[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company's unaudited consolidated financial statements for the period ended September 30, 2019, reflect its transition to Bank Holding Company Accounting from Investment Company Accounting effective April 2, 2018, resulting in the consolidation of subsidiaries like Medallion Bank and a strategic shift towards consumer lending, with total assets reaching $1.52 billion [Basis of Preparation](index=3&type=section&id=Basis%20of%20Preparation) The company transitioned to Bank Holding Company Accounting from Investment Company Accounting effective April 2, 2018, consolidating subsidiaries like Medallion Bank and shifting focus to consumer finance - Effective April 2, 2018, the Company withdrew its election to be regulated as a business development company (BDC) and began reporting under Bank Holding Company Accounting, which requires the consolidation of its subsidiaries, including Medallion Bank[10](index=10&type=chunk)[11](index=11&type=chunk)[15](index=15&type=chunk) - The company has strategically transitioned away from medallion lending to focus on its growing consumer finance portfolio, originated through Medallion Bank[12](index=12&type=chunk) - Total assets under management grew to **$1.649 billion** as of September 30, 2019, from **$1.522 billion** at the end of 2018[12](index=12&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) The unaudited consolidated financial statements present the company's financial position and performance, reflecting key balance sheet and income statement metrics for Q3 2019 and year-to-date Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Sep 30, 2019 ($ in thousands) | Dec 31, 2018 ($ in thousands) | | :--- | :--- | :--- | | Net loans receivable | 1,099,169 | 981,487 | | Total assets | 1,519,754 | 1,381,846 | | Deposits | 962,987 | 848,040 | | Total liabilities | 1,226,964 | 1,091,642 | | Total equity | 292,790 | 290,204 | Consolidated Statement of Operations Highlights (Unaudited) | Income Statement Item | Q3 2019 ($ in thousands) | Q3 2018 ($ in thousands) | Nine Months 2019 ($ in thousands) | | :--- | :--- | :--- | :--- | | Net interest income | 25,415 | 24,265 | 70,930 | | Provision for loan losses | 8,337 | 18,205 | 36,851 | | Net income (loss) attributable to Medallion | 4,975 | (4,697) | (1,297) | | Diluted net income (loss) per share | $0.20 | $(0.19) | $(0.05) | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes provide insights into loan portfolio composition, allowance for loan losses, nonaccrual loans, and accounting policy changes like CECL deferral and VIE deconsolidation Loan Portfolio Composition (Gross) | Loan Category | Sep 30, 2019 ($ in thousands) | % of Total | Dec 31, 2018 ($ in thousands) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Recreation | 706,393 | 62% | 587,038 | 58% | | Home improvement | 230,726 | 20% | 183,155 | 18% | | Commercial | 68,209 | 6% | 64,083 | 6% | | Medallion | 136,954 | 12% | 183,606 | 18% | | **Total Gross Loans** | **1,142,282** | **100%** | **1,017,882** | **100%** | Allowance for Loan Losses Activity (Nine Months Ended Sep 30, 2019) | Activity ($ in thousands) | Amount | | :--- | :--- | | Beginning Balance (Dec 31, 2018) | 36,395 | | Total Charge-offs | (39,248) | | Total Recoveries | 9,115 | | Net Charge-offs | (30,133) | | Provision for loan losses | 36,851 | | **Ending Balance (Sep 30, 2019)** | **43,113** | - Total nonaccrual loans decreased to **$27.1 million** (**2% of gross loans**) as of September 30, 2019, down from **$34.9 million** (**3% of gross loans**) at December 31, 2018[106](index=106&type=chunk) - The company will defer implementation of the new CECL credit loss standard to fiscal years beginning after December 15, 2022, as permitted for smaller reporting companies[93](index=93&type=chunk) - Effective October 31, 2018, the company deconsolidated the Taxi Medallion Loan Trust III (Trust III), a variable interest entity (VIE), as it was no longer determined to be the primary beneficiary[258](index=258&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=46&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's strategic shift from medallion lending to consumer finance, which now constitutes 84% of the net loan portfolio, with Q3 2019 results showing a return to profitability driven by higher net interest income and a lower provision for loan losses [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Q3 2019 vs. Q3 2018 Performance | Metric | Q3 2019 | Q3 2018 | | :--- | :--- | :--- | | Net Income (Loss) Attributable to Stockholders | $4,975,000 | $(4,697,000) | | Diluted EPS | $0.20 | $(0.19) | | Net Interest Income | $25,415,000 | $24,265,000 | | Provision for Loan Losses | $8,337,000 | $18,205,000 | | Net Interest Margin | 8.71% | 7.94% | - The improvement in net income for Q3 2019 was driven by a lower provision for loan losses, reflecting a smaller medallion portfolio and stable medallion values, and continued growth in