICES Incorporated by reference from our Definitive Proxy Statement expected to be filed by April 29, 2024 for our 2024 Annual Meeting of Shareholders under the caption “Principal Accountant Fees and Services.” 61 PART IV ITEM 15. EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES (A) 1. FINANCIAL STATEMENTS The consolidated financial statements of Medallion Financial Corp. and the Report of Independent Public Accountants thereon are included as set forth on the Index to Financial Statements on F-1. 2. FINANCIAL STATEMENT SCHEDULES See Index to Financial Statements on F-1. 3. EXHIBITS 3.1(a) Restated Medallion Financial Corp. Certificate of Incorporation. Filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (File No. 000-27812) and incorporated by reference herein. 3.1(b) Amendment to Restated Certificate of Incorporation. Filed as Exhibit 3.1.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 (File No. 000-27812) and incorporated by reference herein. 3.2 Second Amended and Restated By-Laws of Medallion Financial Corp., as amended and restated as of May 1, 2022. Filed as Exhibit 3.1 to the Current Report on Form 8-K filed on May 2, 2022 (File No. 001-37747) and incorporated by reference herein. 4.1 Description of Registered Securities of Medallion Financial Corp. Filed as Exhibit 4.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No. 001-37747) and incorporated by reference herein. 4.2 Fixed/Floating Rate Junior Subordinated Note, dated June 7, 2007, by Medallion Financial Corp., in favor of Medallion Financing Trust I. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on June 11, 2007 (File No. 814-00188) and incorporated by reference herein. 4.3 Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on March 26, 2019 (File No. 001-37747) and incorporated by reference herein. 4.4 Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on December 23, 2020 (File No. 001-37747) and incorporated by reference herein. 4.5 Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on March 1, 2021 (File No. 001-37747) and incorporated by reference herein. 4.6 Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on October 2, 2023 (File No. 001-37747) and incorporated by reference herein. 4.7 Form of Note Purchase Agreement, including the form of Note attached thereto. Filed as Exhibit 4.1 to the Current Report on Form 8-K filed on December 28, 2023 (File No. 001-37747) and incorporated by reference herein. 10.1 First Amended and Restated Employment Agreement, between Medallion Financial Corp. and Alvin Murstein dated May 29, 1998. Filed as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 814-00188) and incorporated by reference herein.* 10.2 Amendment No. 1 to First Amended and Restated Employment Agreement, dated and effective as of April 27, 2017, by and between Medallion Financial Corp. and Alvin Murstein. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on May 3, 2017 (File No. 814-00188) and incorporated by reference herein.* 10.3 Amendment No. 2 to First Amended and Restated Employment Agreement, dated and effective as of December 22, 2017, by and between Medallion Financial Corp. and Alvin Murstein. Filed as Exhibit 10.3 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 814-00188) and incorporated by reference herein.* 62 10.4 First Amended and Restated Employment Agreement, between Medallion Financial Corp. and Andrew Murstein dated May 29, 1998. Filed as Exhibit 10.20 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 814-00188) and incorporated by reference herein.* 10.5 Amendment No. 1 to First Amended and Restated Employment Agreement, dated and effective as of April 27, 2017, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.2 to the Current Report on Form 8-K filed on May 3, 2017 (File No. 814-00188) and incorporated by reference herein.* 10.6 Amendment No. 2 to First Amended and Restated Employment Agreement, dated and effective as of December 22, 2017, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.6 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 814-00188) and incorporated by reference herein.* 10.7 Amendment No. 3 to First Amended and Restated Employment Agreement, dated April 27, 2023, by and between Medallion Financial Corp. and Andrew Murstein. Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (File No. 001-37747) and incorporated by reference herein.* 10.8 Employment Agreement, dated June 27, 2016, between Donald Poulton, Medallion Financial Corp. and Medallion Bank. Filed as Exhibit 10.2 to the Current Report on Form 8-K filed on June 30, 2016 (File No. 814-00188) and incorporated by reference herein.* 10.9 Amended and Restated Employment Agreement, dated June 13, 2022, by and between Anthony N. Cutrone and Medallion Financial Corp. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 15, 2022 (File No. 001-37747) and incorporated by reference herein.* 10.10 Amended and Restated Employment Agreement, dated August 10, 2021, by and between David Justin Haley and Medallion Financial Corp. and Medallion Bank. Filed as Exhibit 10.9 to the Annual report on Form 10-K for the fiscal year ended December 31, 2022 (File No. 001-37747) and incorporated by reference herein.* 10.11 First Amended and Restated 2006 Non-Employee Director Stock Option Plan. Filed as Exhibit B to Amendment No. 3 to Form 40-APP filed on June 18, 2012 (File No. 812-13666) and incorporated by reference herein.* 10.12 2015 Non-Employee Director Stock Option Plan. Filed as Exhibit B to Amendment No. 2 to Form 40-APP filed on January 14, 2016 (File No. 812-14458) and incorporated by reference herein.* 10.13 2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2018 Annual Meeting of Shareholders filed on April 30, 2018 (File No. 001-37747) and incorporated by reference herein.* 10.14 Amendment to Medallion Financial Corp. 2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2020 Annual Meeting of Shareholders filed on April 28, 2020 (File No. 001-37747) and incorporated by reference herein.* 10.15 Amendment No. 2 to Medallion Financial Corp. 2018 Equity Incentive Plan. Filed as Annex A to our definitive proxy statement for our 2022 Annual Meeting of Shareholders filed on May 2, 2022 (File No. 001-37747) and incorporated by reference herein.* 10.16 Medallion Financial Corp. Annual Short Term Incentive Plan, adopted by the Board of Directors on June 1, 2022. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 7, 2022 (File No. 001-37747) and incorporated by reference herein.* 10.17 Form of Performance Stock Unit Notice and Agreement. Filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 (File No. 001-37747) and incorporated by reference herein.* 10.18 Indenture of Lease, dated October 31, 1997, by and between Sage Realty Corporation, as Agent and Landlord, and Medallion Financial Corp., as Tenant. Filed as Exhibit 10.64 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 812-09744) and incorporated by reference herein. 10.19 First Amendment of Lease, dated September 6, 2005, by and between Medallion Financial Corp. and Sage Realty Corporation. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on September 12, 2005 (File No. 814-00188) and incorporated by reference herein. 63 10.20 Second Amendment of Lease, dated August 5, 2015, by and between Sage Realty Corporation and Medallion Financial Corp. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 7, 2015 (File No. 814-00188) and incorporated by reference herein. 10.21 Agreement of Lease, dated July 3, 2002, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.17 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.22 Amendment of Lease Agreement, dated October 29, 2004, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.18 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.23 Assignment of Lease, dated July 6, 2006, by and between Medallion Bank and Zerop Medical, LLC, and consented and agreed to by B-LINE Holdings, L.C. Filed as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.24 Second Amendment of Lease Agreement, dated January 9, 2007, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.20 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.25 Third Amendment of Lease Agreement, dated October 31, 2007, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.21 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.26 Third Amendment of Lease Agreement, dated November 15, 2011, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.22 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.27 Fourth Amendment of Lease Agreement, dated November 21, 2011, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.23 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.28 Fifth Amendment of Lease Agreement, dated November 26, 2012, by and between B-LINE Holdings, L.C. and Medallion Bank. Filed as Exhibit 10.24 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.29 Sixth Amendment of Lease Agreement, dated January 26, 2017, by and between Investment Property Group, LLC, as successor-in-interest to B-LINE Holdings, L.C., and Medallion Bank. Filed as Exhibit 10.25 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.30 Seventh Amendment of Lease Agreement, dated May 10, 2017, by and between Investment Property Group, LLC and Medallion Bank. Filed as Exhibit 10.26 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.31 Eighth Amendment of Lease Agreement, dated March 28, 2018, by and between Investment Property Group, LLC and Medallion Bank. Filed as Exhibit 10.27 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.32 Letter from Mountain High Real Estate Advisors, Inc. to Medallion Bank, dated July 23, 2018, regarding 8 th Amendment Lease Commencement. Filed as Exhibit 10.28 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-37747) and incorporated by reference herein. 10.33 Ninth Amendment to Agreement of Lease, dated August 19, 2019, by and between Investment Property Group, LLC and Medallion Bank. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 21, 2019 (File No. 001-37747) and incorporated by reference herein. 64 10.34 Tenth Amendment to Agreement of Lease, dated April 5, 2022, by and between Investment Property Group, LLC and Medallion Bank. Filed as Exhibit 10.34 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No. 001-37747) and incorporated by reference herein. 10.35 Eleventh Amendment to Agreement of Lease, dated February 22, 2024, by and between Investment Property Group, LLC and Medallion Bank. Filed herewith. 10.36 Commitment Letter, dated February 28, 2024, by the Small Business Administration to Medallion Capital, Inc., accepted and agreed to by Medallion Capital, Inc. on February 28, 2024. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on February 29, 2024 (File No. 001-33747) and incorporated by reference herein . 10.37 Junior Subordinated Indenture, dated as of June 7, 2007, between Medallion Financing Trust I and Wilmington Trust Company as trustee. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 11, 2007 (File No. 814-00188) and incorporated by reference herein. 10.38 Purchase Agreement, dated as of June 7, 2007, among Medallion Financial Corp., Medallion Financing Trust I, and Merrill Lynch International. Filed as Exhibit 10.3 to the Current Report on Form 8-K filed on June 11, 2007 (File No. 814-00188) and incorporated by reference herein. 10.39 Cooperation Agreement, dated as of May 1, 2022, by and among Medallion Financial Corp., KORR Value L.P., KORR Acquisitions Group, Inc., Kenneth Orr, David Orr, and Jonathan Orr. Filed as Exhibit 10.1 to the Current Report on Form 8-K filed on May 2, 2022 (File No. 001-37747) and incorporated by reference herein. 10.40 Amendment to Cooperation Agreement, dated as of August 10, 2022, by and among Medallion Financial Corp., KORR Value L.P., KORR Acquisitions Group, Inc., Kenneth Orr, David Orr, and Jonathan Orr. Filed as Exhibit 10.2 to the Current Report on Form 8-K/A filed on August 11, 2022 (File No. 001-37747) and incorporated by reference herein. 21.1 List of Subsidiaries of Medallion Financial Corp. Filed herewith. 23.1 Consent of Mazars USA LLP, independent registered public accounting firm, related to reports on financial statements of Medallion Financial Corp. Filed herewith. 31.1 Certification of Alvin Murstein pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of Anthony N. Cutrone pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32.1 Certification of Alvin Murstein pursuant to 18 USC. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32.2 Certification of Anthony N. Cutrone pursuant to 18 USC. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. 97.1 Medallion Financial Corp. Amended and Restated Compensation Recoupment Policy. Filed herewith. 101.INS XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this Annual Report on Form 10-K. ITEM 16. FORM 10-K SUMMARY Not applicable. 65 SIGNA TURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange of Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDALLION FINANCIAL CORP. Date: March 7, 2024 By: /s/ Alvin Murstein Alvin Murstein Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Alvin Murstein Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) March 7, 2024 Alvin Murstein /s/ Anthony N. Cutrone Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) March 7, 2024 Anthony N. Cutrone /s/ Andrew M. Murstein President and Director March 7, 2024 Andrew M. Murstein /s/ John Everets Director March 7, 2024 John Everets /s/ Cynthia Hallenbeck Director March 7, 2024 Cynthia Hallenbeck /s/ Brent O. Hatch Director March 7, 2024 Brent O. Hatch /s/ Robert M. Meyer Director March 7, 2024 Robert M. Meyer /s/ David L. Rudnick Director March 7, 2024 David L. Rudnick /s/ Allan J. Tanenbaum Director March 7, 2024 Allan J. Tanenbaum 66 MEDALLION FINANCIAL CORP. INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( Mazars USA LLP, New York, NY, PCAOB ID 339 ) F- 2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F- 4 Consolidated Statements of Operations for the Years Ended December 31, 2023 , 2022, and 2021 F- 5 Consolidated Statements of Other Comprehensive Income for the Years Ended December 31, 2023, 2022, and 2021 F- 6 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023, 2022, and 2021 F- 7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021 F- 8 Notes to Consolidated Financial Statements F- 9 F- 1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Medallion Financial Corp. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Medallion Financial Corp. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, other comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2023 and the related notes to the financial statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations, changes in stockholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 7, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F- 2 Allowance for Credit Losses Critical Audit Matter Description As discussed in Notes 2 and 4 to the consolidated financial statements, the allowance for credit losses (“ACL”) is assessed on a regular basis on loans segregated into homogenous pools based on similarities. For consumer loans, the Company uses historical delinquency and actual loss rates modified by quantitative adjustments based on macroeconomic factors over a twelve month reasonable and supportable forecast period. For commercial loans, the Company assesses the historical impact that macroeconomic indicators have had on the loan portfolio, to determine an approximate allowance for credit loss. We identified the valuation of the ACL as a critical audit matter. The principal considerations for that determination included the high degree of judgment and subjectivity involved in evaluating management’s estimates, particularly as it related to evaluating management’s assessment of the qualitative factors. