We, Medallion
Financial Corp. or the Company, are a commercial finance company, organized as a Delaware corporation, that includes Medallion Bank, our primary operating subsidiary. Effective April 2, 2018, following authorization by our shareholders, we
withdrew our previous election to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. Prior to such time, we were
a closed-end, non-diversified management
investment company that had elected to be treated as a BDC under the 1940 Act.
As a result of this change in status, commencing with the three months ended June 30, 2018:
In accordance with FASB Accounting Standards Codification (ASC) Topic 946 Financial Services Investment Company, we are making
this change to our financial reporting prospectively, and not restating or revising periods prior to our change in status to a
non-investment
company effective April 2, 2018. Accordingly, in this report
we refer to both accounting in accordance with US generally accepted accounting principles (GAAP) applicable to bank holding companies (Bank Holding Company Accounting), which applies commencing April 2, 2018, and to that applicable to
investment companies under the 1940 Act (Investment Company Accounting), which applies to prior periods.
We are a commercial finance company that historically has had a leading position in originating, acquiring, and
servicing loans that finance taxicab medallions and various types of commercial businesses. Recently, our strategic growth has been through Medallion Bank, a wholly-owned subsidiary of ours, which originates consumer loans for the purchase of
recreational vehicles, boats, and trailers and to finance small-scale home improvements. Since Medallion Bank acquired a consumer loan portfolio and began originating consumer loans in 2004, it has increased its consumer loan portfolio at a compound
annual growth rate of 17% (20% if there had been no loan sales during 2016 and 2017). In January 2017, we announced our plans to transform our overall strategy. We are transitioning away from medallion lending and placing our strategic focus on our
growing consumer finance portfolio. Total assets under management were $1,561,000,000 as of June 30, 2018, and were $1,593,000,000 and $1,606,000,000 as of December 31, 2017 and June 30, 2017, and have grown at a compound annual
growth rate of 10% from $215,000,000 at the end of 1996. Since our initial public offering in 1996, we have paid/declared distributions in excess of $263,060,000 or $14.66 per share.
We conduct our business through various wholly-owned subsidiaries including:
Our other consolidated subsidiaries are comprised of Medallion Fine Art, Inc., Medallion Taxi
Media, Inc.,
CDI-LP
Holdings, Inc., and Medallion Motorsports, LLC, the managing member of RPAC Racing LLC, or RPAC. In addition, we make both marketable and nonmarketable equity investments, primarily as
a function of our mezzanine lending business.
The financial information is divided into two sections. The first section, Item 1,
includes our unaudited consolidated financial statements including related footnotes. The second section, Item 2, consists of Managements Discussion and Analysis of Financial Condition and Results of Operations for the quarter ended
June 30, 2018.
Our consolidated balance sheet as of June 30, 2018, and the related consolidated statements of operations,
consolidated statements of other comprehensive loss, consolidated statement of stockholders equity, and cash flows for the quarter then ended included in Item 1 have been prepared by us, without audit, pursuant to the rules and regulations of
the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the US have been condensed or omitted pursuant to such rules and regulations. In
the opinion of management, the accompanying consolidated financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly our consolidated financial position and results of operations. The results
of operations for the quarter ended June 30, 2018 may not be indicative of future performance. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form
10-K
for the year ended December 31, 2017.
The accompanying notes should be read in conjunction with these consolidated financial statements.
The accompanying notes
should be read in conjunction with these consolidated financial statements.
The accompanying notes should be read in conjunction with these consolidated financial statements.
The accompanying notes should be read in conjunction with
these consolidated financial statements.
The accompanying notes should be read in conjunction with these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018
(1) ORGANIZATION OF
MEDALLION FINANCIAL CORP. AND ITS SUBSIDIARIES
Medallion Financial Corp. (the Company) is a commercial 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, a Federal Deposit Insurance Corporation (FDIC) insured industrial bank, that originates consumer loans, raises deposits, and conducts other banking activities. Medallion 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. Medallion Bank was initially formed for the primary purpose of originating commercial loans in three categories: 1) loans to finance the purchase of
taxicab medallions, 2) asset-based commercial loans, and 3) SBA 7(a) loans. The loans are marketed and serviced by Medallion Banks affiliates that have extensive prior experience in these asset groups. Subsequent to its formation, Medallion
Bank began originating consumer loans to finance the purchases of RVs, boats, and other related items, and to finance small scale home improvements. The Company also conducts business through Medallion Funding LLC (MFC), a Small Business Investment
Company (SBIC) which originates and services taxicab medallion and commercial loans.
The Company also conducts business through its
subsidiaries, Medallion Capital, Inc. (MCI), an SBIC which conducts a mezzanine financing business, and Freshstart Venture Capital Corp. (FSVC), an SBIC which originates and services taxicab medallion and commercial loans. MFC, MCI, and FSVC, as
SBICs, are regulated by the Small Business Administration (SBA). MCI and FSVC are financed in part by the SBA.
The Company has a
controlling ownership stake in Medallion Motorsports, LLC., the primary owner of RPAC Racing, LLC (RPAC), a professional car racing team that competes in the Monster Energy NASCAR Cup Series, which is also consolidated with the Company.