the higher-yielding consumer lending segments[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - For the nine months ended September 30, 2019, the company recorded a net loss of **$1.3 million**, which included a one-time gain of **$4.1 million** on debt extinguishment[138](index=138&type=chunk)[354](index=354&type=chunk) [Loan Portfolio and Credit Quality](index=51&type=section&id=Loan%20Portfolio%20and%20Credit%20Quality) - The consumer loan portfolio (Recreation and Home Improvement) grew significantly, with total originations of **$351.8 million** in the first nine months of 2019[287](index=287&type=chunk) Loans 90+ Days Past Due as a % of Total Portfolio | Date | Percentage | | :--- | :--- | | Sep 30, 2019 | 0.7% | | Dec 31, 2018 | 2.0% | | Sep 30, 2018 | 1.3% | - The estimated weighted average loan-to-value ratio of the medallion loan portfolio was approximately **202%** as of September 30, 2019, an improvement from **220%** at year-end 2018[300](index=300&type=chunk) [Segment Performance](index=57&type=section&id=Segment%20Performance) - **Recreation Lending:** This segment remains the primary earnings driver, accounting for **75% of interest income** and generating **$7.1 million** in net income in Q3 2019[310](index=310&type=chunk)[313](index=313&type=chunk) - **Home Improvement Lending:** This segment continues to grow, contributing **$1.9 million** in net income for Q3 2019[317](index=317&type=chunk) - **Medallion Lending:** The segment recorded a net loss of **$4.2 million** in Q3 2019 due to continued non-accruals, charge-offs, and portfolio contraction, with New York City medallions representing **88%** of this portfolio[325](index=325&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk) [Liquidity and Capital Resources](index=70&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary sources of liquidity include brokered certificates of deposit from Medallion Bank, SBA debentures, and various credit facilities, with deposits constituting **81% of total debt** as of September 30, 2019[385](index=385&type=chunk)[390](index=390&type=chunk) - In 2019, the company enhanced liquidity by completing private placements of 8.25% unsecured notes, raising a total of **$36 million**[387](index=387&type=chunk) - The one-year cumulative interest rate gap was negative **$301.9 million**, or **25% of interest-rate sensitive assets**, indicating a liability-sensitive position in the short term[384](index=384&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=74&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company reports no material changes to its quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K for the year ended December 31, 2018 - There has been no material change in market risk disclosures from the company's 2018 Form 10-K[410](index=410&type=chunk) [Controls and Procedures](index=74&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2019, with no material changes to internal controls over financial reporting occurring during the quarter - The company's disclosure controls and procedures were evaluated and found to be effective as of September 30, 2019[411](index=411&type=chunk) - No changes in internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the company's internal control were identified during the quarter[412](index=412&type=chunk) [PART II—OTHER INFORMATION](index=75&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=75&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings incidental to its ordinary course of business, with management believing no pending or threatened proceedings will have a material adverse effect on its financial condition or results of operations - Management believes that no current legal proceedings are expected to have a material adverse impact on the company's financial condition or results[414](index=414&type=chunk) [Risk Factors](index=75&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 - No material changes in risk factors were reported compared to the 2018 Form 10-K[415](index=415&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company did not repurchase any of its shares during the third quarter of 2019, with approximately $22.9 million remaining authorized for future repurchases under the existing stock repurchase program - No shares were repurchased during the three months ended September 30, 2019, and the company has **$22,874,509** remaining under its authorized stock repurchase program[416](index=416&type=chunk) [Exhibits](index=76&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including a lease agreement amendment, CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and XBRL data files - The exhibits filed with this report include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL interactive data files[418](index=418&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37747 MEDALLION FINANCIAL CORP. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 04-3291176 (State of Incorporatio ...