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s significant estimates and assumptions. How the Critical Matter Was Addressed in the Audit Our audit procedures related to the allowance for credit losses included the following, among others: • Obtained an understanding of the Company’s process for establishing the ACL, including the qualitative and forecast factor adjustments of the ACL. • Evaluated the design and tested the operating effectiveness of internal controls over the Company’s ACL including controls over: o Management’s process for identification, basis for development and related adjustments; including reasonableness, of the qualitative factor components of the ACL. o Management’s review of reliability and accuracy of data used to calculate and estimate the various components for the ACL, including accuracy of the calculation. • Evaluated the reasonableness of management’s application of qualitative adjustments to historical loss rates in the ACL, including: o Evaluated completeness and accuracy of the information utilized as a basis for the qualitative factors to third party or internal sources. o Evaluated the relevance of inputs in the calculation utilized as a basis for qualitative factors. • Evaluated analytics and trends of the overall allowance for credit loss analysis to assess for reasonableness. • Evaluated the mathematical accuracy of formulas used in setting qualitative factors and applications of the factors to loan segments. • Utilized professionals with specialized skills and knowledge to assist in evaluating the appropriateness of the quantitative models and the reasonableness of judgments used by management in determining certain qualitative adjustments. /s/ Mazars USA LLP We have served as the Company’s auditor since 2005. New York, New York March 7, 2024 F- 3 MEDALLION FINANCIAL CORP. CONSOLIDATED BAL A NCE SHEETS December 31, (Dollars in thousands, except share and per share data) 2023 2022 Assets Cash and cash equivalents $ 52,591 $ 33,172 Federal funds sold 97,254 72,426 Investment securities 54,282 48,492 Equity investments 11,430 10,293 Loans 2,215,886 1,916,953 Allowance for credit losses ( 84,235 ) ( 63,845 ) Net loans receivable 2,131,651 1,853,108 Goodwill 150,803 150,803 Intangible assets, net 20,591 22,035 Property, equipment, and right-of-use lease asset, net 14,076 13,168 Accrued interest receivable 13,538 12,613 Loan collateral in process of foreclosure (1) 11,772 21,819 Income tax receivable 671 2,095 Other assets 29,168 19,855 Total assets $ 2,587,827 $ 2,259,879 Liabilities Deposits (2) $ 1,866,657 $ 1,607,110 Long-term debt (3) 235,544 214,320 Deferred tax liabilities, net 21,207 26,753 Short-term debt 8,000 5,000 Operating lease liabilities 7,019 8,408 Accrued interest payable 6,822 4,790 Accounts payable and accrued expenses (4) 30,804 22,974 Total liabilities 2,176,053 1,889,355 Commitments and contingencies (5) Stockholders’ equity Preferred stock ( 1,000,000 shares of $ 0.01 par value stock authorized- none outstanding) — — Common stock ( 50,000,000 shares of $ 0.01 par value stock authorized - 29,051,800 shares at December 31, 2023 and 28,663,827 shares at December 31, 2022 issued) 291 287 Additional paid in capital 288,046 283,663 Treasury stock ( 5,602,154 shares at December 31, 2023 and December 31, 2021) ( 45,538 ) ( 45,538 ) Accumulated other comprehensive income (loss) ( 3,696 ) ( 3,349 ) Retained earnings 103,883 66,673 Total stockholders’ equity 342,986 301,736 Non-controlling interest in consolidated subsidiaries 68,788 68,788 Total equity 411,774 370,524 Total liabilities and equity $ 2,587,827 $ 2,259,879 Number of shares outstanding 23,449,646 23,061,673 Book value per share $ 14.63 $ 13.08 (1) Includes financed sales of this collateral to third parties that are reported separately from the loan portfolio, and that are conducted by the Bank of $ 6.2 million and $ 7.5 million as of December 31, 2023 and 2022 . (2) Includes $ 4.3 million and $ 3.8 million of deferred financing costs as of December 31, 2023 and 2022 . Refer to Note 5 for more details . (3) Includes $ 4.2 million and $ 3.2 million of deferred financing costs as of December 31, 2023 and 2022 . Refer to Note 5 for more details. (4) Includes the short-term portion of lease liabilities of $ 2.5 million and $ 2.2 million as of December 31, 2023 and 2022 . Refer to Note 6 for more details. (5) Refer to Note 10 for details. The accompanying notes should be read in conjunction with these consolidated financial statements. F- 4 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEME NTS OF OPERATIONS Year Ended December 31, (Dollars in thousands, except share and per share data) 2023 2022 2021 Interest and fees on loans $ 244,829 $ 195,074 $ 157,990 Interest and dividends on investment securities 6,211 1,547 976 Total interest income (1) 251,040 196,621 158,966 Interest on deposits 47,780 22,666 17,543 Interest on long-term debt 12,670 13,387 12,907 Interest on short-term borrowings 2,496 132 690 Total interest expense (2) 62,946 36,185 31,140 Net interest income 188,094 160,436 127,826 Provision for credit losses 37,810 30,059 4,622 Net interest income after provision for credit losses 150,284 130,377 123,204 Other income Gain on equity investments 5,178 2,779 17,379 Gain on sale of loans and taxi medallion 4,992 5,448 1,788 Write-down of loan collateral in process of foreclosure ( 1,696 ) ( 657 ) ( 5,592 ) Sponsorship and race winnings, net — — 12,567 Gain on extinguishment of debt — — 4,626 Other income 2,846 1,956 798 Total other income, net 11,320 9,526 31,566 Other expenses Salaries and employee benefits 37,562 31,130 31,591 Loan servicing fees 9,543 8,371 7,013 Collection costs 6,000 5,314 5,279 Professional fees 5,886 13,054 5,311 Regulatory fees 3,194 2,418 1,872 Rent expense 2,472 2,378 2,454 Amortization of intangible assets 1,445 1,445 1,445 Race team related expenses — — 9,559 Other expenses 9,466 7,943 8,375 Total other expenses 75,568 72,053 72,899 Income before income taxes 86,036 67,850 81,871 Income tax provision ( 24,910 ) ( 17,963 ) ( 24,217 ) Net income after taxes 61,126 49,887 57,654 Less: income attributable to the non-controlling interest 6,047 6,047 3,546 Total net income attributable to Medallion Financial Corp. $ 55,079 $ 43,840 $ 54,108 Basic net income per share $ 2.45 $ 1.86 $ 2.20 Diluted net income per share $ 2.37 $ 1.83 $ 2.17 Weighted average common shares outstanding Basic 22,510,435 23,583,049 24,599,804 Diluted 23,248,323 23,927,342 24,943,169 (1) Included in interest and investment income is $ 1.6 million , $ 0.7 million , and $ 0.8 million of paid-in-kind interest for the years ended December 31, 2023, 2022, and 2021 . (2) Average borrowings outstanding were $ 2.0 billion , $ 1.7 billion and $ 1.4 billion as of December 31, 2023, 2022, and 2021 and the related average borrowing costs were 3.16 % , 2.17 % , and 2.28 % for the years ended December 31, 2023, 2022, and 2021 . The accompanying notes should be read in conjunction with these consolidated financial statements. F- 5 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENTS OF OTHE R COMPREHENSIVE INCOME Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Net income after taxes $ 61,126 $ 49,887 $ 57,654 Other comprehensive loss, net of tax ( 347 ) ( 4,383 ) ( 978 ) Total comprehensive income 60,779 45,504 56,676 Less comprehensive income attributable to the non-controlling interest 6,047 6,047 3,546 Total comprehensive income attributable to Medallion Financial Corp. $ 54,732 $ 39,457 $ 53,130 The accompanying notes should be read in conjunction with these consolidated financial statements. F- 6 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEMENT OF CHANGES IN STOCKH OLDERS’ EQUITY (Dollars in thousands) Common Stock Shares Common Stock Capital in Excess of Par Treasury Stock Shares Treasury Stock Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Non- controlling Interest Total Equity Balance at December 31, 2020 27,828,871 $ 278 $ 277,539 ( 2,951,243 ) $ ( 24,919 ) $ ( 23,502 ) $ 2,012 $ 231,408 $ 73,153 $ 304,561 Net income — — — — — 54,108 — 54,108 3,546 57,654 Distributions to non-controlling interest — — — — — — — — ( 6,516 ) ( 6,516 ) Disposition of RPAC — — — — — — — — ( 1,395 ) ( 1,395 ) Stock-based compensation — 3 2,258 — — — — 2,261 — 2,261 Issuance of restricted stock, net 258,120 — — — — — — — — — Forfeiture of restricted stock, net ( 21,940 ) — — — — — — — — — Issuance in connection with vesting of restricted stock units 15,508 — — — — — — — — — Exercise of stock options 44,070 — 241 — — — — 241 — 241 Other comprehensive loss, net of tax — — — — — — ( 978 ) ( 978 ) — ( 978 ) Balance at December 31, 2021 28,124,629 $ 281 $ 280,038 ( 2,951,243 ) $ ( 24,919 ) $ 30,606 $ 1,034 $ 287,040 $ 68,788 $ 355,828 Net income — — — — — 43,840 — 43,840 6,047 49,887 Distributions to non-controlling interest — — — — — — — — ( 6,047 ) ( 6,047 ) Stock-based compensation — 6 3,470 — — — — 3,476 — 3,476 Issuance of restricted stock, net 522,475 — — — — — — — — — Forfeiture of restricted stock, net ( 29,359 ) — — — — — — — — — Issuance in connection with vesting of restricted stock units 22,337 — — — — — — — — — Exercise of stock options 23,745 — 155 — — — — 155 155 Purchase of common stock — — — ( 2,650,911 ) ( 20,619 ) — — ( 20,619 ) — ( 20,619 ) Dividends paid on common stock — — — — — ( 7,773 ) — ( 7,773 ) — ( 7,773 ) Other comprehensive loss, net of tax — — — — — — ( 4,383 ) ( 4,383 ) — ( 4,383 ) Balance at December 31, 2022 28,663,827 $ 287 $ 283,663 ( 5,602,154 ) $ ( 45,538 ) $ 66,673 $ ( 3,349 ) $ 301,736 $ 68,788 $ 370,524 Adoption of ASU 2016-13, net of tax — — — — — ( 9,935 ) — ( 9,935 ) — ( 9,935 ) Balance at January 1, 2023 28,663,827 287 283,663 ( 5,602,154 ) ( 45,538 ) 56,738 ( 3,349 ) 291,801 68,788 360,589 Net income — — — — — 55,079 — 55,079 6,047 61,126 Distributions to non-controlling interest — — — — — — — — ( 6,047 ) ( 6,047 ) Stock-based compensation — 3 4,710 — — — — 4,713 — 4,713 Withheld restricted stock for employees' tax obligation ( 91,169 ) — ( 768 ) — — — — ( 768 ) — ( 768 ) Issuance of restricted stock, net 399,793 — — — — — — — — — Forfeiture of restricted stock, net ( 12,807 ) — — — — — — — — — Issuance in connection with vesting of restricted stock units 23,211 — — — — — — — — — Exercise of stock options 68,945 1 441 — — — — 442 — 442 Dividends paid on common stock — — — — — ( 7,934 ) — ( 7,934 ) — ( 7,934 ) Other comprehensive loss, net of tax — — — — — — ( 347 ) ( 347 ) — ( 347 ) Balance at December 31, 2023 29,051,800 $ 291 $ 288,046 ( 5,602,154 ) $ ( 45,538 ) $ 103,883 $ ( 3,696 ) $ 342,986 $ 68,788 $ 411,774 The accompanying notes should be read in conjunction with these consolidated financial statements. F- 7 MEDALLION FINANCIAL CORP. CONSOLIDATED STATEME NTS OF CASH FLOWS Year Ended December 31, (Dollars in thousands) 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income/net decrease in net assets resulting from operations $ 61,126 $ 49,887 $ 57,654 Adjustments to reconcile net income/net decrease in net assets resulting from operations to net cash provided by operating activities: Provision for credit losses 37,810 30,059 4,622 Paid-in-kind interest income ( 1,636 ) ( 724 ) ( 814 ) Depreciation and amortization 5,243 5,229 6,519 Amortization of origination fees, net 9,588 8,707 7,996 (Decrease) increase in deferred and other tax liabilities, net ( 345 ) 7,281 18,327 Net change in value of loan collateral in process of foreclosure 10,597 5,738 8,966 Net gains on equity investments ( 5,178 ) ( 2,779 ) ( 17,380 ) Stock-based compensation expense 4,713 3,476 2,261 Gain on extinguishment of debt — — ( 4,626 ) Increase in accrued interest receivable ( 925 ) ( 1,992 ) ( 283 ) Gain on disposition of RPAC — — ( 715 ) Increase in other assets ( 15,470 ) ( 3,919 ) ( 5,354 ) Decrease in accounts payable and accrued expenses 6,209 6,382 2,694 (Decrease) increase in accrued interest payable 2,032 1,395 ( 1,141 ) Net cash provided by operating activities 113,764 108,740 78,726 CASH FLOWS FROM INVESTING ACTIVITIES Loans originated ( 975,391 ) ( 1,000,785 ) ( 760,790 ) Proceeds from principal receipts, sales, and maturities of loans 616,193 535,067 464,448 Purchases of investments ( 11,573 ) ( 20,713 ) ( 19,354 ) Proceeds from disposition of RPAC, net — — 17,676 Proceeds from principal receipts, sales, and maturities of investments 9,444 14,762 35,647 Proceeds from the sale and principal payments on loan collateral in process of foreclosure 20,631 22,664 24,052 Net cash used for investing activities ( 340,696 ) ( 449,005 ) ( 238,321 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from time deposits and funds borrowed 975,175 839,104 805,577 Repayments of time deposits and funds borrowed ( 689,920 ) ( 483,671 ) ( 627,263 ) Treasury stock repurchased — ( 20,619 ) — Cash dividend paid on common stock ( 7,703 ) ( 7,543 ) — Distributions to non-controlling interests ( 6,047 ) ( 6,047 ) ( 6,516 ) Payment of withholding taxes on net settlement of vested stock ( 768 ) — — Proceeds from the exercise of stock options 442 155 241 Net cash provided by financing activities 271,179 321,379 172,039 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,247 ( 18,886 ) 12,444 Cash and cash equivalents, beginning of period 105,598 124,484 112,040 Cash and cash equivalents, end of period (1) $ 149,845 $ 105,598 $ 124,484 SUPPLEMENTAL INFORMATION Cash paid during the period for interest $ 57,509 $ 31,976 $ 29,867 Cash paid during the period for income taxes 25,102 8,848 5,479 NON-CASH INVESTING Loans transferred to loan collateral in process of foreclosure, net $ 21,181 $ 12,791 $ 15,888 (1) Includes federal funds sold. The accompanying notes should be read in conjunction with these consolidated financial statements. F- 8 MEDALLION FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 (1) ORGANIZATION OF MEDALLION FINANCIAL CORP. AND ITS SUBSIDIARIES Medallion Financial Corp., or the Company, is a specialty finance company organized as a Delaware corporation that reports as a bank holding company, but is not a bank holding company for regulatory purposes. The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Bank, or the Bank, a Federal Deposit Insurance Corporation, or FDIC, insured industrial bank that originates consumer loans, raises deposits, and conducts other banking activities. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies, and undergoes examinations by those agencies. The Bank was formed in May 2002 for the purpose of obtaining an industrial bank charter pursuant to the laws of the State of Utah. The Bank originates consumer loans on a national basis for the purchase of recreational vehicles, or “RVs”, boats and other consumer recreational equipment and to finance home improvements such as roofs, swimming pools, and windows. Prior to 2015, the Bank originated commercial loans to finance the purchase of taxi medallions, all of which are serviced by the Company. The loans are financed primarily with time certificates of deposit which are originated nationally through a variety of brokered deposit relationships. The Company also conducts business through its subsidiaries Medallion Capital, Inc., or MCI, a Small Business Investment Company, or SBIC, which conducts a mezzanine financing business; Medallion Funding LLC, or MFC, an SBIC, which historically was the Company's primary taxi medallion lending company; and Freshstart Venture Capital Corp., or FSVC, which historically originated and serviced taxi medallion and commercial loans and was an SBIC through 2023. MCI, and MFC, as SBICs, are regulated by the Small Business Administration, or SBA. MCI is financed in part by the SBA. The Company established a wholly-owned subsidiary, Medallion Financing Trust I, or Fin Trust, for the purpose of issuing unsecured trust preferred securities to investors. Fin Trust is a separate legal and corporate entity with its own creditors who, in any liquidation of Fin Trust, will be entitled to be satisfied out of Fin Trust’s assets prior to any value in Fin Trust becoming available to Fin Trust’s equity holders. The assets of Fin Trust, aggre gating $ 34.0 million at December 31, 2023 , are comprised solely of a subordinated note from the Company and are not available to pay obligations of its affiliates or any other party, and the assets of affiliates or any other party are not available to pay obligations of Fin Trust. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S., or GAAP, requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties. All of these estimates reflect management’s best judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions change, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of loans and loan collateral in process of foreclosure, goodwill and intangible assets, and investments, among other effects. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its wholly-owned and controlled subsidiaries. All significant intercompany transactions, balances, and profits (losses) have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with GAAP. The Company consolidates all entities it controls thro ugh a majority voting interest, a controlling interest through other contractual rights, or as being identified as the primary beneficiary of VIEs. The primary beneficiary is the party who has both (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and (2) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third-party’s holding is recorded as non-controlling interest. F- 9 Cash and Cash Equivalents The Company considers all highly liquid instruments with an original purchased maturity of three months or less to be cash equivalents. Cash balances are generally held in accounts at large national or regional banking organizations in amounts that exceed the federally insured limits. As of December 31, 2023, cash also included $ 1.3 million of interest-bearing funds deposited in other banks with original terms of 5 to 6 years. Fair Value of Assets and Liabilities The Company follows the Financial Accounting Standards Board, or FASB, FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or FASB ASC 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 defines fair value as an exit price (i.e. a price that would be received to sell, as opposed to acquire, an asset or transfer a liability), and emphasizes that fair value is a market-based measurement. It establishes a fair value hierarchy that distinguishes between assumptions developed based on market data obtained from independent external sources and the reporting entity’s own assumptions. Further, it specifies that fair value measurement should consider adjustment for risk, such as the risk inherent in the valuation technique or its inputs. See also Notes 14 and 15 to the consolidated financial statements. Equity Investments The Company follows FASB ASC Topic 321, Investments – Equity Securities, or ASC 321, which requires all applicable investments in equity securities with a readily determinable fair value to be valued as such, and those without a readily determinable fair value, are measured at cost, less any impairment plus or minus any observable price changes. Equity investments of $ 11.4 million and $ 10.3 million as of December 31, 2023 and 2022, were comprised mainly of nonmarketable stock and stock warrants, are recorded at cost less any impairment plus or minus observable price changes, and a vast majority are held by our SBIC subsidiary in connection with its mezzanine lending business. As of December 31, 2023, cumulative impairment of $ 3.5 million had been recorded with respect to these investments. During 2021, the Company purchased $ 2.0 million of equity securities with a readily determinable fair value. As a result, all unrealized gains and losses are included in gain (loss) on equity investments. A s of December 31, 2023 and 2022, the fair value of these securities were $ 1.7 million and $ 1.7 million and are included in other assets on the consolidated balance sheet. The following table presents the unrealized portion related to the equity securities held as of December 31, 2023. Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Net gains (losses) recognized during the period on equity securities $ 24 $ ( 226 ) $ ( 50 ) Less: Net gains (losses) recognized during the period on equity securities sold during the period — — — Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date $ 24 $ ( 226 ) $ ( 50 ) Investment Securities The Company follows FASB ASC Topic 320, Investments – Debt Securities, or ASC 320, which requires that all applicable investments in debt securities be classified as trading securities, available-for-sale securities, or held-to-maturity securities. Investment securities are purchased from time-to-time in the open market at prices that are greater or lesser than the par value of the investment. The resulting premium or discount is deferred and recognized on a level yield basis as an adjustment to the yield of the related investment. The net premium on investment securities totaled $ 0.1 million as of both December 31, 2023 and 2022 , and less than $ 0.1 million, $ 0.1 million, and $ 0.1 million was amortized to interest income for the years ended December 31, 2023, 2022, and 2021. ASC 320 further requires that held-to-maturity securities be re ported at amortized cost and available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings at the date of the consolidated financial statements, and reported in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity, net of the effect of income taxes, until they are sold. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results and any amounts previously included in stockholders’ equity, which were recorded net of the income tax effect, will be reversed. In accordance with ASC 326, we do not maintain an allowance for credit losses for accrued interest receivable. Loans The Company’s loans are currently reported at the principal amount outstanding, inclusive of deferred loan acquisition costs, which primarily includes deferred fees paid to loan originators, and which is amortized to interest income over the life of the loan. Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. As of December 31, 2023 and 2022, net loan origination costs were $ 40.0 million and $ 34.9 million . Net amortization to income for the years ended December 31, 2023, 2022, and 2021 were $ 8.3 million, $ 8.7 million , and $ 8.0 million . F- 10 Interest income is recorded on the accrual basis. Taxi medallion and commercial loans are placed on nonaccrual status, and all uncollected accrued interest is reversed, when there is doubt as to the collectability of interest or principal, or if loans are 90 days or more past due, unless management has determined that they are both well-secured and in the process of collection. Interest income on nonaccrual loans is generally recognized when cash is received, unless a determination has been made to apply all cash receipts to principal. The consumer loan portfolio has different characteristics, typified by a larger number of smaller dollar loans that have similar characteristics. A loan is considered to be impaired, or nonperforming, when based on current information and events, it is unlikely the Company will be able to collect all amounts due according to the contractual terms of the original loan agreement. Management considers loans that are in bankruptcy status, but have not been charged-off, to be impaired. Consumer loans are placed on nonaccrual when they become 90 days past due, or earlier if they enter bankruptcy, and are charged-off in their entirety when deemed uncollectible, or when they become 120 days past due, whichever occurs first, at which time appropriate recovery efforts against both the borrower and the underlying collateral are initiated. For the recreation loan portfolio, the process to repossess the collateral is started at 60 days past due. If the collateral is not located and the account reaches 120 days delinquent, the account is charged-off. If the collateral is repossessed, a loss is recorded by writing the collateral down to its fair value less selling costs, and the collateral is sent to auction. When the collateral is sold, the net auction proceeds are applied to the account, and any remaining balance is written off. Proceeds collected on charged-off accounts are recorded as recoveries. Total loans 90 days or more past due were $ 16.8 million or 0.77 % of the total loan portfolio as of December 31, 2023, as compared to $ 8.9 million , or 0.47 % as of December 31, 2022. Beginning in the first quarter of 2023, the Company began charging off recreation loans at the point when borrowers filed for bankruptcy. This change resulted in approximately $ 2.5 million of loans being charged off in the first quarter of 2023. The Company may modify the contractual cash flow of loans in situations where borrowers are experiencing financial difficulties. The Company strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before they reach nonaccrual status. These modified terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance and other actions intended to minimize the economic loss to the Company and to avoid foreclosure or repossession of the collateral. For modifications where the Company forgives principal, the entire amount of such principal forgiveness is immediately charged off. Modified loans are considered impaired loans. Loan collateral in process of foreclosure primarily includes taxi medallion loans that have reached 120 days past due and have been charged-down to their net realizable value, in add ition to consumer repossessed collateral in the process of being sold. For New York City taxi medallion loans in the process of foreclosure, the Company continued to utilize a net value of $ 79,500 when assessing net realizable value for these taxi medallion loans, despite fluctuating current transfer prices which may exceed that level from time to time . The "loan collateral in the process of foreclosure" designation reflects that the collection activities on these loans have transitioned from working with the borrower, to the liquidation of the collateral securing the loans. The Company accounts for its sales of loans in accordance with FASB Accounting Standards Codification Topic 860, Transfers and Servicing, or FASB ASC 860, which provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. In accordance with FASB ASC 860, the Company had elected the fair value measurement method for its servicing assets and liabilities. The principal portion of loans serviced for others by the Company and its affiliates was $ 14.0 million at December 31, 2023 and $ 19.5 million December 31, 2022. The Company has evaluated the servicing aspect of its business in accordance with FASB ASC 860 and determined that no material servicing asset or liability existed as of December 31, 2023 and 2022 . Allowance for Credit Losses On January 1, 2023, the Company adopted Accounting Standards Update 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", or ASC 326, which replaced the incurred loss methodology that delayed recognition until it was probable a loss had been incurred with a lifetime expected loss methodology using "reasonable and supportable" expectations about the future, referred to as the current expected credit loss, or CECL, methodology. For consumer loans, the Company uses historical delinquency and actual loss rates modified by quantitative adjustments based on macroeconomic factors over a twelve-month reasonable and supportable forecast period. For commercial loans, the Company assesses the historical impact that macroeconomic indicators have had on the loan portfolio, to determine an approximate allowance for credit loss. Unlike consumer loans, where loans may have similar performing characteristics, each commercial loan is unique. The Company evaluates each commercial loan for specific impairment with additional allowance for credit losses recognized as necessary. For taxi medallion loans, the Company maintains specific reserves adjusting the carrying amount of loans down to net collateral value. The allowance is evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation is inherently subjective, as it requires estimates, including those based on changes in economic conditions, that are susceptible to significant revision as more information becomes available. Credit losses are deducted from the allowance, and subsequent recoveries are added back to the allowance. F- 11 The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after December 15, 2022 are presented under ASC 326. The transition to the CECL methodology on January 1, 2023 resulted in an increase of $ 13.7 million to the Company's allowance for credit losses on loans, or ACL, and a net-of-tax cumulative-effect adjustment of $ 9.9 million to the beginning balance of retained earnings. The CECL methodology transition effects on the allowance for credit losses are shown in the following table: (Dollars in thousands) December 31, 2022 Pre-Topic 326 Adoption Effect of ASC 326 Adoption (Transition Amounts) January 1, 2023 Post-ASC 326 Adoption Assets: Loans: Recreation $ 41,966 $ 10,037 $ 52,003 Home improvement 11,340 1,518 12,858 Commercial 1,049 2,157 3,206 Taxi medallion 9,490 — 9,490 Strategic partnership — — — Allowance for credit losses on loans $ 63,845 $ 13,712 $ 77,557 Prior to January 1, 2023, the Company used historical delinquency and actual loss rates with a three-year look-back period for taxi medallion loans and a one-year look-back period for recreation and home improvement loans and used historical loss experience and other projections for commercial loans. The allowance was evaluated on a quarterly basis by management based on the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect the borrowers' ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and excess concentration risks. This evaluation was inherently subjective, as it required estimates that were susceptible to significant revision as more information became available. Goodwill and Intangible Assets The Company’s goodwill and intangible assets arose as a result of the excess of fair value over book value for several of the Company’s previously unconsolidated portfolio investment companies as of April 2, 2018. This fair value was brought forward under the Company’s new reporting, and was subject to a purchase price accounting allocation process conducted by an independent third-party expert to arrive at the current categories and amounts. Goodwill is not amortized, but is subject to quarterly review by management to determine whether additional impairment testing is needed, and such testing is performed at least on an annual basis. Intangible assets are amortized over their useful life of approximately 20 years. As of December 31, 2023 and 2022, the Company had intangible assets of $ 20.6 million and $ 22.0 million . The Company recognized $ 1.4 million of amortization expense on the intangible assets for each of the years ended December 31, 2023 and 2022. Additional ly, loan portfolio premiums of $ 12.4 million were determined as of April 2, 2018, of which none were outstanding as of December 31, 2023 and 2022 , and of which $ 0.0 million, $ 0.5 million, and $ 2.2 million was amortized to interest income for the years ended December 31, 2023, 2022, and 2021. Management performed a step 0 analysis in assessing the goodwill and intangibles for impairment at December 31, 2023 and 2022 , concluding that there was no impairment of these assets. The following table details of the intangible assets as of December 31, 2023 and 2022: December 31, (Dollars in thousands) 2023 2022 Brand-related intellectual property $ 4,916 $ 16,775 Home improvement contractor relationships 15,675 5,260 Total intangible assets $ 20,591 $ 22,035 Fixed Assets Fixed assets are carried at cost less accumulated depreciation and amortization, and are depreciated on a straight-line basis over their estimated useful lives of 3 to 10 years . Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated economic useful life of the improvement. Depreciation and amortization expense was $ 0.4 million, $ 0.4 million, and $ 0.3 million for the years ended December 31, 2023, 2022, and 2021 . F- 12 Deferred Costs Deferred financing costs represent costs associated with obtaining the Company’s borrowing facilities, and are amortized on a straight line basis over the lives of the related financing agreements and life of the respective pool. Amortization expense was $ 3.1 million, $ 2.6 million, and $ 2.4 million for the years ended December 31, 2023, 2022, and 2021. In addition, the Company capitalizes certain costs for transactions in the process of completion (other than business combinations), including those for potential investments, and the sourcing of other financing alternatives. Upon completion or termination of the transaction, any accumulated amounts will be amortized against income over an appropriate period, or written off. The amount on the Company’s balance sheet for all of these purposes were $ 8.5 million and $ 7.0 million as of December 31, 2023 and 2022 . Income Taxes Income taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes, or ASC 740. Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are also recorded for net operating losses, capital losses and any tax credit carryforwards. A valuation allowance is provided against a deferred tax asset when it is more likely than not that some or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether a valuation allowance for deferred tax assets is needed. Items considered in determining the Company’s valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods and the expected timing of the reversal of temporary differences. The Company recognizes tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. The Company records income tax related interest and penalties, if applicable, within current income tax expense. Earnings Per Share (EPS) Basic earnings per share are computed by dividing net income resulting from operations available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if option contracts to issue common stock were exercised, or if restricted stock vests, and has been computed after considering the weighted average dilutive effect of the Company’s stock options and restricted stock. The Company uses the treasury stock method to calculate diluted EPS, which is a method of recognizing the use of proceeds that could be obtained upon exercise of options and warrants, including unvested compensation expense related to the shares, in computing diluted EPS. It assumes that any proceeds would be used to purchase common stock at the average market price during the period. The table below shows the calculation of basic and diluted EPS. Year Ended December 31, (Dollars in thousands, except share and per share data) 2023 2022 2021 Net income attributable to common stockholders $ 55,079 $ 43,840 $ 54,108 Weighted average common shares outstanding applicable to basic EPS 22,510,435 23,583,049 24,599,804 Effect of restricted stock grants 461,098 276,469 250,763 Effect of dilutive stock options 142,216 67,825 92,602 Effect of performance stock unit grants 134,574 — — Adjusted weighted average common shares outstanding applicable to diluted EPS 23,248,323 23,927,342 24,943,169 Basic income per share $ 2.45 $ 1.86 $ 2.20 Diluted income per share 2.37 1.83 2.17 Potentially dilutive common shares excluded from the above calculations aggregated 92,310 shares, 347,963 shares, and 421,190 shares as of December 31, 2023, 2022, and 2021 . Stock Compensation The Company follows FASB ASC Topic 718, or ASC 718, Compensation – Stock Compensation, for its equity incentive, stock option, and restricted stock plans, and accordingly, the Company recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options are reflected in net income resulting from operations for any new grants using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option. Stock-based employee compensation costs pertaining to restricted stock are reflected in net income resulting from operations for any new grants using the grant date fair value of the shares granted, expensed over the vesting period of the underlying stock. During the years ended December 31, 2023, 2022, and 2021, the Company issued 399,793 , 522,475 , and 258,120 restricted shares of stock-based compensation awards, 296,444 , 0 , and 0 performance stock units, 83,158 , 129,638 , and 16,803 restricted stock units, and 0 , 0 , and 317,398 shares of other stock-based compensation awards; and recognized $ 4.7 million, $ 3.5 million, and $ 2.3 million, or $ 0.20 , $ 0.15 , and $ 0.09 per diluted common share for each respective year, of non-cash stock-based compensation expense related to the grants. As of December 31, 2023 , the total remaining unrecognized compensation cost related to unvested stock options and restricted stock was $ 5.0 million, which is expected to be recognized over the next 9 quarters. F- 13 Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the bank regulators about components, risk weightings, and other factors. FDIC-insured banks, including the Bank, are subject to certain federal laws, which impose various legal limitations on the extent to which banks may finance or otherwise supply funds to certain of their affiliates. In particular, the Bank is subject to certain restrictions on any extensions of credit to, or other covered transactions with, such as certain purchases of assets, the Company or its affiliates. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios as defined in the regulations (set forth in the table below). Additionally, as conditions of granting the Bank’s application for federal deposit insurance, the FDIC ordered that the Tier 1 leverage capital to total assets ratio, as defined, be not less than 15 %, a level which could preclude its ability to pay dividends to the Company, and that an adequate allowance for credit losses be maintained. As of December 31, 2023, the Bank’s Tier 1 leverage ratio was 16.2 % . The Bank’s actual capital amounts and ratios, and the regulatory minimum ratios are presented in the following table. Regulatory December 31, (Dollars in thousands) Minimum Well-Capitalized 2023 2022 Common equity tier 1 capital $ 293,774 $ 242,049 Tier 1 capital 362,561 310,837 Total capital 390,153 334,913 Average assets 2,232,816 1,917,904 Risk-weighted assets 2,155,641 1,888,530 Leverage ratio (1) 4.0 % 5.0 % 16.2 % 16.2 % Common equity tier 1 capital ratio (2) 7.0 6.5 13.6 12.8 Tier 1 capital ratio (3) 8.5 8.0 16.8 16.5 Total capital ratio (3) 10.5 10.0 18.1 17.7 (1) Calculated by dividing Tier 1 capital by average assets. (2) Calculated by subtracting preferred stock or non-controlling interest from Tier 1 capital and dividing by risk-weighted assets. (3) Calculated by dividing Tier 1 or total capital by risk-weighted assets. In the table above, the minimum risk-based ratios as of December 31, 2023 and 2022 reflect the capital conservation buffer of 2.5 %. The minimum regulatory requirements, inclusive of the capital conservation buffer, were the binding requirements for the risk-based requirements, and the “well-capitalized” requirements were the binding requirements for Tier 1 leverage capital as of both December 31, 2023 and 2022 . Recently Issued Accounting Standards On January 1, 2023, the Company adopted ASC 326. Please refer to Allowance for Credit Losses, within this footnote, for the impact of adopting this standard. In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures, or Topic 323: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The main objective of this new standard is to allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company is assessing the impact of the update on the accompanying financial statements. In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The amendments in this update seek to clarify or improve disclosure and presentation requirements. The Company is assessing the impact of the update on the accompanying financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting, or Topic 280: Improvements to Reportable Segment Disclosures. The main objective of this update is to provide transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company is assessing the impact of the update on the accompanying financial statements. F- 14 In December 2023, the FASB issued ASU 2023-09, Income Taxes, or Topic 740: Improvements to Income Tax Disclosures. The main objective of this update is to improve financial reporting disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for the annual periods beginning after December 15, 2024. The Company is assessing the impact of the update on the accompanying financial statements. Reclassifications Certain reclassifications have been made to prior year balances to conform with the current year presentation. These reclassifications have no effect on the previously reported results of operations. (3) INVESTMENT SECURITIES The following tables present details of fixed maturity securities available for sale as of December 31, 2023 and 2022. December 31, 2023 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Mortgage-backed securities, principally obligations of U.S. federal agencies $ 44,653 $ — $ ( 4,791 ) $ 39,862 State and municipalities 13,733 21 ( 1,501 ) 12,253 Agency bonds 2,187 — ( 20 ) 2,167 Total $ 60,573 $ 21 $ ( 6,312 ) $ 54,282 December 31, 2022 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Mortgage-backed securities, principally obligations of U.S. federal agencies $ 43,286 $ — $ ( 4,933 ) $ 38,353 State and municipalities 11,015 13 ( 889 ) 10,139 Total $ 54,301 $ 13 $ ( 5,822 ) $ 48,492 The amortized cost and estimated market value of investment securities as of December 31, 2023 by contractual maturity are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 2023 (Dollars in thousands) Amortized Cost Fair Value Due in one year or less $ 2,395 $ 2,336 Due after one year through five years 7,313 7,049 Due after five years through ten years 8,833 7,808 Due after ten years 42,032 37,089 Total $ 60,573 $ 54,282 The following tables show information pertaining to securities with gross unrealized losses as of December 31, 2023 and 2022, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows. Less than Twelve Months Twelve Months and Over December 31, 2023 (Dollars in thousands) Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Mortgage-backed securities, principally obligations of U.S. federal agencies $ ( 78 ) $ 5,797 $ ( 4,714 ) $ 33,971 State and municipalities $ ( 204 ) $ 4,839 $ ( 1,296 ) $ 7,371 Agency bonds — — ( 20 ) 2,167 Total $ ( 282 ) $ 10,636 $ ( 6,030 ) $ 43,509 Less than Twelve Months Twelve Months and Over December 31, 2022 (Dollars in thousands) Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Mortgage-backed securities, principally obligations of U.S. federal agencies $ ( 731 ) $ 12,321 $ ( 4,202 ) $ 26,023 State and municipalities ( 286 ) 4,628 ( 603 ) 3,502 Total $ ( 1,017 ) $ 16,949 $ ( 4,805 ) $ 29,525 As of December 31, 2023 and 2022 , the Company had 60 and 57 securities with unrealized losses that have not been recognized in income because the issuers' bonds are of high credit quality, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date. F- 15 (4) LOANS AND ALLOWANCE FOR CREDIT LOSSES The following table shows the major classification of loans, inclusive of capitalized loan origination costs, at December 31, 2023 and 2022. As of December 31, 2023 2022 (Dollars in thousands) Amount As a Percent of Gross Loans Amount As a Percent of Gross Loans Recreation $ 1,336,226 60 % $ 1,183,512 62 % Home improvement 760,617 34 626,399 33 Commercial 114,827 5 92,899 5 Taxi medallion 3,663 * 13,571 1 Strategic partnership 553 * 572 * Total gross loans 2,215,886 100 % 1,916,953 100 % Allowance for credit losses ( 84,235 ) ( 63,845 ) Total net loans $ 2,131,651 $ 1,853,108 (*) Less than 1%. The following tables show the activity of the gross loans for the years ended December 31, 2023 and 2022. (Dollars in thousands) Recreation Home Improvement Commercial Taxi Medallion Strategic Partnership Total Gross loans – December 31, 2022 $ 1,183,512 $ 626,399 $ 92,899 $ 13,571 $ 572 $ 1,916,953 Loan originations 447,039 357,394 34,850 2,426 118,338 960,047 Principal payments, sales, maturities, and recoveries ( 231,158 ) ( 209,894 ) ( 13,389 ) ( 6,859 ) ( 118,357 ) ( 579,657 ) Charge-offs ( 50,512 ) ( 12,308 ) ( 1,019 ) ( 3,829 ) — ( 67,668 ) Transfer to loan collateral in process of foreclosure, net ( 18,875 ) — — ( 2,306 ) — ( 21,181 ) Amortization of origination costs ( 12,270 ) 2,668 14 — — ( 9,588 ) FASB origination costs, net 18,490 ( 3,642 ) ( 164 ) 660 — 15,344 Paid-in-kind interest — — 1,636 — — 1,636 Gross loans – December 31, 2023 $ 1,336,226 $ 760,617 $ 114,827 $ 3,663 $ 553 $ 2,215,886 (Dollars in thousands) Recreation Home Improvement Commercial Taxi Medallion Strategic Partnership Total Gross loans – December 31, 2021 $ 961,320 $ 436,772 $ 76,696 $ 14,046 $ 90 $ 1,488,924 Loan originations 513,062 392,543 28,172 605 49,526 983,908 Principal payments, sales, maturities, and recoveries ( 259,326 ) ( 196,203 ) ( 6,610 ) ( 419 ) ( 49,044 ) ( 511,602 ) Charge-offs ( 27,055 ) ( 6,393 ) ( 6,083 ) ( 314 ) — ( 39,845 ) Transfer to loan collateral in process of foreclosure, net ( 12,444 ) — — ( 347 ) — ( 12,791 ) Amortization of origination costs ( 10,470 ) 1,763 — — — ( 8,707 ) Amortization of loan premium ( 213 ) ( 322 ) — — — ( 535 ) FASB origination costs, net 18,638 ( 1,761 ) — — — 16,877 Paid-in-kind interest — — 724 — — 724 Gross loans – December 31, 2022 $ 1,183,512 $ 626,399 $ 92,899 $ 13,571 $ 572 $ 1,916,953 F- 16 The following table sets forth the activity in the allowance for credit losses for the years ended December 31, 2023 and 2022. December 31, (Dollars in thousands) 2023 2022 Allowance for credit losses – beginning balance (1) $ 63,845 $ 50,166 CECL transition amount upon ASU 2016-13 adoption 13,712 — Charge-offs Recreation ( 50,512 ) ( 27,055 ) Home improvement ( 12,308 ) ( 6,393 ) Commercial ( 1,019 ) ( 6,083 ) Taxi medallion ( 3,829 ) ( 314 ) Total charge-offs ( 67,668 ) ( 39,845 ) Recoveries Recreation 11,449 13,785 Home improvement 2,886 2,761 Commercial 10 47 Taxi medallion 22,191 6,872 Total recoveries 36,536 23,465 Net charge-offs (2) ( 31,132 ) ( 16,380 ) Provision for credit losses 37,810 30,059 Allowance for credit losses – ending balance (3) $ 84,235 $ 63,845 (1) Represents allowance prior to the adoption of ASU 2016-13. (2) As of December 31, 2023 , cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion portfolio were $ 176.8 million, including $ 107.9 million related to loans secured by New York taxi medallions, some of which may represent collection opportunities for the Company. (3) As of December 31, 2023 and 2022, there was no allowance for credit losses a nd net charge-offs related to the strategic partnership loans. With the adoption of ASC 326, the Company also adopted ASU 2022-02, Financial Instruments – Credit Losses, or Topic 326: Troubled Debt Restructurings and Vintage Disclosures. Under this standard, the Company is required to disclose current period gross write-offs, by year of origination, for financing receivables. (Dollars in thousands) 2023 2022 2021 2020 2019 Prior Total Recreation $ 3,136 $ 18,836 $ 10,857 $ 5,115 $ 5,001 $ 7,567 $ 50,512 Home improvement 2,196 5,686 2,662 702 435 627 12,308 Commercial — — 119 — 900 — 1,019 Taxi medallion — — — — — 3,829 3,829 Total $ 5,332 $ 24,522 $ 13,638 $ 5,817 $ 6,336 $ 12,023 $ 67,668 The following tables set forth the allowance for credit losses by type as of December 31, 2023 and 2022. December 31, 2023 (Dollars in thousands) Amount Percentage of Allowance Allowance as a Percent of Loan Category Allowance as a Percent of Nonaccrual Recreation $ 57,532 68 % 4.31 % 221.50 % Home improvement 21,019 25 2.76 80.92 Commercial 4,148 5 3.61 15.97 Taxi medallion 1,536 2 41.93 5.91 Total $ 84,235 100 % 3.80 % 324.31 % December 31, 2022 (Dollars in thousands) Amount Percentage of Allowance Allowance as a Percent of Loan Category Allowance as a Percent of Nonaccrual Recreation $ 41,966 66 % 3.55 % 130.60 % Home improvement 11,340 18 1.81 35.29 Commercial 1,049 1 1.13 3.26 Taxi medallion 9,490 15 69.93 29.53 Total $ 63,845 100 % 3.33 % 198.69 % The following table presents total nonaccrual loans and foregone interest, substantially all of which is in the taxi medallion portfolio. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions. Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Total nonaccrual loans $ 25,974 $ 32,133 $ 35,571 Interest foregone for the year 928 1,267 1,620 Amount of foregone interest applied to principal for the year 238 375 432 Interest foregone life-to-date 2,119 2,419 3,623 Amount of foregone interest applied to principal life-to-date 822 1,204 942 Percentage of nonaccrual loans to gross loan portfolio 1.2 % 1.7 % 2.4 % Percentage of allowance for credit losses to nonaccrual loans 324.3 % 198.7 % 141.0 % F- 17 The following tables present the performance status of loans as of December 31, 2023 and 2022. December 31, 2023 (Dollars in thousands) Performing Nonperforming Total Percentage of Nonperforming to Total Recreation $ 1,326,567 $ 9,655 $ 1,336,222 0.72 % Home improvement 759,128 1,493 760,621 0.20 Commercial 103,664 11,163 114,827 9.72 Taxi medallion — 3,663 3,663 100.00 Strategic partnership 553 — 553 — Total $ 2,189,912 $ 25,974 $ 2,215,886 1.17 % December 31, 2022 (Dollars in thousands) Performing Nonperforming Total Percentage of Nonperforming to Total Recreation $ 1,173,846 $ 9,666 $ 1,183,512 0.82 % Home improvement 625,820 579 626,399 0.09 Commercial 84,165 8,734 92,899 9.40 Taxi medallion — 13,571 13,571 100.00 Strategic partnership 572 — 572 — Total $ 1,884,403 $ 32,550 $ 1,916,953 1.70 % For those loans aged under 90 days past due, there is a possibility that their delinquency status will continue to deteriorate and they will subsequently be placed on nonaccrual status and be reserved for, and as such, deemed nonperforming. The following tables provide additional information on attributes of the nonperforming loan portfolio as of December 31, 2023 and 2022, all of which had an allowance recorded against the principal balance. December 31, 2023 2022 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With an allowance recorded Recreation $ 9,655 $ 9,655 $ 416 $ 9,666 $ 9,666 $ 343 Home improvement 1,493 1,493 41 579 579 10 Commercial 11,163 11,301 1,897 8,734 8,823 963 Taxi medallion 3,663 4,347 1,536 13,571 14,686 9,490 Total nonperforming loans with an allowance $ 25,974 $ 26,796 $ 3,890 $ 32,550 $ 33,754 $ 10,806 Year Ended December 31, 2023 2022 (Dollars in thousands) Average Investment Recorded Interest Income Recognized Average Investment Recorded Interest Income Recognized With an allowance recorded Recreation $ 9,048 $ 16 $ 9,093 $ 401 Home improvement 1,382 1 514 4 Commercial 7,368 — 13,381 — Taxi medallion 4,607 — 16,019 — Total nonperforming loans with an allowance $ 22,405 $ 17 $ 39,007 $ 405 F- 18 The following tables show the aging of all loans as of December 31, 2023 and 2022. December 31, 2023 Days Past Due Recorded Investment 90 Days and (Dollars in thousands) 30-59 60-89 90 + Total Current Total (1) Accruing Recreation $ 40,282 $ 15,039 $ 9,095 $ 64,416 $ 1,228,175 $ 1,292,591 $ — Home improvement 3,936 2,562 1,502 8,000 756,069 764,069 — Commercial — 2,156 6,240 8,396 107,140 115,536 — Taxi medallion 201 — — 201 3,462 3,663 — Strategic partnership — — — — 553 553 — Total $ 44,419 $ 19,757 $ 16,837 $ 81,013 $ 2,095,399 $ 2,176,412 $ — (1) Excludes $ 40.0 million of capitalized loan origination costs. December 31, 2022 Days Past Due Recorded Investment 90 Days and (Dollars in thousands) 30-59 60-89 90 + Total Current Total (1) Accruing Recreation $ 31,781 $ 11,877 $ 7,365 $ 51,023 $ 1,095,072 $ 1,146,095 $ — Home improvement 3,266 1,256 579 5,101 623,776 628,877 — Commercial — — 74 74 93,396 93,470 — Taxi medallion 142 393 885 1,420 12,151 13,571 — Strategic partnership — — — — 572 572 — Total $ 35,189 $ 13,526 $ 8,903 $ 57,618 $ 1,824,967 $ 1,882,585 $ — (1) Excludes $ 34.9 million of capitalized loan origination costs. The Company estimates that the weighted average loan-to-value ratio of the taxi medallion loans was approximately 183 % and 339 % as of December 31, 2023 and 2022. Under ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," concurrent with the elimination of troubled debt restructuring, or TDR, disclosures, the Company must disclose loans to borrowers experiencing financial difficulty that were modified during the reporting period. The Company did not have any such loan modifications on January 1, 2023 or during the year ended December 31, 2023. The following table shows the TDRs, which the Company entered into during the year ended December 31, 2022. (Dollars in thousands) Number of Loans Pre- Modification Investment Post- Modification Investment Recreation loans 80 1,203 1,203 Taxi medallion loans 2 252 252 As of December 31, 2022 , no taxi medallion loans and two commercial loans were modified as TDRs in the previous 12 months. Modified taxi medallion loans and commercial loans had a respective investment value of $ 0.9 million and $ 5.3 million. As of December 31, 2022 , 63 recreation loans modified as TDRs were in default and had an investment value of $ 0.9 million. The following tables show the activity of the loan collateral in process of foreclosure, which relates only to the recreation and taxi medallion loans, for the years ended December 31, 2023 and 2022. Year Ended December 31, 2023 (Dollars in thousands) Recreation Taxi Medallion (1) Total Loan collateral in process of foreclosure – December 31, 2022 $ 1,376 $ 20,443 $ 21,819 Transfer from loans, net 18,875 2,306 21,181 Sales ( 7,890 ) ( 700 ) ( 8,590 ) Cash payments received ( 730 ) ( 11,311 ) ( 12,041 ) Collateral valuation adjustments ( 9,852 ) ( 745 ) ( 10,597 ) Loan collateral in process of foreclosure – December 31, 2023 $ 1,779 $ 9,993 $ 11,772 (1) As of December 31, 2023, taxi medallion loans in the process of foreclosure included 333 taxi medallions in the New York market, 206 taxi medallions in the Chicago market, 31 taxi medallions in the Newark market, and 31 taxi medallions in various other markets. Year Ended December 31, 2022 (Dollars in thousands) Recreation Taxi Medallion (1) Total Loan collateral in process of foreclosure – December 31, 2021 $ 1,720 $ 35,710 $ 37,430 Transfer from loans, net 12,444 347 12,791 Sales ( 7,707 ) ( 2,668 ) ( 10,375 ) Cash payments received — ( 12,289 ) ( 12,289 ) Collateral valuation adjustments ( 5,081 ) ( 657 ) ( 5,738 ) Loan collateral in process of foreclosure – December 31, 2022 $ 1,376 $ 20,443 $ 21,819 (1) As of December 31, 2022, taxi medallion loans in the process of foreclosure included 452 taxi medallions in the New York market, 335 taxi medallions in the Chicago market, 54 taxi medallions in the Newark market, and 39 taxi medallions in various other markets. F- 19 (5) FUNDS BORROWED The following table presents outstanding balances of funds borrowed as of December 31, 2023. Payments Due for the Year Ending December 31, (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter December 31, 2023 (1) December 31, 2022 (1) Interest Rate (2) Deposits (3) $ 678,846 $ 533,405 $ 325,498 $ 184,458 $ 147,232 $ — $ 1,869,439 $ 1,609,672 3.07 % Privately placed notes 3,000 — 31,250 53,750 39,000 12,500 139,500 121,000 8.08 SBA debentures and borrowings 5,000 14,000 14,000 2,000 1,250 39,000 75,250 68,512 3.69 Trust preferred securities — — — — — 33,000 33,000 33,000 7.75 Total $ 686,846 $ 547,405 $ 370,748 $ 240,208 $ 187,482 $ 84,500 $ 2,117,189 $ 1,832,184 3.50 % (1) Excludes deferred financing costs of $ 8.5 million and $ 7.0 million as of December 31, 2023 and 2022 . (2) Weighted average contractual rate as of December 31, 2023 . (3) Balance excludes $ 1.5 million and $ 1.3 million of strategic partner reserve deposits as of December 31, 2023 and 2022 . (A) DEPOSITS Most deposits are raised through the use of investment brokerage firms that package time deposits in denominations of less than $ 250,000 qualifying for FDIC insurance into larger pools that are sold to the Bank. The rates paid on the deposits are highly competitive with market rates paid by other financial institutions. Additionally, a brokerage fee is paid, depending on the maturity of the deposits, which averages less than 0.15 %. Interest on the deposits is accrued daily and paid monthly, quarterly, semiannually, or at maturity. In October 2020, the Bank began to originate time deposits through internet listing services. These deposits are from other financial institutions and, as of December 31, 2023 and 2022, the Bank had $ 11.8 million and $ 12.4 million in listing service deposit balances. In April 2023, the Bank began to originate retail savings deposits through a third-party service provider and, as of December 31, 2023 , the Bank had $ 14.9 million in retail savings deposit balances. The following table presents the maturity of the deposit pools, which includes strategic partner reserve deposits, as of December 31, 2023 . (Dollars in thousands) December 31, 2023 Three months or less $ 191,715 Over three months through six months 190,494 Over six months through one year 296,637 Over one year 1,190,593 Deposits 1,869,439 Strategic partner collateral deposits 1,500 Total deposits $ 1,870,939 (B) FEDERAL RESERVE DISCOUNT WINDOW AND OTHER BORROWINGS In March 2023, the Bank established a discount window line of credit at the Federal Reserve. As of December 31, 2023 , the Bank had approximately $ 38.0 million in investment securities pledged as collateral to the Federal Reserve. The current advance rate on the pledged securities is 100 % of fair value, for a total of approximately $ 38.0 million in secured borrowing capacity, of which no ne was utilized as of December 31, 2023. The Bank has borrowing arrangements with several commercial banks. These agreements are accommodations that can be terminated at any time, for any reason and allow the Bank to borrow up to $ 75.0 million. As of December 31, 2023 , no thing was outstanding on these lines. (C) PRIVATELY PLACED NOTES In December 2023, the Company completed a private placement to certain institutional investors of $ 12.5 million aggregate principal amount of 9.00 % unsecured senior notes due December 2033 , with interest payable semiannually. The Company intends to use the net proceeds from the offering for general corporate purposes, including the repayment of the remaining 8.25 % notes maturing in March 2024 . In September 2023, the Company completed a private placement to certain institutional investors of $ 39.0 million aggregate principal amount of 9.25 % unsecured senior notes due September 2028 , with interest payable semiannually. The Company used the net proceeds from the offering for general corporate purposes, including the repurchase of $ 33.0 million of the 8.25 % notes issued in March 2019 with a maturity date of March 2024 described below. In February 2021, the Company completed a private placement to certain institutional investors of $ 25.0 million aggregate principal amount of 7.25 % unsecured senior notes due February 2026 , with interest payable semiannually. In March 2021, an additional $ 3.3 million principal amount of such notes was issued to certain institutional investors. Subsequently in April 2021, an additional $ 3.0 million principal amount of such notes was issued to certain institutional investors. The Company used the net proceeds from the offering for general corporate purposes, including repayment of outstanding debt. F- 20 In December 2020, the Company completed a private placement to certain institutional investors of $ 33.6 million aggregate principal amount of 7.50 % unsecured senior notes due December 2027 , with interest payable semiannually. In February and March 2021, an additional $ 8.5 million principal amount of such notes was issued to certain institutional investors. Subsequently in April 2021, an additional $ 11.7 million principal amount of such notes was issued to certain institutional investors. The Company used the net proceeds from the offering for general corporate purposes, including repayment of outstanding debt. In March 2019, the Company completed a private placement to certain institutional investors of $ 30.0 million aggregate principal amount of 8.25 % unsecured senior notes due in March 2024 , with interest payable semiannually. The Company used the net proceeds from the offering for general corporate purposes, including repaying certain borrowings under its notes payable to banks at a discount which led to a gain of $ 4.1 million in 2019. In August 2019, an additional $ 6.0 million principal amount of such notes was issued to certain institutional investors. As described above, in September 2023, the Company repurchased and cancelled $ 33.0 million of these notes, leaving $ 3.0 million principal amount remaining outstanding as of December 31, 2023. (D) SBA DEBENTURES AND BORROWINGS Over the years, the SBA has approved commitments for MCI and FSVC, typically for a four and half year term and a 1 % fee. During 2017, the SBA restructured FSVC’s debentures with SBA totaling $ 33.5 million in principal into a new loan by the SBA to FSVC in the principal amount of $ 34.0 million, or the SBA Loan. In connection with the SBA Loan, FSVC executed a Note, or the SBA Note, with an effective date of March 1, 2017, in favor of SBA, in the principal amount of $ 34.0 million. The SBA Loan bore an interest rate of 3.25 % with all remaining unpaid principal and interest being due on April 30, 2024 , the maturity date. In October 2023, FSVC repaid, in full, all amounts due to the SBA under the SBA Note. On July 10, 2023, MCI accepted a commitment from the SBA for $ 20.0 million in debenture financing. In connection with the commitment, MCI paid the SBA a leverage fee of $ 0.2 million, with an additional $ 0.4 million fee to be paid pro-rata as MCI draws under the commitment. As of December 31, 2023 , $ 9.8 million of the commitment had been drawn, and $ 5.5 million was drawable, with the balance of $ 4.7 million drawable upon the infusion of $ 2.4 million of capital from either the capitalization of retained earnings or a capital infusion into MCI from the Company. (E) TRUST PREFERRED SECURITIES In June 2007, the Company issued and sold $ 36.1 million aggregate principal amount of unsecured junior subordinated notes to Fin Trust which, in turn, sold $ 35.0 million of trust preferred securities to Merrill Lynch International and issued 1,083 shares of common stock to the Company. Prior to the cessation of LIBOR on June 30, 2023, the notes bore a variable rate of interest of 90-day LIBOR plus 2.13 %. With the cessation of LIBOR, interest is calculated using the Secured Overnight Financing Rate (SOFR) adjusted by a relevant spread adjustment of approximately 26 basis points , plus 2.13 %. The notes mature in September 2037 and are prepayable at par. Interest is payable quarterly in arrears. The terms of the trust preferred securities and the notes are substantially identical. In December 2007, $ 2.0 million of the trust preferred securities were repurchased from a third-party investor. As of December 31, 2023, $ 33.0 million was outstanding on the trust preferred securities. (F) COVENANT COMPLIANCE Certain of the Company's debt agreements contain financial covenants that require the Company to maintain certain financial ratios and minimum tangible net worth. As of December 31, 2023 , the Company was in compliance with all such covenants. (6) LEASES The Company has leased premises that expire at various dates through November 30, 2030 subject to various operating leases. The Company has implemented ASC Topic 842 under a modified retrospective approach, in which no adjustments have been made to the prior year balances. The following table presents the operating lease costs and additional information for the years ended December 31, 2023, 2022, and 2021. December 31, (Dollars in thousands) 2023 2022 2021 Operating lease costs $ 2,390 $ 2,216 $ 2,287 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases 2,472 2,378 2,454 Right-of-use asset obtained in exchange for lease liability ( 226 ) ( 187 ) ( 118 ) F- 21 The following table presents the breakout of the operating leases as of December 31, 2023 and 2022. December 31, (Dollars in thousands) 2023 2022 Operating lease right-of-use assets $ 8,785 $ 9,723 Other current liabilities 2,472 2,239 Operating lease liabilities 7,019 8,408 Total operating lease liabilities 9,491 10,647 Weighted average remaining lease term 4.9 years 5.5 years Weighted average discount rate 5.47 % 5.66 % The following table presents maturities of the lease liabilities as of December 31, 2023 . (Dollars in thousands) 2024 $ 2,536 2025 2,546 2026 2,567 2027 1,342 2028 573 Thereafter 1,139 Total lease payments 10,703 Less imputed interest 1,212 Total operating lease liabilities $ 9,491 (7) INCOME TAXES The Company is subject to federal and applicable state corporate income taxes on its taxable ordinary income and capital gains. As a corporation taxed under Subchapter C of the Internal Revenue Code, the Company is able, and intends, to file a consolidated federal income tax return with corporate subsidiaries in which it holds 80% or more of the outstanding equity interest measured by both vote and fair value. The following table sets forth the significant components of the Company's deferred and other tax assets and liabilities as of December 31, 2023 and 2022. December 31, (Dollars in thousands) 2023 2022 Goodwill and other intangibles $ 43,034 $ 43,397 Provision for credit losses ( 13,032 ) ( 9,945 ) Net operating loss carryforwards (1) ( 3,802 ) ( 3,730 ) Accrued expenses, compensation, and other assets ( 6,976 ) ( 3,819 ) Unrealized gains on other investments ( 1,877 ) ( 1,445 ) Total deferred tax liability 17,347 24,458 Valuation allowance 3,860 2,295 Deferred tax liability, net $ 21,207 $ 26,753 (1) As of December 31, 2023 , the Company had an estimated $ 11.1 million of net operating loss carryforwards, $ 1.7 million of which expires at various dates between December 31, 2026 and December 31, 2035 , which had a net carrying value of $ 1.2 million of December 31, 2023 . The following table shows the components of the Company's tax provision for the years ended December 31, 2023, 2022, and 2021. Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Current Federal $ 18,634 $ 5,213 $ 3,550 State 6,014 560 1,563 Deferred 0 0 0 Federal ( 52 ) 8,090 13,686 State 314 4,100 5,418 Net provision for income taxes $ 24,910 $ 17,963 $ 24,217 The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax (provision) benefit reported for the years ended December 31, 2023, 2022, and 2021. Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Statutory Federal income tax provision at 21 % $ 18,068 $ 14,249 $ 17,193 State and local income taxes, net of federal income tax benefit 3,534 2,787 3,363 Valuation allowance against deferred tax assets 1,565 — 1,833 Change in effective state income tax rates and accrual ( 222 ) ( 811 ) 1,691 Income attributable to non-controlling interest — — ( 628 ) Non-deductible expenses 2,024 1,987 178 Other ( 59 ) ( 249 ) 587 Total income tax provision $ 24,910 $ 17,963 $ 24,217 F- 22 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible pursuant to ASC 740. The Company considers the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company’s evaluation of the realizability of deferred tax assets must consider both positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. Based upon these considerations, the Company determined the necessary valuation allowance as of December 31, 2023. The Company has filed tax returns in many states. Federal, New York State, New York City, and Utah state tax filings of the Company for the tax years 2020 through the present are the more significant filings that are open for examination. (8) STOCK OPTIONS AND RESTRICTED STOCK The Company’s Board of Directors approved the 2018 Equity Incentive Plan, or the 2018 Plan, which was approved by the Company’s stockholders on June 15, 2018. The terms of 2018 Plan provide for grants of a variety of different type of stock awards to the Company’s employees and non-employee directors, including options, restricted stock, restricted stock units, performance stock units, and stock appreciation rights, etc. On April 22, 2020, the Company’s Board of Directors approved an amendment to the 2018 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 19, 2020, and subsequently on April 26, 2022, the Company’s Board of Directors approved an additional amendment to the 2018 Plan to further increase the number of shares of the Company’s common stock authorized for issuance thereunder, which was approved by the Company’s stockholders on June 14, 2022. A total of 5,710,968 shares of the Company’s common stock are issuable under the 2018 Plan, and 2,228,057 were issuable as of December 31, 2023. Awards under the 2018 Plan are subject to certain limitations as set forth in the 2018 Plan, which will terminate when all shares of common stock authorized for delivery have been delivered and the forfeiture restrictions on all awards have lapsed, or by action of the Board of Directors pursuant to the 2018 Plan, whichever occurs first. The Company’s Board of Directors approved the 2015 Non-Employee Director Stock Option Plan, or the 2015 Director Plan, on March 12, 2015, which was approved by the Company’s shareholders on June 5, 2015, and on which exemptive relief to implement the 2015 Director Plan was received from the SEC on February 29, 2016. A total of 300,000 shares of the Company’s common stock were issuable under the 2015 Director Plan, and 258,334 remained issuable as of June 15, 2018. Effective June 15, 2018, the 2018 Plan was approved, and these remaining shares were rolled into the 2018 Plan. Under the 2015 Director Plan, unless otherwise determined by a committee of the Board of Directors comprised of directors who are not eligible for grants under the 2015 Director Plan, the Company granted options to purchase 12,000 shares of the Company’s common stock to a non-employee director upon election to the Board of Directors, with an adjustment for directors who were elected to serve less than a full term. The option price per share could not be less than the current market value of the Company’s common stock on the date the option was granted. Options granted under the 2015 Director Plan vested annually, as defined in the 2015 Director Plan. The term of the options could not exceed ten years . The Company’s Board of Directors approved the First Amended and Restated 2006 Director Plan, or the Amended Director Plan, on April 16, 2009, which was approved by the Company’s shareholders on June 5, 2009, and on which exemptive relief to implement the Amended Director Plan was received from the SEC on July 17, 2012. A total of 200,000 shares of the Company’s common stock were issuable under the Amended Director Plan. No additional shares are available for issuance under the Amended Director Plan. Under the Amended Director Plan, unless otherwise determined by a committee of the Board of Directors comprised of directors who are not eligible for grants under the Amended Director Plan, the Company would grant options to purchase 9,000 shares of the Company’s common stock to an Eligible Director upon election to the Board of Directors, with an adjustment for directors who were elected to serve less than a full term. The option price per share could not be less than the current market value of the Company’s common stock on the date the option was granted. Options granted under the Amended Director Plan vested annually, as defined in the Amended Director Plan. The term of the options could not exceed ten years . Additional shares are only available for future issuance under the 2018 Plan. At December 31, 2023, 959,522 options on the Company’s common stock were outstanding under the Company’s plans, of which 697,647 options were vested. Additionally, as of December 31, 2023 , there were 995,376 unvested restricted shares, 296,444 unvested performance stock units, 84,822 unvested restricted stock units, and 160,595 vested restricted stock units under the 2018 Plan. F- 23 The fair value of each restricted stock grant is determined on the date of grant by the closing market price of the Company’s common stock on the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. There were no options granted during the year ended December 31, 2023 . The following assumption categories are used to determine the value of any option grants. Year Ended December 31, 2023 2022 2021 Risk free interest rate — — 0.97 % Expected dividend yield — — — Expected life of option in years (1) — — 6.25 Expected volatility (2) — — 53.98 % (1) Expected life is calculated usin g the simplified method. (2) The Company determines its expected volatility based on the Company's historical volatility . During 2023, the Company’s Compensation Committee of the Board of Directors began granting performance stock units, or PSUs, to certain officers and employees of the Company. Granted PSUs are subject to specified performance criteria for a particular performance period. The number of PSUs that vest can range from zero to 200 % of the grant amount. In addition, dividends that accrue during the vesting period are reinvested in dividend equivalent PSUs. PSUs and the related dividend equivalent PSUs are converted into shares of common stock after vesting. Once the PSUs and dividend equivalent PSUs have vested, shares of common stock are delivered. The following table presents the activity for the stock option programs for the years ended December 31, 2023, 2022, and 2021. Number of Options Exercise Price Per Share Weighted Average Exercise Price Outstanding at December 31, 2020 (2) 951,669 2.14 - 12.55 6.41 Granted 317,398 6.79 6.79 Cancelled ( 113,310 ) 4.89 - 11.53 6.64 Exercised (1) ( 44,070 ) 5.21 - 7.25 5.58 Outstanding at December 31, 2021 (2) 1,111,687 2.14 - 12.55 6.41 Granted — — — Cancelled ( 26,093 ) 4.89 - 12.55 7.08 Exercised (1) ( 23,745 ) 4.89 - 7.25 6.51 Outstanding at December 31, 2022 (2) 1,061,849 2.14 - 9.38 6.51 Granted — — — Cancelled ( 33,382 ) 4.89 - 9.38 6.80 Exercised (1) ( 68,945 ) 4.89 - 7.25 6.44 Outstanding at December 31, 2023 (2) 959,522 $ 2.14 - 9.38 $ 6.51 Options exercisable at December 31, 2021 320,922 2.14 - 12.55 $ 6.53 December 31, 2022 548,426 2.14 - 9.38 6.51 December 31, 2023 697,647 2.14 - 9.38 6.51 (1) The aggregate intrinsic value, which represents the difference between the price of the Company’s common stock at the exercise date and the related exercise price of the underlying options, wa s $ 0.1 million, $ 0.1 million, and $ 0.2 million for the years ended December 31, 2023, 2022, and 2021 . (2) The aggregate intrinsic value, which represents the difference betwee n the price of the Company’s common stock at December 31, 2023 and the related exercise price of the underlying options, was $ 3.2 million for outstanding options and $ 2.3 million for exercisable options as of December 31, 2023 . The remaining contractual life was 6.1 years for outstanding options and 5.9 years for exercisable options at December 31, 2023 . The following table presents the activity for the unvested options outstanding under the plans for the year ended December 31, 2023. Number of Options Exercise Price Per Share Weighted Average Exercise Price Outstanding at December 31, 2022 513,423 $ 4.89 - 7.25 $ 6.52 Granted — — — Cancelled ( 3,336 ) 4.89 - 7.25 5.51 Vested ( 248,212 ) 4.89 - 7.25 6.55 Outstanding at December 31, 2023 261,875 $ 4.89 - 7.25 $ 6.49 The intrinsic value of the options vested was $ 0.4 million, $ 0.3 million, and less than $ 0.1 million for the years ended December 31, 2023, 2022, and 2021. F- 24 The following table presents the activity for the restricted stock programs for the years ended December 31, 2023, 2022, and 2021. Number of Shares Grant Price Per Share Weighted Average Grant Price Outstanding at December 31, 2020 416,140 4.39 - 7.25 $ 6.24 Granted 258,120 6.79 - 8.40 7.38 Cancelled ( 21,940 ) 4.89 - 7.25 5.98 Vested (1) ( 158,994 ) 4.39 - 7.25 6.16 Outstanding at December 31, 2021 (2) 493,326 4.89 - 7.25 6.87 Granted 522,475 6.86 - 7.68 7.46 Cancelled ( 29,373 ) 4.89 - 8.40 7.32 Vested (1) ( 129,140 ) 4.89 - 7.25 6.53 Outstanding at December 31, 2022 (2) 857,288 $ 4.89 - 7.25 7.27 Granted 399,793 7.67 - 9.37 8.34 Cancelled ( 12,807 ) 4.89 - 8.40 7.24 Vested (1) ( 248,898 ) 4.89 - 7.68 7.10 Outstanding at December 31, 2023 (2) 995,376 $ 4.89 - 9.37 $ 7.74 (1) The aggregate fair value of the restricted stock vested was $ 2.1 million, $ 1.0 million, and $ 1.1 million for the years ended December 31, 2023, 2022, and 2021 . (2) The aggregate fair value of the restricted stock was $ 9.8 million as of December 31, 2023 . The remaining vesting period was 2.2 years at December 31, 2023 . During the year ended December 31, 2023 , the Company granted 83,158 restricted stock units, or RSUs, with a vesting date of June 22, 2024 at a grant price of $ 9.14 and during the year ended December 31, 2022 granted 129,638 RSUs with a vesting date of June 14, 2023 at a grant price of $ 6.75 . For the RSUs granted in 2023 and 2022, u nitholders had the option of deferring settlement until a future date if the recipient makes a formal election under the guidelines of IRC Section 409A. As of December 31, 2023 , there were 245,417 RSUs outstanding, including 160,595 which had previously vested. During the year ended December 31, 2023, the Company granted 296,444 PSUs at a grant price of $ 6.08 . No PSUs were granted during the year ended December 31, 2022. The PSUs have vesting conditions based upon certain levels of total pre-tax income as well as return on common equity attained over a three-year period. The PSUs cliff vest after three years based upon the performance of the Company. Dividend equivalent PSUs accumulate and convert to additional shares for the benefit of the grantee at the vesting date or are forfeited if the performance conditions are not met. (9) SEGMENT REPORTING The Company has five business segments, which include four lending and one non-operating segments, which are reflective of how Company management makes decisions about its business and operations. The four lending segments reflect the main types of lending performed at the Company, which are recreation, home improvement, commercial, and taxi medallion. The recreation and home improvement lending segments are conducted by the Bank and loans are made to borrowers residing nationwide. The highest concentrations of recreation loans are in Texas and Florida at 15 % and 10 % of loans outstanding and with no other states at or above 10 % as of December 31, 2023. The recreation lending segment is a consumer finance business that works with third-party dealers and financial service providers for the purpose of financing RVs, boats, and other consumer recreational equipment, of which RVs and boats make up 54 % and 19 % of the segment portfolio with no other product lines exceeding 10 % as of December 31, 2023. The home improvement lending segment works with contractors and financial service providers to finance residential home improvement with the largest product lines being roofs, swimming pools, and windows at 41 % , 20 % , and 13 % with no other product lines exceeding 10 % . The highest concentrations of home improvement loans are in Texas and Florida, both at 10 % of loans outstanding and with no other states at or above 10 % as of December 31, 2023. The commercial lending segment focuses on serving a wide variety of industries, with concentrations in manufacturing, construction, and wholesale trade making up 53 % , 13 % , and 11 % of the loans outstanding as of December 31, 2023 with no other product lines exceeding 10 %. The commercial lending segment invests across the United States with concentrations in California, Minnesota, and Wisconsin having 27 % , 12 % , and 10 % of the segment portfolio, and no other states having a concentration at or above 10 % . The taxi medallion lending segment arose in connection with the financing of taxi medallions, taxis, and related assets, primarily all of which are located in the New York City metropolitan area as of December 31, 2023. The Company's corporate and other investments segment is a non-operating segment that includes items not allocated to the Company's operating segments such as investment securities, equity investments, intercompany eliminations, and other corporate elements. Additionally, through December 1, 2021, the date of disposition, the Company had another non-operating segment, RPAC, a race car team. As part of segment reporting, capital ratios for all operating segments have been normalized as a percentage of consolidated total equity divided by total assets, with the net adjustment applied to corporate and other investments. In addition, the commercial segment primarily represents the mezzanine lending business, with certain legacy commercial loans (immaterial to total) allocated to corporate and other investments. F- 25 As part of segment reporting, capital ratios for all operating segments have been normalized as a percentage of consolidated total equity divided by