The Company formed a wholly-owned subsidiary, Medallion Servicing Corporation (MSC), to provide loan services to Medallion Bank. The Company
has assigned all of its loan servicing rights for Medallion Bank, which consists of servicing taxi medallion loans originated by Medallion Bank, to MSC, which bills and collects the related service fee income from Medallion Bank, and is allocated
and charged by the Company for MSCs share of these servicing costs.
MFC established a wholly-owned subsidiary, Taxi Medallion Loan
Trust III (Trust III), for the purpose of owning medallion loans originated by MFC or others. Trust III is a separate legal and corporate entity with its own creditors who, in any liquidation of Trust III, will be entitled to be satisfied out of
Trust IIIs assets prior to any value in Trust III becoming available to Trust IIIs equity holders. The assets of Trust III, aggregating $72,462,000 at June 30, 2018, 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 Trust III. Trust IIIs loans are serviced by MFC. As of June 30, 2018, Trust III had a deficit of $26,590,000, as a result of losses taken
on the medallion loans in Trust III. This amount exceeded our maximum exposure to Trust III, which is solely due to a limited guarantee by MFC of $6,065,000, by $20,525,000. Due to technical consolidation accounting rules, we are required to record
these losses, even though we are under no obligation to cover them financially. The Company is exploring alternative approaches to this investment to allow for full or partial recovery of these amounts as well as to not incur additional losses in
this entity going forward. There can be no assurance that the Company will be able to do so.
The Company established a wholly-owned
subsidiary, Medallion Financing Trust I (Fin Trust) for the purpose of issuing unsecured 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 Trusts assets prior to any value in Fin Trust becoming available to Fin Trusts equity holders. The assets of Fin Trust, aggregating $36,143,000 at June 30, 2018, 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.
MFC, through several wholly-owned subsidiaries (together, Medallion Chicago), purchased $8,689,000 of City of Chicago taxicab medallions out
of foreclosure, which are leased to fleet operators while being held for sale. The 159 medallions are carried at a net realizable value of $5,535,000 on the Companys consolidated balance sheet at June 30, 2018 compared to fair value of
$7,450,000 and $9,510,000 at December 31, 2017 and June 30, 2017.
Page 14 of 97
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Change to Bank Holding Company Accounting
As described above, effective April 2, 2018, the Company withdrew its previous election to be regulated as a BDC under the 1940 Act. Prior
to such time, the Company was
a closed-end, non-diversified management
investment company that had elected to be treated as a BDC under the 1940 Act.
Accordingly, commencing with the three months ended June 30, 2018, the Company (which now consolidates the results of Medallion Bank and its other subsidiaries) reports in accordance with Bank Holding Company Accounting; periods prior to such
change in status are reported in accordance with Investment Company Accounting. Significant accounting policies that differ between such periods are described in more detail below.
Use of Estimates
The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the US (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 managements 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 other receivables, investments other than securities, loans held for sale, 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 commencing
with the three months ended June 30, 2018. All significant intercompany transactions, balances, and profits (losses) have been eliminated in consolidation. Prior to the Companys election to withdraw from being regulated as a BDC under the
1940 Act effective April 2, 2018, Medallion Bank and various other Company subsidiaries were not consolidated with the Company prior to the three months ended June 30, 2018, and as such see Note 6 for the presentation of financial
information for Medallion Bank and other controlled subsidiaries for such prior periods.
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.
Fair Value of Assets and Liabilities
The Company follows FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, (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 entitys 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
Equity investments of $10,773,000 at June 30, 2018, comprised mainly of nonmarketable stock and stock warrants, are recorded at cost and
are evaluated for impairment periodically. Prior to April 2, 2018, equity investments were recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation. The fair value of investments that had no ready
market were determined in good faith by the Board of Directors, based upon the financial condition and operating performance of the underlying investee companies as well as general market trends for businesses in the same industry. Included in the
equity investments were
non-marketable
securities of $9,521,000 at December 31, 2017.
Investment Securities (Bank Holding Company Accounting)
The Company follows FASB ASC Topic 320, InvestmentsDebt and Equity Securities (ASC 320), which requires that all applicable investments
in equity securities with readily determinable fair values, and 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
Page 15 of 97
totaled $212,000, and $21,000 was amortized to interest income for the three months ended June 30, 2018. Medallion Bank, a previously unconsolidated subsidiary under Investment Company
Accounting for the period, had net premium on investment securities of $265,000, and $20,000 and $40,000 was amortized to interest income for the three and six months ended June 30, 2017. Refer to Note 3 for more details. ASC 320 further
requires
that held-to-maturity securities
be reported at amortized cost and
available-for-sale
securities be reported at fair value, with unrealized gains and losses excluded from earnings at the date of the financial statements, and reported in
accumulated other comprehensive income (loss) as a separate component of shareholders 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 shareholders equity, which were recorded net of the income tax effect, will be reversed
.