Financial Data and Key Metrics Changes - The net portfolio decreased to $121 million, a 53% decrease from Q2 2018 and a 14% decrease from Q1 2019 [6][16] - The net loss for Q2 was $7.5 million or $0.31 per share, compared to a net loss of $14.6 million or $0.60 per share in the prior year [14] - Cash flow from operations increased to $19.3 million in Q2 2019 from $16.1 million in Q1 2019, a 20% increase [14] - The provision for Medallion loan losses was $8.2 million, compared to $5.3 million in Q1 2019 and $24.8 million in the prior year [16] Business Line Data and Key Metrics Changes - Medallion Bank originated $226.5 million in loans for recreational vehicles and home improvement, up from $217.9 million in the same period last year [9] - The net consumer portfolio stood at $863 million, a 9% increase from $792 million in Q1 2019 [10] - The commercial lending segment grew its portfolio by 18% quarter-over-quarter, with net income of $141,000 for Q2 [11][18] Market Data and Key Metrics Changes - The average interest rate on the consumer loan portfolio was 14.82%, slightly down from 14.94% in Q1 2019 [17] - The commercial lending segment's average interest rate was 13.75%, consistent with the previous quarter [18] Company Strategy and Development Direction - The company is focusing on strategic partnerships with financial technology companies to enhance its consumer portfolio [11][22] - The management is optimistic about the growth potential in consumer and commercial lending segments, expecting strong loan demand in the coming quarters [18][28] Management Comments on Operating Environment and Future Outlook - Management expressed confidence that losses from Medallion loans will continue to decrease in the upcoming quarters [24] - There is a positive sentiment in the industry regarding medallion prices, with expectations of recovery due to upcoming congestion pricing in New York [31][32] Other Important Information - The bank recorded a Tier 1 leverage ratio of 15.96% and a 35% efficiency ratio, indicating strong capital and operational efficiency [12][15] - The company is exploring additional products to complement its consumer portfolio [10] Q&A Session Summary Question: Can you expand on the strategic partnerships and expected outcomes? - Management highlighted the advantages of Utah ILCs for FinTech partnerships and expects to finalize a partnership by January [22][23] Question: How can provisioning for Medallion loans be forecasted? - Management noted that forecasting is challenging due to the unpredictable nature of losses but expressed optimism about decreasing losses moving forward [24] Question: What is the outlook on loan demand? - Management indicated strong demand across core business lines, with expectations of continued growth [28] Question: Any updates on medallion recovery? - Management mentioned ongoing settlement discussions with larger customers and a positive outlook for medallion prices [30][31] Question: What is the current status of Medallion valuations? - Management reported significant variability in medallion prices, with cash deals dropping to around $110,000 and finance deals reaching up to $300,000 [36][37]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37747 MEDALLION FINANCIAL CORP. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 04-3291176 (St ...