total assets, with the net adjustment applied to corporate and other investments. In addition, the commercial segment primarily represents the mezzanine lending business, with certain legacy commercial loans (immaterial to total) allocated to corporate and other investments. The following table presents segment data as of and for the year ended December 31, 2023. Year Ended December 31, 2023 Consumer Lending (Dollars in thousands) Recreation Home Improvement Commercial Lending Taxi Medallion Lending Corporate and Other Investments Consolidated Total interest income $ 167,765 $ 62,703 $ 12,719 $ 1,596 $ 6,257 $ 251,040 Total interest expense 31,436 18,137 3,597 72 9,704 62,946 Net interest income (loss) 136,329 44,566 9,122 1,524 ( 3,447 ) 188,094 Provision (benefit) for credit losses 44,592 17,583 1,988 ( 26,318 ) ( 35 ) 37,810 Net interest income (loss) after loss provision 91,737 26,983 7,134 27,842 ( 3,412 ) 150,284 Other income 376 6 5,971 3,358 1,609 11,320 Operating expenses ( 32,601 ) ( 16,752 ) ( 3,547 ) ( 7,256 ) ( 15,412 ) ( 75,568 ) Net income (loss) before taxes 59,512 10,237 9,558 23,944 ( 17,215 ) 86,036 Income tax (provision) benefit ( 17,231 ) ( 2,964 ) ( 2,767 ) ( 6,933 ) 4,985 ( 24,910 ) Net income (loss) after taxes 42,281 7,273 6,791 17,011 ( 12,230 ) 61,126 Income attributable to the non-controlling interest 6,047 Total net income attributable to Medallion Financial Corp. $ 55,079 Balance Sheet Data Total loans $ 1,336,222 $ 760,621 $ 114,827 $ 3,663 $ 553 $ 2,215,886 Total assets 1,297,870 744,904 110,850 12,247 421,956 2,587,827 Total funds borrowed 1,062,584 609,863 90,754 10,027 345,462 2,118,690 Selected Financial Ratios Return on average assets 3.36 % 1.04 % 6.65 % 91.25 % ( 3.13 )% 2.51 % Return on average stockholders' equity * * * * * 17.33 Return on average equity 21.24 6.60 41.51 574.86 ( 19.78 ) 15.79 Interest yield 13.07 8.86 12.80 26.94 N/A 11.19 Net interest margin, gross 10.62 6.29 9.18 25.73 N/A 8.38 Net interest margin, net of allowance 11.09 6.45 9.45 61.60 N/A 8.68 Reserve coverage 4.31 2.76 3.61 41.93 N/A 3.80 Delinquency status (1) 0.70 0.20 5.40 — N/A 0.77 Charge-off (recovery) ratio (2) 3.04 1.33 1.02 ( 309.96 ) N/A 1.48 (1) Loans 90 days or more past due. (2) Negative balances indicate recoveries for the period. (*) Line item is not applicable to segments. F- 26 The following table presents segment data as of and for the year ended December 31, 2022. Year Ended December 31, 2022 Consumer Lending (Dollars in thousands) Recreation Home Improvement Commercial Lending Taxi Medallion Lending Corporate and Other Investments Consolidated Total interest income $ 139,145 $ 44,703 $ 9,348 $ 632 $ 2,793 $ 196,621 Total interest expense 17,932 7,697 3,040 508 7,008 36,185 Net interest income (loss) 121,213 37,006 6,308 124 ( 4,215 ) 160,436 Provision (benefit) for credit losses 22,802 7,616 5,963 ( 6,474 ) 152 30,059 Net interest income (loss) after loss provision 98,411 29,390 345 6,598 ( 4,367 ) 130,377 Other income — 14 3,306 4,341 1,865 9,526 Operating expenses ( 30,463 ) ( 13,514 ) ( 4,910 ) ( 10,520 ) ( 12,646 ) ( 72,053 ) Net income (loss) before taxes 67,948 15,890 ( 1,259 ) 419 ( 15,148 ) 67,850 Income tax (provision) benefit ( 17,989 ) ( 4,207 ) 333 ( 111 ) 4,011 ( 17,963 ) Net income (loss) after taxes 49,959 11,683 ( 926 ) 308 ( 11,137 ) 49,887 Income attributable to the non-controlling interest 6,047 Total net income attributable to Medallion Financial Corp. $ 43,840 Balance Sheet Data Total loans $ 1,183,512 $ 626,399 $ 92,899 $ 13,571 $ 572 $ 1,916,953 Total assets 1,154,680 618,923 101,447 25,496 359,333 2,259,879 Total funds borrowed 936,789 502,131 82,304 20,685 291,526 1,833,435 Selected Financial Ratios Return on average assets 4.38 % 1.95 % ( 0.91 )% 1.18 % ( 3.02 )% 2.40 % Return on average stockholders' equity * * * * * 14.92 Return on average equity 26.66 12.08 ( 5.50 ) 6.97 ( 18.40 ) 13.74 Interest yield 12.82 8.49 10.63 4.58 N/A 10.70 Net interest margin, gross 11.17 7.03 7.17 0.90 N/A 8.73 Net interest margin, net of allowance 11.57 7.16 7.28 2.76 N/A 9.05 Reserve coverage 3.55 1.81 1.13 69.93 N/A 3.33 Delinquency status (1) 0.64 0.09 0.08 6.52 N/A 0.47 Charge-off (recovery) ratio (2) 1.22 0.69 6.86 ( 47.51 ) N/A 0.96 (1) Loans 90 days or more past due. (2) Negative balances indicate recoveries for the period. (*) Line item is not applicable to segments. F- 27 The following table presents segment data as of and for the year ended December 31, 2021. Year Ended December 31, 2021 Consumer Lending (Dollars in thousands) Recreation Home Improvement Commercial Lending Taxi Medallion Lending RPAC (2) Corporate and Other Investments Consolidated Total interest income (loss) $ 118,305 $ 34,204 $ 6,592 $ ( 1,483 ) $ — $ 1,348 $ 158,966 Total interest expense 9,993 4,153 2,720 5,914 546 7,814 31,140 Net interest income (loss) 108,312 30,051 3,872 ( 7,397 ) ( 546 ) ( 6,466 ) 127,826 Provision (benefit) for credit losses 7,671 2,750 — ( 7,752 ) — 1,953 4,622 Net interest income (loss) after loss provision 100,641 27,301 3,872 355 ( 546 ) ( 8,419 ) 123,204 Sponsorship and race winnings — — — — 12,567 — 12,567 Race team related expenses — — — — ( 9,559 ) — ( 9,559 ) Other income (loss) — 63 6,542 ( 641 ) 716 12,319 18,999 Operating expenses ( 30,156 ) ( 11,703 ) ( 3,441 ) ( 1,350 ) ( 5,824 ) ( 10,866 ) ( 63,340 ) Net income (loss) before taxes 70,485 15,661 6,973 ( 1,636 ) ( 2,646 ) ( 6,966 ) 81,871 Income tax (provision) benefit ( 18,699 ) ( 4,155 ) ( 1,850 ) 433 ( 1,498 ) 1,552 ( 24,217 ) Net income (loss) after taxes 51,786 11,506 5,123 ( 1,203 ) ( 4,144 ) ( 5,414 ) 57,654 Income attributable to the non-controlling interest 3,546 Total net income attributable to Medallion Financial Corp. $ 54,108 Balance Sheet Data Total loans net $ 961,320 $ 436,772 $ 76,696 $ 14,046 $ — $ 90 $ 1,488,924 Total assets 943,753 442,503 102,711 86,526 — 297,564 1,873,057 Total funds borrowed 744,701 349,172 81,048 68,276 — 234,804 1,478,001 Selected Financial Ratios Return on average assets 5.93 % 2.90 % 6.12 % ( 0.13 )% ( 16.03 )% ( 2.01 )% 3.33 % Return on average stockholders' equity * * * * * * 21.24 Return on average equity 29.66 14.49 30.61 ( 0.64 ) ( 697.38 ) ( 14.49 ) 17.64 Interest yield 13.45 9.14 9.86 ( 6.97 ) N/A N/A 11.08 Net interest margin, gross 12.31 8.03 5.79 ( 34.78 ) N/A N/A 8.91 Net interest margin, net of allowance 12.76 8.17 5.81 ( 93.60 ) N/A N/A 9.25 Reserve coverage 3.37 1.68 1.49 65.74 N/A N/A 3.37 Delinquency status (1) 0.41 0.03 0.10 — N/A N/A 0.28 Charge-off (recovery) ratio 0.29 0.15 — 41.72 N/A N/A 0.89 (1) Loans 90 days or more past due. (2) The Company sold its interest in RPAC in December 2021. Selected earnings data are applicable through the date of sale. (*) Line item is not applicable to segments. (10) COMMITMENTS AND CONTINGENCIES (A) EMPLOYMENT AGREEMENTS The Company has employment agreements with certain key officers, including Mr. Alvin Murstein and Mr. Andrew Murstein, for either a one-, two-, three-, four-, or five-year term. Typically, the contracts with a one- or two-year term will renew for new one- or two-year terms unless prior to the term either the Company or the executive provides notice to the other party of its intention not to extend the employment period beyond the current one or two-year term (as applicable); however, in addition to Mr. Andrew Murstein's employment agreement, as further described below, there is currently one agreement that renews after two years for additional one-year terms and one agreement with a three-year term that does not have a renewal period. In the event of a change in control, as defined, during the employment period, the agreements provide for severance compensation to the executive in an amount equal to the balance of the salary, bonus, and value of fringe benefits which the executive would be entitled to receive for the remainder of the employment period. On April 25, 2023, Mr. Alvin Murstein, the Company’s Chairman of the Board and Chief Executive Officer, notified the Company of his election not to renew the term of his employment pursuant to the First Amended and Restated Employment Agreement, dated May 29, 1998, as amended, between him and the Company. Accordingly, the term of his employment as Chief Executive Officer of the Company will expire on May 28, 2027, unless sooner terminated in accordance with the provisions thereof. In addition, on April 27, 2023, Mr. Andrew Murstein, the Company’s President and Chief Operating Officer, entered into an amendment to the First Amended and Restated Employment Agreement, dated May 29, 1998, as amended, between him and the Company. Pursuant to such amendment, effective as of May 29, 2023, (i) the expiration of his then current term of employment shall be revised to end on May 28, 2027, and (ii) on May 29, 2024, and on each May 29 thereafter, such term of employment shall automatically renew each year for a three-year term unless, prior to the end of the first year of the then-applicable three-year term, either Mr. Murstein or the Company provides at least 30 days’ advance notice to the other party of its intention not to renew the then-applicable term of employment for a new three-year term, in each case unless such employment term is otherwise terminated pursuant to the terms thereof. F- 28 Employment agreements expire at various dates through 2027 , with future minimum payments under these agreements of approximately $ 9.9 million as follows: (Dollars in thousands) 2024 $ 4,259 2025 2,547 2026 2,161 2027 900 Thereafter — Total $ 9,867 (B) OTHER COMMITMENTS As of December 31, 2023 the Company had no other commitments. Generally, any commitments would be on the same terms as loans to or investments in existing borrowers or investees, and generally have fixed expiration dates. Since some commitments would be expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. (C) SEC LITIGATION On December 29, 2021, the SEC filed a civil complaint in the U.S. District Court for the Southern District of New York against the Company and its President and Chief Operating Officer alleging certain violations of the antifraud, books and records, internal controls and anti-touting provisions of the federal securities laws. The litigation relates to certain issues that occurred during the period 2015 to 2017, including (i) the Company’s retention of third parties in 2015 and 2016 concerning posting information about the Company on certain financial websites and (ii) the Company’s financial reporting and disclosures concerning certain assets, including Medallion Bank, in 2016 and 2017, a period when the Company had previously reported as a business development company (BDC) under the Investment Company Act of 1940. Since April 2018, the Company does not report as a BDC, and has not worked with such third parties since 2016. The Company does not expect to change previously reported financial results. The Company filed a motion to dismiss the complaint on March 22, 2022, the SEC filed an amended complaint on April 26, 2022 and the Company filed a motion to dismiss the amended complaint on August 5, 2022. The SEC is seeking injunctive relief, disgorgement plus pre-judgment interest and civil penalties in amounts unspecified, as well as an officer and director bar against the Company’s President and Chief Operating Officer. The Company and its President and Chief Operating Officer intend to defend themselves vigorously and believe that the SEC will not prevail on its claims. Nevertheless, depending on the outcome of the litigation, the Company could incur a loss and other penalties that could be material to the Company, its results of operations and/or financial condition, as well as a bar against its President and Chief Operating Officer. In addition, the Company has and expects to further incur significant legal fees and expenses in defending such charges by the SEC and the Company may be subject to shareholder litigation relating to these SEC matters. (D) OTHER LITIGATION AND REGULATORY MATTERS The Company and its subsidiaries are subject to inquiries from certain regulators and are currently involved in various legal proceedings incident to the normal course of business, including collection matters with respect to certain loans. The Company intends to vigorously defend any outstanding claims and pursue its legal rights. In the opinion of management, based on the advice of legal counsel, except for the pending SEC litigation, as described above, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision could result in a material adverse impact on the financial condition or results of operations of the Company. (11) RELATED PARTY TRANSACTIONS Certain directors, officers, and stockholders of the Company are also directors and officers of its main consolidated subsidiaries, MFC, MCI, FSVC, and the Bank, as well as other subsidiaries. Officer salaries are set by the Board of Directors of the Company. Jeffrey Rudnick, the son of one of the Company’s directors, served as the Company’s Senior Vice President at a salary of $ 250,950 , $ 239,000 , and $ 195,000 for the years ended December 31, 2023, 2022, and 2021 , which was increased to $ 260,988 effective January 1, 2024. Mr. Rudnick received an annual cash bonus of $ 95,000 , $ 85,000 , and $ 75,000 as well as an equity bonus in the amount of $ 52,000 , $ 50,000 , and $ 45,019 for the years ended December 31, 2023, 2022, and 2021 . F- 29 (12) STOCKHOLDERS’/SHAREHOLDERS’ EQUITY On April 29, 2022, our board of directors authorized a new stock repurchase program with no expiration date, pursuant to which we were authorized to repurchase up to $ 35 million of our sh ares, which was increased to $ 40 million on August 10, 2022, also with no expiration date. Such new repurchase program replaced the previous one, which was terminated. As of December 31, 2023, up to $ 19,998,012 of shares remain authorized for repurchase under our stock repurchase program. The Company did no t repurchase any shares during the year ended December 31, 2023 . (13) EMPLOYEE BENEFIT PLANS The Company has a 401(k) Investment Plan, or the 401(k) Plan, which, effective June 1, 2022, covers all full-time and part-time employees of the Company who have attained the age of 18 and have a minimum of thirty (30) days of service. Under the 401(k) Plan, an employee may elect to defer not less than 1 % of total annual compensation, up to the applicable limits set forth in the Internal Revenue Code. Employee contributions are invested in various mutual funds according to the directions of the employee. Once eligible f ull-time employees have completed a minimum of ninety (90) days of service, and part time employees have worked at least 1,000 hours, the Company matches employee contributions to the 401(k) Plan in an amount per employee equal to fifty percent of the first 8% of the employee’s annual contribu tions, subject to legal limits. Prior to June 1, 2022, the 401(k) Plan covered full- and part-time employees of the Company aged 21 and older that had completed a minimum of thirty (30) days of service, with the Company matching one-third of the first 6% of the contributions of eligible employees that had completed at least one (1) year of service (in the case of full-time employees) or 1,000 hours (in the case of part-time employees). T he Company’s 401(k) plan expense was approximately $ 0.5 million, $ 0.3 million, and $ 0.3 million for the years ended December 31, 2023, 2022, and 2021 . (14) FAIR VALUE OF FINANCIAL INSTRUMENTS FASB ASC Topic 825, “Financial Instruments,” requires disclosure of fair value information about certain financial instruments, whether assets, liabilities, or off-balance-sheet commitments, if practicable. The following methods and assumptions were used to estimate the fair value of each class of financial instrument. Fair value estimates that were derived from broker quotes cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. (a) Cash and cash equivalents – Book value equals fair value. (b) Equity securities – The Company’s equity securities are recorded at cost less impairment plus or minus observable price changes. (c) Investment securities – The Company’s investments are recorded at the estimated fair value of such