Other Investment Valuation (Investment Company Accounting)
Prior to April 2, 2018, under the 1940 Act, the Companys investment in Medallion Bank, as a wholly owned portfolio investment, was
subject to quarterly assessments of fair value. The Company conducted a thorough valuation analysis, and also received an opinion regarding the valuation from an independent third party to assist the Board of Directors in its determination of the
fair value of Medallion Bank on at least an annual basis. The Companys analysis included factors such as various regulatory restrictions that were established at Medallion Banks inception, by the FDIC and State of Utah, and also by
additional regulatory restrictions, such as the prior moratorium imposed by the Dodd-Frank Act on the acquisition of control of an industrial bank by a commercial firm (a company whose gross revenues are primarily derived from
non-financial
activities) which expired in July 2013 and the lack of any new charter issuances since the moratoriums expiration. Because of these restrictions and other factors, the Companys Board of
Directors had previously determined that Medallion Bank had little value beyond its recorded book value. As a result of this valuation process, the Company had previously used Medallion Banks actual results of operations as the best estimate
of changes in fair value, and recorded the results as a component of unrealized appreciation (depreciation) on investments. In the 2015 second quarter, the Company first became aware of external interest in Medallion Bank and its portfolio assets at
values in excess of their book value. Expression of interest in Medallion Bank from both investment bankers and interested parties has continued. The Company incorporated these new factors in the Medallion Banks fair value analysis and the
Board of Directors determined that Medallion Bank had a fair value in excess of book value. In addition, in the 2016 third quarter there was a court ruling involving a marketplace lender that the Company believes heightens the interest of
marketplace lenders to acquire or merge with Utah industrial banks. The Company also engaged a valuation specialist to assist the Board of Directors in their determination of Medallion Banks fair value, and this appreciation of $15,500,000 was
thereby recorded in 2015, and additional appreciation of $128,918,000 was recorded in 2016, $7,849,000 was recorded in 2017, and $39,826,000 was recorded in the first quarter of 2018. Refer to Note 6 for additional details.
At December 31, 2017, there were
non-marketable
securities of $302,147,000 related to portfolio
investments in controlled subsidiaries that were not consolidated with the Company. Because of the inherent uncertainty of valuations, the Board of Directors estimates of the values of the investments may differ significantly from the values
that would have been used had a ready market for the investments existed, and the differences could be material.
Loans
The Companys 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. Effective April 2, 2018, the existing loan balances were recharged at fair value in connection with the change in
reporting, and balances, net of reserves, became the fair value opening balances.
Loan origination fees and certain direct origination
costs are deferred and recognized as an adjustment to the yield of the related loans. At June 30, 2018 and December 31, 2017, net loan origination costs were $13,696,000 and $90,000 ($11,187,000 when combined with Medallion Bank). Net
amortization to income for the three months ended June 30, 2018 and 2017 was $1,040,000 and $18,000 ($852,000 when combined with Medallion Bank), and was $1,053,000 ($1,918,000 when combined with Medallion Bank) and $38,000 ($1,701,000 when
combined with Medallion Bank) for the comparable six month periods.
Interest income is recorded on the accrual basis. Taxicab 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 portfolio
has different characteristics, typified by a larger number of lower dollar loans that have similar characteristics. A loan is considered to be impaired, or nonperforming, when based on current information and events, it is likely the Company will be
unable 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. These 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
Page 16 of 97
uncollectible, or when they become 120 days past due, whichever occurs first, at which time appropriate collection and recovery efforts against both the borrower and the underlying collateral are
initiated. For the recreational consumer 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 to write 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 a recovery. Total loans more than 90 days past due were $15,161,000 at June 30, 2018, or 1.32% of the total loan portfolio, compared to $60,450,000, or
18.9% at December 31, 2017.
Loan collateral in process of foreclosure primarily includes taxicab medallion loans that have reached
120 days past due and have been charged down to their net realizable value, in addition to consumer repossessed collateral in the process of being sold. The taxicab medallion loan component reflects that the collection activities on the loans have
transitions from working with the borrower to the liquidation of the collateral securing the loans.
The Company had $126,052,000 and
$183,529,000 of net loans pledged as collateral under borrowing arrangements at June 30, 2018 and December 31, 2017.
The
Company accounted for its sales of loans in accordance with FASB Accounting Standards Codification Topic 860, Transfers and Servicing (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 $26,583,000 at June 30, 2018 and $338,867,000 at December 31, 2017, which included $311,988,000 of loans serviced for Medallion Bank. The Company had evaluated the servicing aspect of its business in accordance with FASB ASC
860, most of which relates to servicing assets held by Medallion Bank, and determined that no material servicing asset or liability existed as of June 30, 2018 and December 31, 2017. The Company assigned its servicing rights to the
Medallion Bank portfolio to MSC. The costs of servicing were allocated to MSC by the Company, and the servicing fee income was billed to and collected from Medallion Bank by MSC.
Allowance for Loan Losses (Bank Holding Company Accounting)
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the
collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, prevailing economic
conditions, and excess concentration risks. In analyzing the adequacy of the allowance for loan losses, the Company uses historical delinquency and actual loss rates with a one year lookback period for consumer loans. For commercial loans deemed
nonperforming, the historical loss experience and other projections are looked at, and for medallion loans, non performing loans are valued at the median sales price over the most recent quarter. This evaluation is inherently subjective, as it
requires estimates that are susceptible to significant revision as more information becomes available. As a result, reserves are recorded above the calculated amounts as an additional buffer against future losses. Credit losses are deducted from the
allowance and subsequent recoveries are added back to the allowance.