Financial Data and Key Metrics Changes - Medallion Financial recorded net interest income of $22.3 million for Q1 2019, with a net interest margin of 8.56%, up from 8.07% in the previous quarter and 6.96% in Q1 2018 [13][14] - Net income for Q1 2019 was $1.2 million or $0.05 per share, compared to a loss of $14.9 million or $0.62 per share in the prior year period [13][14] - The provision for medallion loan losses was $5.3 million in Q1 2019, marking a significant decrease from $62.7 million in Q1 2018 [14][15] Business Line Data and Key Metrics Changes - The medallion portfolio decreased to a net $140 million as of March 31, 2019, a 56% decrease from $319 million a year ago [6][15] - The consumer portfolio stood at $792 million, while the commercial portfolio was $55 million as of March 31, 2019 [11] - Net income before taxes for consumer and commercial segments was $8.8 million for Q1 2019, with consumer loan delinquencies over 90 days at 0.44% [10][15] Market Data and Key Metrics Changes - The medallion loans comprised 14% of net loans, down from 16% in the previous quarter and 28% a year ago [6] - The average interest rate on the consumer loan portfolio was 14.94%, slightly down from 15.06% in the previous quarter [15] - The commercial lending segment recorded net income of $226,000 for Q1 2019, down from $1.6 million in the previous quarter [16] Company Strategy and Development Direction - The company is focusing on consumer and commercial lending segments, exploring growth opportunities in these areas [5][10] - Medallion Financial aims to leverage the recent private placement of $30 million to support growth initiatives and potentially buy back debt at a discount [5][70] - The company is optimistic about the impact of congestion pricing in New York City, which may increase taxi usage and fares [7][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the stability of the medallion business and the potential positive effects of congestion pricing [22] - The company noted a downward trend in loan loss provisions, indicating improved operational performance [14][23] - Management highlighted the importance of personal guarantees and good documentation in their collection efforts, contributing to positive trends in recoveries [31][39] Other Important Information - The bank recorded a Tier 1 leverage ratio of 16.56%, indicating strong capitalization [11] - The efficiency ratio for the bank was reported at 38.65%, reflecting effective asset management [18] - The company is exploring strategic partnerships and new business lines to enhance growth potential [73] Q&A Session Summary Question: Operational trends with medallion and provision outlook - Management noted stability in the medallion business and positive sentiment regarding congestion pricing, with a provision of $5.3 million being the lowest in a long time [22][23] Question: Recovery of larger medallion borrowers - Management indicated that while recoveries are positive, significant recoveries may take 2-3 years to reflect in income due to GAAP accounting rules [24][41] Question: Demand on the consumer lending side - Demand is strong in both home improvement and RV/marine segments, with higher growth noted in RV/marine due to less competition [32] Question: Collection costs and future expectations - Collection costs are expected to be lumpy, but trends are moving positively with successful collection efforts [31] Question: Tax benefits and overall tax rate - A tax benefit of $600,000 was recorded due to charge-offs and a settlement, with a projected tax rate of 25% for the rest of the year [51][52]

Part I [Our Business](index=3&type=section&id=ITEM%201.%20OUR%20BUSINESS) Medallion Financial Corp. strategically transitioned from taxicab medallion lending to consumer finance, consolidating subsidiaries and adopting Bank Holding Company accounting - Effective April 2, 2018, the company withdrew its BDC election, consolidating subsidiaries and adopting **Bank Holding Company Accounting standards**[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) - The company is strategically transitioning from medallion lending to focus on its growing **consumer finance portfolio**[16](index=16&type=chunk)[222](index=222&type=chunk) Net Loans Receivable by Segment (as of Dec 31, 2018) | Segment | Loans (in thousands) | Allowance for Loan Loss (in thousands) | Net Loans Receivable (in thousands) | | :--- | :--- | :--- | :--- | | Recreation | $ 587,038 | $ 6,856 | $ 580,182 | | Home improvement | $ 183,155 | $ 1,796 | $ 181,359 | | Commercial | $ 64,083 | $ — | $ 64,083 | | Medallion | $ 183,606 | $ 27,743 | $ 155,863 | | **Total** | **$1,017,882** | **$ 36,395** | **$ 981,487** | [Our Market](index=4&type=section&id=Our%20Market) The company's lending activities are segmented into consumer, commercial, and medallion loans, with consumer loans being the largest at 77% of net loans receivable - Consumer loans (recreation and home improvement) grew to **77% of net loans receivable**, totaling **$761.5 million** at December 31, 2018[20](index=20&type=chunk) - Medallion loans decreased to **16% of net loans receivable** (**$155.9 million**) at year-end 2018, down from **28%** (**$388.0 million**) of the managed portfolio at year-end 2017[32](index=32&type=chunk) - Commercial loans constituted **7% of net loans receivable** (**$64.1 million**) as of December 31, 2018[29](index=29&type=chunk) [Our Strategy](index=7&type=section&id=Our%20Strategy) The company's core strategy focuses on leading in profitable niche markets through strong broker relationships, specialized financing, and disciplined underwriting - The company's core philosophy, "In niches there are riches," focuses on profitable markets for industry leadership[42](index=42&type=chunk) - In 2018, **100% of consumer loans** were generated through relationships with brokers and dealers[43](index=43&type=chunk) - The company employs disciplined underwriting and rigorous portfolio monitoring, emphasizing credit and risk analysis[45](index=45&type=chunk) [Loan/Investment Activity](index=9&type=section&id=Loan%2FInvestment%20Activity) Net loans receivable decreased to $981.5 million by year-end 2018 due to sales and losses, with funding diversified across bank loans, SBA debentures, and brokered CDs Loan/Investment Portfolio Activity (in thousands) | Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net investments at beginning of year | $1,380,054 | $1,517,592 | $1,501,555 | | Loans/investments originated | $428,510 | $475,465 | $738,238 | | Repayments of loans/investments | ($261,383) | ($270,133) | ($655,071) | | Consumer loans sold to third parties | ($100,920) | ($221,447) | ($97,511) | | Net realized losses on loans/investments | ($42,305) | ($79,264) | ($34,888) | | Net loans receivable/investments at end of year | $981,487 | $1,380,054 | $1,517,592 | Sources of Funds (as of Dec 31, 2018) | Source | Amount Outstanding (in thousands) | Average Interest Rate | | :--- | :--- | :--- | | Bank loans | $ 59,615 | 4.55% | | Preferred securities | $ 33,000 | 4.86% | | Retail notes | $ 33,625 | 9.00% | | SBA debentures and borrowings | $ 80,099 | 3.40% | | Brokered CDs & other funds borrowed | $ 848,040 | 2.14% | | Other borrowings | $ 7,649 | 2.00% | | **Total Debt Outstanding** | **$ 1,062,028** | | [Regulation](index=12&type=section&id=REGULATION) The company operates under extensive regulation, including an exception from the 1940 Act, with Medallion Bank subject to FDIC and Utah DFI oversight, and SBIC subsidiaries regulated by the SBA - The company operates under an exception from the **Investment Company Act of 1940** (Section 3(c)(6)) for banking and specific lending activities[68](index=68&type=chunk) - Medallion Bank is subject to **FDIC and Utah DFI regulation**, including **U.S. Basel III capital rules**, requiring a **Tier 1 leverage ratio of not less than 15%**[69](index=69&type=chunk)[72](index=72&type=chunk)[79](index=79&type=chunk) - Three subsidiaries are licensed as **SBICs** and are subject to **SBA regulations**, including limits on interest rates, investment types, and conflicts of interest[84](index=84&type=chunk)[86](index=86&type=chunk)[89](index=89&type=chunk) [Risk Factors](index=18&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from concentrated consumer lending, declining taxicab medallion values, reliance on brokered deposits, and extensive regulatory oversight - The business is heavily concentrated in consumer lending, making it susceptible to **macroeconomic conditions** and increased regulation[99](index=99&type=chunk) - Increased competition from ridesharing apps has materially impacted the taxicab industry, leading to **reduced medallion values** and **increased loan delinquencies**[106](index=106&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - The company relies on brokered deposits for funding, contingent on Medallion Bank remaining **"well-capitalized"** under FDIC regulations[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - The company operates in a highly regulated environment, with oversight from the **FDIC, Utah DFI, and SBA**, subject to laws like the Dodd-Frank Act[134](index=134&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk) [Properties](index=36&type=section&id=ITEM%202.