investments. (d) Loans receivable – The Company’s loans are recorded at book value which approximated fair value. (e) Floating rate borrowings – Due to the short-term nature of these instruments, the carrying amount approximates fair value. (f) Commitments to extend credit – The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and present creditworthiness of the counter parties. For fixed rate loan commitments, fair value also includes a consideration of the difference between the current levels of interest rates and the committed rates. At December 31, 2023 and 2022, the estimated fair value of these off-balance-sheet instruments was not material. (g) Fixed rate borrowings – The fair value of the debentures payable to the SBA is estimated based on current market interest rates for similar debt. F- 30 The following table presents the carrying amounts and fair values of the Company’s financial instruments as of December 31, 2023 and 2022. December 31, 2023 2022 (Dollars in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Financial assets Cash, cash equivalents, and federal funds sold (1) $ 149,845 $ 149,845 $ 105,598 $ 105,598 Equity investments 11,430 11,430 10,293 10,293 Investment securities 54,282 54,282 48,492 48,492 Loans receivable 2,131,651 2,131,651 1,853,108 1,853,108 Accrued interest receivable (2) 13,538 13,538 12,613 12,613 Equity securities (3) 1,748 1,748 1,724 1,724 Financial liabilities Funds borrowed 2,118,689 2,118,689 1,833,434 1,833,434 Accrued interest payable (2) 6,822 6,822 4,790 4,790 (1) Categorized as level 1 within the fair value hierarchy, excluding $ 1.3 million as of December 31, 2023 and $ 1.3 million as of December 31, 2022 of interest-bearing deposits categorized as level 2. See Note 15. (2) Categorized as level 3 within the fair value hierarchy. See Note 15. (3) Included within other assets on the balance sheet. (15) FAIR VALUE OF ASSETS AND LIABILITIES The Company follows the provisions of FASB ASC 820, which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. In accordance with FASB ASC 820, the Company has categorized its assets and liabilities measured at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The Company's assessment and classification of an investment within a level can change over time based upon maturity or liquidity of the investment and would be reflected at the beginning of the quarter in which the change occurred. As required by FASB ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a level 3 fair value measurement may include inputs that are observable (levels 1 and 2) and unobservable (level 3). Therefore, gains and losses for such assets and liabilities categorized within the level 3 table below may include changes in fair value that are attributable to both observable inputs (levels 1 and 2) and unobservable inputs (level 3). Assets and liabilities measured at fair value, recorded on the consolidated balance sheets, are categorized based on the inputs to the valuation techniques as follows: Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations). Level 2. Assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: a) Quoted prices for similar assets or liabilities in active markets (for example, restricted stock); b) Quoted price for identical or similar assets or liabilities in non-active markets (for example, corporate and municipal bonds, which trade infrequently); c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (examples include certain residential and commercial mortgage-related assets, including loans, securities, and derivatives). Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the assets or liability (examples include certain private equity investments, and certain residential and commercial mortgage-related assets, including loans, securities, and derivatives). F- 31 A review of fair value hierarchy classification is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain assets or liabilities. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in/out of the level 3 category as of the beginning of the quarter in which the reclassifications occur. Equity investments were recorded at cost less impairment plus or minus observable price changes. Commencing in 2020, the Company elected to measure equity investments at fair value on a non-recurring basis, which have been adjusted for all periods presented. The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022. December 31, 2023 (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets Interest-bearing deposits $ — $ 1,250 $ — $ 1,250 Available for sale investment securities — 54,282 — 54,282 Equity securities 1,748 — — 1,748 Total (1) $ 1,748 $ 55,532 $ — $ 57,280 (1) Total unrealized losses of $ 0.3 million , net of tax, was included in comprehensive loss for the year ended December 31, 2023 related to these assets. December 31, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets Interest-bearing deposits $ — $ 1,250 $ — $ 1,250 Available for sale investment securities — 48,492 — 48,492 Equity securities 1,724 — — 1,724 Total (1) $ 1,724 $ 49,742 $ — $ 51,466 (1) Total unrealized losses of $ 4.4 million , net of tax, was included in other comprehensive loss for the year ended December 31, 2022 related to these assets. The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and 2022. December 31, 2023 (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets Equity investments $ — $ — $ 11,430 $ 11,430 Impaired loans — — 25,974 25,974 Loan collateral in process of foreclosure — — 11,772 11,772 Total $ — $ — $ 49,176 $ 49,176 December 31, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets Equity investments $ — $ — $ 10,293 $ 10,293 Impaired loans — — 32,133 32,133 Loan collateral in process of foreclosure — — 21,819 21,819 Total $ — $ — $ 64,245 $ 64,245 F- 32 Significant Unobservable Inputs ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as level 3 within the fair value hierarchy. The tables below are not intended to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the Company. The valuation techniques and significant unobservable inputs used in non-recurring level 3 fair value measurements of assets and liabilities as of December 31, 2023 and 2022. (Dollars in thousands) Fair Value at December 31, 2023 Valuation Techniques Unobservable Inputs Range (Weighted Average) Equity investments $ 11,157 Investee financial analysis Financial condition and operating performance of the borrower (1) N/A Collateral support N/A 273 Precedent market transaction Offering price $ 8.73 / share Impaired loans 25,974 Market approach Historical and actual loss experience 0.00 % - 28.48 % 60 % of balance Transfer prices (2) $ 0.0 - $ 79.5 Collateral value N/A Loan collateral in process of foreclosure 11,772 Market approach Transfer prices (2) $ 0.0 - $ 79.5 Collateral value (3) $ 2.3 - $ 45.0 (Dollars in thousands) Fair Value at December 31, 2022 Valuation Techniques Unobservable Inputs Range (Weighted Average) Equity investments $ 10,020 Investee financial analysis Financial condition and operating performance of the borrower (1) N/A Collateral support N/A 273 Precedent market transaction Offering price $ 8.73 / share Impaired loans 32,133 Market approach Historical and actual loss experience 0.00 % - 6.55 % 60 % of balance Transfer prices (2) $ 0.0 - 79.5 Collateral value N/A Loan collateral in process of foreclosure 21,819 Market approach Transfer prices (2) $ 0.0 - 79.5 Collateral value (3) $ 2.5 - $ 54.1 (1) Includes projections based on revenue, EBITDA, leverage and liquidation amounts. These assumptions are based on a variety of factors, including economic conditions, industry and market developments, market valuations of comparable companies, and company-specific developments, including exit strategies and realization opportunities. (2) Represents amount net of liquidation costs. (3) Relates to the recreation portfolio. (16) MEDALLION BANK PREFERRED STOCK (Non-controlling interest) On December 17, 2019, the Bank closed an initial public offering of 1,840,000 shares of its Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, with a $ 46.0 million aggregate liquidation amount, yielding net proceeds of $ 42.5 million, which were recorded in the Bank’s shareholders’ equity. Dividends are payable quarterly from the date of issuance to, but excluding April 1, 2025, at a rate of 8 % per annum, and from and including April 1, 2025, at a floating rate equal to a benchmark rate (which is expected to be three-month Secured Overnight Financing Rate, or SOFR ) plus a spread of 6.46 % per annum. On July 21, 2011, the Bank issued, and the U.S. Treasury purchased , 26,303 shares of Senior Non-Cumulative Perpetual Preferred Stock, Series E for an aggregate purchase price of $ 26.3 million under the Small Business Lending Fund Program, or SBLF, with a liquidation amount of $ 1,000 per share. The SBLF is a voluntary program intended to encourage small business lending by providing capital to qualified smaller banks at favorable rates. The Bank pays a dividend rate of 9 % on the Series E. F- 33 (17) PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS The following shows the condensed financial information of Medallion Financial Corp. (parent company only). Condensed Balance Sheets December 31, (Dollars in thousands) 2023 2022 Assets Cash $ 31,001 $ 20,669 Investment in bank subsidiary (1) 523,189 479,496 Investment in non-bank subsidiaries 88,931 83,727 Income tax receivable 21,951 22,835 Net loans receivable 2,403 2,538 Loan collateral in process of foreclosure 795 2,001 Other assets 6,613 7,603 Total assets $ 674,883 $ 618,869 Liabilities Long-term borrowings (2) $ 166,625 $ 151,808 Short-term borrowings 3,000 — Deferred tax liabilities 35,719 38,091 Intercompany payables 32,600 33,378 Other liabilities 25,165 25,068 Total liabilities 263,109 248,345 Parent company equity 342,986 301,736 Non-controlling interest 68,788 68,788 Total stockholders’ equity 411,774 370,524 Total liabilities and equity $ 674,883 $ 618,869 (1) Includes $ 171.4 million and $ 172.8 million of goodwill and intangible assets of the Company which relate specifically to the Bank and $ 68.8 million related to non-controlling interests in consolidated subsidiaries as of December 31, 2023 and 2022 . (2) Includes $ 2.8 million and $ 2.1 million of deferred financing costs as of December 31, 2023 and 2022 . Condensed Statements of Operations Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Dividend income $ 25,125 $ 24,750 $ 19,000 Interest income (loss) 1,243 ( 119 ) ( 2,554 ) Total Dividend and interest income 26,368 24,631 16,446 Interest expense 12,771 11,289 11,209 Net interest income 13,597 13,342 5,237 Provision for credit losses ( 310 ) ( 353 ) ( 4,718 ) Net interest income after provision for credit losses 13,907 13,695 9,955 Other expense, net (1) ( 20,156 ) ( 18,423 ) ( 6,224 ) Income (loss) before income taxes and undistributed earnings of subsidiaries ( 6,249 ) ( 4,728 ) 3,731 Income tax benefit 5,291 7,940 4,452 Income (loss) before undistributed earnings of subsidiaries ( 958 ) 3,212 8,183 Undistributed earnings of subsidiaries 56,037 40,628 45,925 Net income attributable to parent company $ 55,079 $ 43,840 $ 54,108 (1) Includes $ 3.1 million, $ 4.9 million, and $ 7.8 million of net gains on the disposition of taxi medallion assets for the years ended December 31, 2023, 2022, and 2021 . Condensed Statements of Other Comprehensive Income Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Net income $ 55,079 $ 43,840 $ 54,108 Other comprehensive loss, net of tax ( 347 ) ( 4,383 ) ( 978 ) Total comprehensive income attributable to Medallion Financial Corp. $ 54,732 $ 39,457 $ 53,130 F- 34 Condensed Statements of Cash Flow Year Ended December 31, (Dollars in thousands) 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income/net decrease in net assets resulting from operations $ 55,079 $ 43,840 $ 54,108 Adjustments to reconcile net income/net decrease in net assets resulting from operations to net cash provided by operating activities: Equity in undistributed (earnings) losses of subsidiaries ( 81,164 ) ( 64,300 ) ( 60,304 ) (Benefit) provision for credit losses ( 310 ) ( 353 ) ( 4,718 ) Depreciation and amortization 2,198 2,740 4,485 Change in deferred and other tax assets/liabilities, net ( 947 ) ( 1,780 ) ( 5,666 ) Net change in loan collateral in process of foreclosure 252 64 1,619 Gain on extinguishment of debt — — ( 2,204 ) Net realized gains on sale of investments — — ( 11,701 ) Stock-based compensation expense 4,713 3,476 2,261 Decrease (increase) in other assets 990 1,055 ( 1,150 ) Increase in deferred financing costs ( 1,437 ) ( 39 ) ( 1,504 ) Decrease in intercompany payables ( 778 ) ( 6,325 ) ( 11,649 ) (Decrease) increase in other liabilities ( 134 ) 5,430 ( 1,894 ) Net cash used for operating activities ( 21,538 ) ( 16,192 ) ( 38,317 ) CASH FLOWS FROM INVESTING ACTIVITIES Loans originated ( 1,612 ) ( 92 ) — Proceeds from principal receipts, sales, and maturities of loans and investments 2,057 723 28,552 Purchases of investments — — ( 90 ) Proceeds from sale and principal payments of loan collateral in process of foreclosure 954 3,697 666 Investment in subsidiaries ( 5,125 ) ( 4,750 ) ( 3,500 ) Dividends from subsidiaries 25,125 24,750 19,000 Net cash provided by investing activities 21,399 24,328 44,628 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from funds borrowed 51,500 — 51,400 Repayments of funds borrowed ( 33,000 ) — ( 51,155 ) Treasury stock repurchased — ( 20,619 ) — Dividends paid to shareholders ( 7,703 ) ( 7,543 ) — Payment of withholding taxes on net settlement of vested stock ( 768 ) — — Proceeds from the exercise of stock options 442 155 241 Net cash (used for) provided by financing activities 10,471 ( 28,007 ) 486 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 10,332 ( 19,871 ) 6,797 Cash and cash equivalents, beginning of period 20,669 40,540 33,743 Cash and cash equivalents, end of period $ 31,001 $ 20,669 $ 40,540 (18) VARIABLE INTEREST ENTITIES During the 2018 third quarter, the Company determined that Taxi Medallion Trust III, or Trust III, was a VIE. Trust III had historically been consolidated as a subsidiary of MFC, although it should have been consolidated under the variable interest model, since MFC was its primary beneficiary until October 31, 2018. Trust III was a VIE since the key decision-making authority rested in the servicing agreement (where MFC was the servicer for Trust III) rather than in the voting rights of the equity interests and as a result the decision-making rights were considered a variable interest. This conclusion was supported by a qualitative assessment that Trust III did not have sufficient equity at risk. Since the inception of Trust III, MFC had also been party to a limited guaranty which was considered a variable interest because, pursuant to the guaranty, MFC absorbed variability as a result of the on-going performance of the loans in Trust III. As of October 31, 2018, the Company determined that MFC was no longer the primary beneficiary of Trust III and accordingly deconsolidated the VIE, leading to a net gain of $ 25.3 million recorded as well as a new promissory note payable by MFC of $ 1.4 million issued in settlement of the limited guaranty. Subsequent to deconsolidation, the Company’s interest in Trust III was accounted for as an equity investment and had a value of $ 0 through its transfer to a third party in 2021. In addition, the Company remained the servicer of the assets of Trust III for a fee, until its disposition. (19) SUBSEQUENT EVENTS The Company has evaluated the effects of events that have occurred subsequent to December 31, 2023, through the date of financial statement issuance for potential recognition or disclosure. As of such date, there was one subsequent event that required disclosure. On February 28, 2024, MCI accepted a commitment from the SBA for $ 18.5 million in debenture financing with a ten-year term. MCI can draw funds under the commitment, in whole or in part, until September 30, 2028. In connection with the commitment, MCI paid the SBA a leverage fee of $ 0.2 million, with the remaining $ 0.4 million of the fee to be paid pro rata as MCI draws under the commitment. F- 35