Unrealized Appreciation (Depreciation) and Realized Gains
(Losses) on Investments (Investment Company Accounting)
Prior to April 2, 2018, under Investment Company Accounting, the
Companys loans, net of participations and any unearned discount, were considered investment securities under the 1940 Act and recorded at fair value. As part of the fair value methodology, loans were valued at cost adjusted for any unrealized
appreciation (depreciation). Since no ready market existed for these loans, the fair value was determined in good faith by the Board of Directors. In determining the fair value, the Board of Directors considered factors such as the financial
condition of the borrower, the adequacy of the collateral, individual credit risks, cash flows of the borrower, market conditions for loans (e.g. values used by other lenders and any active bid/ask market), historical loss experience, and the
relationships between current and projected market rates and portfolio rates of interest and maturities. Investments other than securities, which represent collateral received from defaulted borrowers, were valued similarly.
Under Investment Company Accounting, the Company recognized unrealized appreciation (depreciation) on investments as the amount by which the
fair value estimated by the Company is greater (less) than the cost basis of the investment portfolio. Realized gains or losses on investments are generated through sales of investments, foreclosure on specific collateral, and writeoffs of loans or
assets acquired in satisfaction of loans, net of recoveries. Unrealized appreciation on investments was $139,700,000, and $110,374,000 as of December 31, 2017 and June 30, 2017. Refer to Note 5 for additional details.
Page 17 of 97
Goodwill and Intangible Assets
The Companys goodwill and intangible assets arose as a result of the excess of fair value over book value for several of the
Companys previously unconsolidated portfolio investment companies as of April 2, 2018. This fair value was brought forward under the Companys new Bank Holding Company 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 impairment testing on an annual basis. Intangible assets are amortized over their useful
life of approximately 20 years. See below for detailed information on the fair value allocation as of April 2, 2018.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value as of
March 31, 2018
|
|
|
Allocation as
of April 2,
2018
|
|
Medallion Bank
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Net loans
(1)
|
|
$
|
|
|
|
$
|
890,000
|
|
Other assets
|
|
|
|
|
|
|
130,393
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Funds borrowed and other liabilities
|
|
|
|
|
|
|
(853,650
|
)
|
|
|
|
|
|
|
|
|
|
Total fair value excluding goodwill and intangibles
|
|
|
|
|
|
|
166,743
|
|
Goodwill
|
|
|
|
|
|
|
150,803
|
|
Intangibles
|
|
|
|
|
|
|
28,900
|
|
|
|
|
|
|
|
|
|
|
Total fair value
(2)
|
|
$
|
346,446
|
|
|
$
|
346,446
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes $12,387 of premiums associated with the loan portfolio.
|
(2)
|
Includes $26,303 of preferred stock held by the US Treasury. See Note 17 for details.
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value as
of March 31,
2018
|
|
|
Allocation as
of April 2,
2018
|
|
RPAC Racing LLC
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
|
$
|
1,647
|
|
Net fixed assets
|
|
|
|
|
|
|
774
|
|
Race cars and parts, net
|
|
|
|
|
|
|
203
|
|
Race cars held for sale
|
|
|
|
|
|
|
916
|
|
Other assets
|
|
|
|
|
|
|
1,902
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
|
|
|
|
(6,531
|
)
|
Notes payable
(1)
|
|
|
|
|
|
|
(27,220
|
)
|
Other liabilities
|
|
|
|
|
|
|
(2,275
|
)
|
|
|
|
|
|
|
|
|
|
Total fair value excluding goodwill and intangibles
|
|
|
|
|
|
|
(30,584
|
)
|
Intangibles
|
|
|
|
|
|
|
31,779
|
|
|
|
|
|
|
|
|
|
|
Total fair value
(2)
|
|
$
|
1,195
|
|
|
$
|
1,195
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes $20,177 due to the Company and its affiliates as of March 31, 2018.
|
(2)
|
Fair value as of March 31, 2018 represents the Companys investment in RPAC Racing LLC series D
units.
|
Page 18 of 97
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
$135,000 and $24,000 for the quarters ended June 30, 2018 and 2017, and was $158,000 and $49,000 for the comparable six months.
Deferred Costs
Deferred
financing costs, included in other assets, represents costs associated with obtaining the Companys 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 $541,000 and $240,000 ($591,000 had Medallion Bank been consolidated) for the quarters ended June 30, 2018 and 2017, and was $764,000 and $468,000 ($1,164,000 had Medallion Bank been consolidated) for the
comparable six months, recorded as interest expense. 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 are amortized against income over an appropriate period, or written off. The amount on the Companys balance sheet for these purposes was
$5,012,000, $3,070,000 ($5,011,000 had Medallion Bank been consolidated), and $3,567,000 ($5,623,000 had Medallion Bank been consolidated) as of June 30, 2018, December 31, 2017 and June 30, 2017.