%20PROPERTIES) The company leases all operational office spaces, including its New York City headquarters and Medallion Bank's Salt Lake City office - The company leases all operational office spaces, including its New York City headquarters (lease expiring April 2027) and Medallion Bank's Salt Lake City office (lease expiring November 2023)[201](index=201&type=chunk) [Legal Proceedings](index=36&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in routine legal proceedings, with a 2017 stockholder derivative action dismissed with prejudice in December 2018 - A stockholder derivative action (Shields v. Murstein, et al.) filed in 2017 was **dismissed with prejudice** on December 17, 2018[203](index=203&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on NASDAQ under 'MFIN', with no dividends paid since 2016 and no repurchases in Q4 2018 - The company's common stock is traded on **NASDAQ** under the symbol **"MFIN"**[207](index=207&type=chunk) - No dividends have been paid since **2016**, and the company does not anticipate paying them, retaining earnings for growth[208](index=208&type=chunk) [Selected Financial Data](index=38&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents consolidated financial data, distinguishing between Bank Holding Company accounting for 9M 2018 and Investment Company accounting for prior periods Selected Financial Data (Bank Holding Company Accounting - 9 Months Ended Dec 31, 2018) | Metric (in thousands, except per share) | Value | | :--- | :--- | | Net interest income | $ 71,987 | | Provision for loan losses | $ 59,008 | | Net loss after taxes | $ (10,172) | | Net loss per share | $ (0.42) | | Total assets | $ 1,381,846 | | Net loans receivable | $ 981,487 | | Total borrowings | $ 1,062,028 | | Total equity | $ 290,204 | Selected Financial Data (Investment Company Accounting) | Metric (in thousands, except per share) | 3 Months Ended Mar 31, 2018 | Year Ended Dec 31, 2017 | Year Ended Dec 31, 2016 | | :--- | :--- | :--- | :--- | | Net investment income (loss) after taxes | $ (3,230) | $ (7,121) | $ 119 | | Net increase (decrease) in net assets | $ (14,874) | $ 278 | $ 23,515 | | Per share increase (decrease) in net assets | $ (0.62) | $ 0.01 | $ 0.97 | | Total assets | $ 616,710 | $ 635,522 | $ 689,377 | | Total shareholders' equity | $ 272,437 | $ 287,159 | $ 286,096 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the strategic shift to consumer finance and accounting changes, reporting a $10.2 million net loss for 9M 2018 due to loan loss provisions - The company's strategic focus is on its growing **consumer finance business** through Medallion Bank, with consumer loans representing **77% of the loan portfolio** as of December 31, 2018[222](index=222&type=chunk) - Effective April 2, 2018, the company changed its accounting from Investment Company to **Bank Holding Company standards**, consolidating subsidiaries like Medallion Bank[228](index=228&type=chunk)[230](index=230&type=chunk) - For the nine months ended December 31, 2018, the company reported a **net loss of $10.2 million**, largely due to a **$59.0 million provision for loan losses**[315](index=315&type=chunk)[316](index=316&type=chunk) - In Q4 2018, the company deconsolidated Taxi Medallion Loan Trust III, resulting in a recorded **gain of $25.3 million**[231](index=231&type=chunk)[318](index=318&type=chunk) [Critical Accounting Policies](index=43&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Critical accounting policies involve significant judgment for Allowance for Loan Losses and Medallion Loan Collateral Valuation, using historical data and discounted cash flow models - The Allowance for Loan Losses is based on historical loss rates and collateral values, with specific allowances required for **medallion loans 90+ days delinquent**[234](index=234&type=chunk)[236](index=236&type=chunk) - Due to low market activity, taxi medallion collateral is valued using recent market transfers and a **discounted cash flow