Income Taxes
Income
taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes (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 our 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. Under ASC 740, forming a conclusion that a valuation allowance is not needed is difficult when there is negative
evidence, such as cumulative losses in recent years. 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 (Loss) Per Share (EPS)
Basic earnings (loss) per share are computed by dividing net income (loss)/net increase (decrease) in net assets resulting from operations
available to common shareholders 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 giving consideration to the weighted average dilutive effect of the Companys 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands, except per share
data)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net loss/ net decrease in net assets resulting from operations available to common
shareholders
|
|
($
|
14,647
|
)
|
|
($
|
4,797
|
)
|
|
($
|
29,521
|
)
|
|
($
|
3,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding applicable to basic EPS
|
|
|
24,230,815
|
|
|
|
23,925,567
|
|
|
|
24,193,057
|
|
|
|
23,909,344
|
|
Effect of dilutive stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average common shares outstanding applicable to diluted EPS
|
|
|
24,230,815
|
|
|
|
23,925,567
|
|
|
|
24,193,057
|
|
|
|
23,909,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
($
|
0.60
|
)
|
|
($
|
0.20
|
)
|
|
($
|
1.22
|
)
|
|
($
|
0.15
|
)
|
Diluted loss per share
|
|
|
(0.60
|
)
|
|
|
(0.20
|
)
|
|
|
(1.22
|
)
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 19 of 97
Potentially dilutive common shares excluded from the above calculations aggregated 100,000 and
682,000 shares as of June 30, 2018 and 2017.
Stock Compensation
The Company follows FASB ASC Topic 718 (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 is reflected in net income (loss)/net increase (decrease) in net assets
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 (loss)/net increase in net assets 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 six months ended June 30, 2018 and 2017, the Company issued 98,164 and 258,232 of restricted shares of stock-based
compensation awards, and 24,000 and 12,000 shares of other stock-based compensation awards, and recognized $145,000 and $296,000, or $0.01 per share for the 2018 second quarter and six months, and $200,000 and $329,000, or $0.01 and $0.01 per share
in the comparable 2017 periods, of
non-cash
stock-based compensation expense related to the grants. As of June 30, 2018, the total remaining unrecognized compensation cost related to unvested stock
options and restricted stock was $533,000, which is expected to be recognized over the next 12 quarters (see Note 9).
Derivatives
The Company manages its exposure to increases in market rates of interest by periodically purchasing interest rate caps to lock in the
cost of funds of its variable-rate debt in the event of a rapid run up in interest rates. The Company entered into contracts to purchase interest rate caps on $30,000,000 of notional value of principal from various multinational banks, with
termination dates ranging to December 2018. The caps provide for payments to the Company if various LIBOR thresholds are exceeded during the cap terms. Total cap purchases were generally fully expensed when paid, including $0 for the three and six
months ended June 30, 2018 and $19,000 and $19,000 for the comparable 2017 periods, and all are carried at $0 on the balance sheet at June 30, 2018.
Regulatory Capital
Medallion Bank is subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation (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
Banks 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 Banks assets, liabilities,
and
certain off-balance sheet
items as calculated under regulatory accounting practices. The Banks 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 Medallion 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, Medallion Bank is subject to certain restrictions on any extensions of credit to,
or other covered transactions, such as certain purchases of assets, with 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 Banks 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%, and that an adequate allowance for loan losses be maintained. As of June 30, 2018, the Banks Tier 1 leverage capital
ratio was 14.95%. The Banks actual capital amounts and ratios, and the regulatory minimum ratios are presented in the following table.
Page 20 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Minimum
|
|
|
Well-capitalized
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
Common equity tier 1 capital
|
|
|
|
|
|
|
|
|
|
$
|
127,258
|
|
|
$
|
137,494
|
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
153,561
|
|
|
|
163,797
|
|
Total capital
|
|
|
|
|
|
|
|
|
|
|
167,344
|
|
|
|
176,876
|
|
Average assets
|
|
|
|
|
|
|
|
|
|
|
1,027,419
|
|
|
|
1,127,087
|
|
Risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
1,045,884
|
|
|
|
995,145
|
|
Leverage ratio
(1)
|
|
|
4.0
|
%
|
|
|
5.0
|
%
|
|
|
14.9
|
%
|
|
|
14.5
|
%
|
Common equity tier 1 capital
ratio
(2)
|
|
|
4.5
|
|
|
|
6.5
|
|
|
|
12.2
|
|
|
|
13.8
|
|
Tier 1 capital ratio
(3)
|
|
|
6.0
|
|
|
|
8.0
|
|
|
|
14.7
|
|
|
|
16.5
|
|
Total capital ratio
(3)
|
|
|
8.0
|
|
|
|
10.0
|
|
|
|
16.0
|
|
|
|
17.8
|
|
(1)
|
Calculated by dividing Tier 1 capital by average assets.
|
(2)
|
Calculated by subtracting preferred stock or
non-controlling
interests
from Tier 1 capital and dividing by risk-weighted assets.
|
(3)
|
Calculated by dividing Tier 1 or total capital by risk-weighted assets.
|
In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer on top of the minimum risk-based capital ratios. The
implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will increase by 0.625% each subsequent January 1 until January 1, 2019. Including the buffer, by January 1, 2019, the Bank will
be required to maintain the following minimum capital ratios: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0%, a Tier 1 risk-based capital ratio of greater than 8.5% and a total risk-based capital ratio of greater than 10.5%
Recently Issued Accounting Standards
In January 2017, the FASB issued ASU
2017-04
IntangiblesGoodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment. The objective of this update is to simplify the subsequent measurement of goodwill, by eliminating step 2 from the goodwill impairment test. The amendments in this update are effective for annual periods
beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not believe this update will have a material impact on its financial condition.