model**[239](index=239&type=chunk) [Segment Results](index=53&type=section&id=SEGMENT%20RESULTS) For 9M 2018, Recreation Lending was the primary profit driver, while Medallion Lending recorded a significant net loss due to loan loss provisions Segment Net Income (Loss) (9 Months Ended Dec 31, 2018) | Segment | Net Income (Loss) (in thousands) | | :--- | :--- | | Recreation Lending | $ 23,945 | | Home Improvement Lending | $ 3,644 | | Commercial Lending | $ 2,697 | | Medallion Lending | $ (27,565) | | RPAC | $ (3,242) | | Corporate and Other | $ (7,344) | - The Recreation Lending segment accounted for **71% of the company's interest income** for the nine-month period[277](index=277&type=chunk) - The Medallion Lending segment's significant loss was driven by a **$41.4 million provision for loan losses**[294](index=294&type=chunk) [Consolidated Results of Operations](index=61&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated results show a $10.2 million net loss for 9M 2018 under Bank Holding Company accounting, primarily due to loan loss provisions Net Income (Loss) / Change in Net Assets (in thousands) | Period | Accounting Standard | Net Income (Loss) / Change in Net Assets | | :--- | :--- | :--- | | 9 Months Ended 12/31/18 | Bank Holding Company | $ (10,172) | | 3 Months Ended 03/31/18 | Investment Company | $ (14,874) | | Year Ended 12/31/17 | Investment Company | $ 278 | | Year Ended 12/31/16 | Investment Company | $ 23,515 | [Asset/Liability Management](index=65&type=section&id=ASSET%2FLIABILITY%20MANAGEMENT) The company manages interest rate risk with a negative one-year cumulative interest rate gap of $232.3 million, funding operations through diverse debt sources - The company had a **negative one-year cumulative interest rate gap of ($232.3) million**, or **(21%) of interest rate sensitive assets**, as of December 31, 2018[355](index=355&type=chunk)[357](index=357&type=chunk) - A hypothetical immediate **1% increase in interest rates** would result in an estimated annualized **increase to net income of $549,000**[365](index=365&type=chunk)[379](index=379&type=chunk) Total Debt Outstanding by Source (as of Dec 31, 2018) | Source | Balance (in thousands) | Percentage | | :--- | :--- | :--- | | Deposits | $ 848,040 | 80% | | SBA debentures and borrowings | $ 80,099 | 7% | | Notes payable to banks | $ 59,615 | 6% | | Retail notes | $ 33,625 | 3% | | Preferred securities | $ 33,000 | 3% | | Other borrowings | $ 7,649 | 1% | | **Total** | **$1,062,028** | **100%** | [Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Primary market risks include interest rate fluctuations and portfolio valuations, with a hypothetical 1% rate increase estimated to raise annualized net income by $549,000 - The principal types of market risk are identified as **fluctuations in interest rates and portfolio valuations**[377](index=377&type=chunk) - A hypothetical immediate **1% increase in interest rates** would increase annualized **net income by approximately $549,000** as of December 31, 2018[379](index=379&type=chunk) [Controls and Procedures](index=71&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with an unqualified audit opinion - Management concluded that **disclosure controls and procedures were effective** as of December 31, 2018[382](index=382&type=chunk) - Management assessed **internal control over financial reporting as effective** as of December 31, 2018, using the COSO framework[386](index=386&type=chunk) - Mazars USA LLP issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2018[389](index=389&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=75&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Definitive Proxy Statement - This section is **incorporated by reference** from the company's 2019 Definitive Proxy Statement[397](index=397&type=chunk) [Executive Compensation](index=75&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the 2019 Definitive Proxy Statement - This section is **incorporated by reference** from the company's 2019 Definitive Proxy Statement[397](index=397&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=75&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information on security ownership and equity compensation plans is incorporated by reference from the 2019 Definitive Proxy Statement - This section is **incorporated by reference** from the company's 2019 Definitive Proxy Statement[398](index=398&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=75&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on related party transactions and director independence is incorporated by reference from the 2019 Definitive Proxy Statement - This section is **incorporated by reference** from the company's 2019 Definitive Proxy Statement[398](index=398&type=chunk) [Principal Accountant Fees and Services](index=75&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information regarding principal accountant fees and services is incorporated by reference from the 2019 Definitive Proxy Statement - This section is **incorporated by reference** from the company's 2019 Definitive Proxy Statement[399](index=399&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=75&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the consolidated financial statements, schedules, and various exhibits filed as part of the Form 10-K report - This section contains the **index to the financial statements (F-1)** and a list of all exhibits filed with the Form 10-K[399](index=399&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)

Financial Data and Key Metrics Changes - Medallion Financial recorded net interest income of $23 million for Q4 2018, with a full-year net interest income of $98.2 million [16] - Net income for Q4 was $9.2 million or $0.38 per share, compared to a net loss of $4.7 million or $0.19 per share in Q3 [17] - The provision for medallion loan losses was $3.4 million in Q4, reflecting a reversal of $8.2 million of reserves due to the deconsolidation of Trust III [17][18] Business Line Data and Key Metrics Changes - The net medallion portfolio decreased to $156 million as of December 31, 2018, a 60% decrease from $388 million at the end of 2017 [9][19] - The consumer and commercial lending segments generated net income before taxes of $41 million for the nine months ending December 31, 2018, and $11.2 million for Q4 [12] - The average interest rate for the consumer loans portfolio was 15.06% in Q4, slightly down from 15.18% in Q3 [20] Market Data and Key Metrics Changes - Taxi medallion loans comprised 16% of net loans at year-end 2018, down from 28% at the end of 2017 [8] - The TLC reported 810 total medallion transfers for 2018, compared to 117 in 2017, indicating greater liquidity and confidence in the market [10] Company Strategy and Development Direction - The company is transitioning away from medallion lending to focus on more profitable consumer and commercial segments [7] - Medallion Bank is expected to continue growing at over 20% per year, with a focus on maintaining high ROEs [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medallion market, citing increased medallion transfers and potential regulatory support from New York City [28][30] - The company anticipates continued recoveries from delinquent loans, although the amounts may vary [31][32] Other Important Information - The bank's Tier 1 capital leverage ratio was 15.85% at the end of 2018, up from 14.50% at the end of 2017, indicating strong capitalization [15] - The company has reduced its medallion-related debt from $252 million at the end of 2015 to $60 million at year-end 2018 [22] Q&A Session Summary Question: Utilization rate in the medallion portfolio and NYC regulations - Management noted solid business with over 90% occupancy rates for fleet operators and increased medallion transfers from 100 in 2017 to 800 in 2018 [26][27] Question: Recovery outlook - Management indicated that while recoveries may not be as high next quarter, many delinquent customers are making payments to avoid losing their medallions [31][32] Question: Seasonality in sponsorship and race winnings - The racing season typically runs from February to November, with revenues peaking in Q2 and Q3, but operating at breakeven [34] Question: Capital uses in Medallion Bank - The focus is on retaining capital at the bank level due to high ROEs and growth potential [38] Question: Reserve for the medallion portfolio - The reserve for medallion loans at year-end was approximately $27.7 million, with no specific reserves [43] Question: Opportunities for deconsolidation - Management mentioned potential opportunities for deconsolidation with FreshStart Trust, estimated at about $30 million [68] Question: Credit quality in consumer lending - Management attributed robust credit quality to good management and underwriting practices, with low delinquencies [77][78]