In June 2016, the FASB issued
ASU 2016-13, Financial
InstrumentsCredit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this new standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial assets and
other commitments to extend credit held by a reporting entity at each reporting date. The aftermath of the global economic crisis and the delayed recognition of credit losses associated with loans (and other financial instruments) was identified as
a weakness in the application of existing accounting standards. Specifically, because the existing incurred loss model delays recognition until it is probable a credit loss was incurred, the FASB explored alternatives that would use more
forward-looking information. Under the FASBs new standard, the concepts used by entities to account for credit losses on financial instruments will fundamentally change. The existing probable and incurred loss
recognition threshold is removed. Loss estimates are based upon lifetime expected credit losses. The use of past and current events must now be supplemented with reasonable and supportable expectations about the future to
determine the amount of credit loss. The collective changes to the recognition and measurement accounting standards for financial instruments and their anticipated impact on the allowance for credit losses modeling have been universally referred to
as the CECL (current expected credit loss) model.
ASU 2016-13 applies
to all entities and is effective for fiscal years beginning after December 15, 2019 for public entities and is effective for
fiscal years beginning after December 15, 2020 for all other entities, with early adoption permitted. The Company is assessing the impact the update will have on its financial statement, but expects the update to have a significant impact on
how the Company expects to account for estimated credit losses on its loans.
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842). ASU
2016-02
requires the recognition of lease assets and lease liabilities by lessees for leases classified as operating under GAAP. ASU
2016-02
applies to all entities and is effective for fiscal years beginning after December 15, 2018 for public entities. The Company has assessed the impact the update will have on its financial condition
and does not believe this update will have a material impact on its financial condition.
Page 21 of 97
(3) INVESTMENT SECURITIES (Bank Holding Company Accounting)
Fixed maturity securities available for sale at June 30, 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Amortized Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross Unrealized
Losses
|
|
|
Fair Value
|
|
Mortgage-backed securities, principally obligations of US federal agencies
|
|
$
|
35,924
|
|
|
$
|
14
|
|
|
$
|
(1,025
|
)
|
|
$
|
34,913
|
|
State and municipalities
|
|
|
10,128
|
|
|
|
3
|
|
|
|
(327
|
)
|
|
|
9,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
46,052
|
|
|
$
|
17
|
|
|
$
|
(1,352
|
)
|
|
$
|
44,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost and estimated market value of investment securities as of June 30, 2018 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.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
Due in one year or less
|
|
$
|
3
|
|
|
$
|
3
|
|
Due after one year through five years
|
|
|
7,802
|
|
|
|
7,597
|
|
Due after five years through ten years
|
|
|
14,272
|
|
|
|
13,830
|
|
Due after ten years
|
|
|
23,975
|
|
|
|
23,287
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
46,052
|
|
|
$
|
44,717
|
|
|
|
|
|
|
|
|
|
|
Information pertaining to securities with gross unrealized losses at June 30, 2018, 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
|
|
(Dollars in thousands)
|
|
Gross Unrealized
Losses
|
|
|
Fair Value
|
|
|
Gross Unrealized
Losses
|
|
|
Fair Value
|
|
Mortgage-backed securities, principally obligations of US federal agencies
|
|
$
|
(523
|
)
|
|
$
|
20,798
|
|
|
$
|
(502
|
)
|
|
$
|
11,975
|
|
State and municipalities
|
|
|
(164
|
)
|
|
|
6,121
|
|
|
|
(163
|
)
|
|
|
3,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(687
|
)
|
|
$
|
26,919
|
|
|
$
|
(665
|
)
|
|
$
|
15,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on securities have not been recognized into 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.
As of December 31, 2017, under Investment Company Accounting, investment securities made up 0% of the net investments.
Page 22 of 97
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES (Bank Holding Company Accounting)
The following table shows the major classification of loans, inclusive of capitalized loan origination costs, at June 30, 2018 under Bank
Holding Company Accounting.
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
Recreation
|
|
$
|
597,348
|
|
Home improvement
|
|
|
195,876
|
|
Commercial
|
|
|
80,105
|
|
Medallion
|
|
|
276,794
|
|
|
|
|
|
|
Total gross loans
|
|
|
1,150,123
|
|
Allowance for loan losses
|
|
|
(21,425
|
)
|
|
|
|
|
|
Total net loans
|
|
$
|
1,128,698
|
|
|
|
|
|
|
The following table sets forth the activity in the allowance for loan losses for the three months ended
June 30, 2018 under Bank Holding Company Accounting.
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
Allowance for loan lossesbeginning balance
(1)
|
|
$
|
|
|
Charge-offs:
|
|
|
|
|
Recreation
|
|
|
(4,646
|
)
|
Home improvement
|
|
|
(561
|
)
|
Commercial
|
|
|
|
|
Medallion
|
|
|
(6,280
|
)
|
|
|
|
|
|
Total charge-offs
|
|
|
(11,487
|
)
|
|
|
|
|
|
Recoveries
|
|
|
|
|
Recreation
|
|
|
1,899
|
|
Home improvement
|
|
|
239
|
|
Commercial
|
|
|
4
|
|
Medallion
|
|
|
194
|
|
|
|
|
|
|
Total recoveries
|
|
|
2,336
|
|
|
|
|
|
|
Net charge-offs
|
|
|
(9,151
|
)
|
Provision for loan losses
(2)
|
|
|
30,576
|
|
|
|
|
|
|
Allowance for loan lossesending balance
|
|
$
|
21,425
|
|
|
|
|
|
|
(1)
|
Beginning balance reflects the transition to Bank Holding Company Accounting by netting previously established
unrealized depreciation against the gross loan balances resulting in a starting point of zero for this table.
|
(2)
|
Includes $6,663 of unallocated allowance for current and performing medallion loans under 90 days past due, as
an additional buffer against future losses, and to conform our methodology to that of Medallion Bank.
|
The following
table sets forth the composition of the allowance for loan losses by type as of June 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Percentage
of
Allowance
|
|
|
Allowance as a
Percent of Loan
Category
|
|
Recreation
|
|
$
|
1,963
|
|
|
|
9
|
%
|
|
|
0.33
|
%
|
Home Improvement
|
|
|
555
|
|
|
|
3
|
|
|
|
0.28
|
|
Commercial
|
|
|
175
|
|
|
|
1
|
|
|
|
0.22
|
|
Medallion
|
|
|
18,732
|
|
|
|
87
|
|
|
|
6.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,425
|
|
|
|
100
|
%
|
|
|
1.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 23 of 97
The following table presents total nonaccrual loans and foregone interest, substantially all of
which is in the medallion portfolio. The decline reflects the chargeoffs of certain loans and their movement to loan collateral in process of foreclosure. The fluctuation in nonaccrual interest foregone is due to past due loans and market
conditions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Holding
Company Accounting
|
|
|
Investment Company Accounting
|
|
(Dollars in thousands)
|
|
June 30, 2018
|
|
|
December 31, 2017
(1)
|
|
|
June 30, 2017
(2)
|
|
Total nonaccrual loans
|
|
$
|
47,904
|
|
|
$
|
98,494
|
|
|
$
|
122,042
|
|
Interest foregone quarter to date
|
|
|
770
|
|
|
|
823
|
|
|
|
2,248
|
|
Amount of foregone interest applied to principal in the quarter
|
|
|
400
|
|
|
|
52
|
|
|
|
679
|
|
Interest foregone life to date
|
|
|
8,281
|
|
|
|
12,485
|
|
|
|
14,934
|
|
Amount of foregone interest applied to principal life to date
|
|
|
3,748
|
|
|
|
3,495
|
|
|
|
9,711
|
|
Percentage of nonaccrual loans to gross loan portfolio
|
|
|
4
|
%
|
|
|
31
|
%
|
|
|
34
|
%
|
(1)
|
Does not include Medallion Bank: nonaccrual loans of $32,668, $1,487 of interest income foregone and $1,221 of
foregone interest paid and applied to principal.
|
(2)
|
Does not include Medallion Bank: nonaccrual loans of $43,246, $1,379 of interest income foregone and $1,065 of
foregone interest paid and applied to principal.
|
The following presents our performance status of loans as of
June 30, 2018 under Bank Holding Company Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Performing
|
|
|
Non- Performing
|
|
|
Total
|
|
Recreation
|
|
$
|
593,177
|
|
|
$
|
4,171
|
|
|
$
|
597,348
|
|
Home improvement
|
|
|
195,759
|
|
|
|
117
|
|
|
|
195,876
|
|
Commercial
|
|
|
72,664
|
|
|
|
7,441
|
|
|
|
80,105
|
|
Medallion
|
|
|
238,965
|
|
|
|
37,829
|
|
|
|
276,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,100,565
|
|
|
$
|
49,558
|
|
|
$
|
1,150,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For those loans aged
31-90
days, 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 table provides additional information on attributes of the nonperforming loan portfolio as of June 30, 2018 under Bank
Holding Company Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
Three Months Ended June 30, 2018
|
|
(Dollars
in
thousands)
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average Investment
Recorded
|
|
|
Interest Income
Recognized
|
|
With no allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Home improvement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medallion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with no allowance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 24 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
Three Months Ended June 30, 2018
|
|
(Dollars
in
thousands)
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average Investment
Recorded
|
|
|
Interest Income
Recognized
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation
|
|
$
|
4,171
|
|
|
$
|
4,171
|
|
|
$
|
145
|
|
|
$
|
5,577
|
|
|
$
|
125
|
|
Home improvement
|
|
|
117
|
|
|
|
117
|
|
|
|
2
|
|
|
|
116
|
|
|
|
|
|
Commercial
|
|
|
7,441
|
|
|
|
7,441
|
|
|
|
175
|
|
|
|
8,256
|
|
|
|
70
|
|
Medallion
|
|
|
37,829
|
|
|
|
37,829
|
|
|
|
12,069
|
|
|
|
55,213
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with allowance
|
|
$
|
49,558
|
|
|
$
|
49,558
|
|
|
$
|
12,391
|
|
|
$
|
69,162
|
|
|
$
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
$
|
49,558
|
|
|
$
|
49,558
|
|
|
$
|
12,391
|
|
|
$
|
69,162
|
|
|
$
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides additional information on attributes of the nonperforming loan portfolio as of
December 31, 2017 and June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Recorded
Investment
(1)
(2)
|
|
|
Unpaid Principal
Balance
|
|
|
Average Recorded
Investment
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Medallion
(3)
|
|
$
|
79,871
|
|
|
$
|
82,612
|
|
|
$
|
128,671
|
|
Commercial
(3)
|
|
|
18,623
|
|
|
|
20,491
|
|
|
|
18,792
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Medallion
(3)
|
|
$
|
112,327
|
|
|
$
|
114,351
|
|
|
$
|
124,084
|
|
Commercial
(3)
|
|
|
9,714
|
|
|
|
17,403
|
|
|
|
9,904
|
|
(1)
|
As of December 31, 2017 and June 30, 2017, $20,851, and $43,486 of unrealized depreciation was
recorded as a valuation allowance on these loans.
|
(2)
|
Interest income of $608 and $1,283 was recognized on loans for the three and six months ended June 30,
2017.
|
(3)
|
Included in the unpaid principal balance is unearned
paid-in-kind
interest on nonaccrual loans of $4,609 and $9,712 as of December 31, 2017 and June 30, 2017, which is included in the nonaccrual disclosures on page 24.
|
The following tables show the aging of all loans as of June 30, 2018 and December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Holding Company Accounting
|
|
Days Past Due
|
|
|
|
|
|
|
|
|
Recorded
Investment >
90 Days and
Accruing
|
|
June 30, 2018
(Dollars in thousands)
|
|
31-60
|
|
|
61-90
|
|
|
91 +
|
|
|
Total
|
|
|
Current
|
|
|
Total
(1)
|
|
Recreation
|
|
$
|
12,981
|
|
|
$
|
3,242
|
|
|
$
|
2,402
|
|
|
$
|
18,625
|
|
|
$
|
554,995
|
|
|
$
|
573,620
|
|
|
$
|
|
|
Home improvement
|
|
|
391
|
|
|
|
173
|
|
|
|
115
|
|
|
|
679
|
|
|
|
200,882
|
|
|
|
201,561
|
|
|
|
|
|
Commercial
|
|
|
492
|
|
|
|
|
|
|
|
215
|
|
|
|
707
|
|
|
|
79,398
|
|
|
|
80,105
|
|
|
|
|
|
Medallion
|
|
|
8,517
|
|
|
|
10,429
|
|
|
|
12,429
|
|
|
|
31,375
|
|
|
|
236,808
|
|
|
|
268,183
|
|
|
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22,381
|
|
|
$
|
13,844
|
|
|
$
|
15,161
|
|
|
$
|
51,386
|
|
|
$
|
1,072,083
|
|
|
$
|
1,123,469
|
|
|
$
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes loan premiums of $12,378 resulting from purchase price accounting and $14,267 of capitalized loan
origination costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Company Accounting
|
|
Days Past Due
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
Investment >
90 Days and
Accruing
|
|
December 31, 2017
(Dollars in thousands)
|
|
31-60
|
|
|
61-90
|
|
|
91 +
|
|
|
Total
|
|
|
Current
|
|
|
Total
|
|
Medallion loans
|
|
$
|
16,049
|
|
|
$
|
12,387
|
|
|
$
|
59,701
|
|
|
$
|
88,137
|
|
|
$
|
140,279
|
|
|
$
|
228,416
|
|
|
$
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured mezzanine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,334
|
|
|
|
88,334
|
|
|
|
|
|
Page 25 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Company Accounting
|
|
Days Past Due
|
|
|
|
|
|
|
|
|
Recorded
Investment >
90 Days and
Accruing
|
|
December 31, 2017
(Dollars in thousands)
|
|
31-60
|
|
|
61-90
|
|
|
91 +
|
|
|
Total
|
|
|
Current
|
|
|
Total
(1)
|
|
Other secured commercial
|
|
|
|
|
|
|
|
|
|
|
749
|
|
|
|
749
|
|
|
|
1,728
|
|
|
|
2,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
|
|
|
|
|
|
|
|
|
749
|
|
|
|
749
|
|
|
|
90,062
|
|
|
|
90,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,049
|
|
|
$
|
12,387
|
|
|
$
|
60,450
|
|
|
$
|
88,886
|
|
|
$
|
230,341
|
|
|
$
|
319,227
|
|
|
$
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the troubled debt restructurings which the Company entered into during the three and
six months ended June 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Number of Loans
|
|
|
Pre-
Modification
Investment
|
|
|
Post-
Modification
Investment
|
|
Medallion loans
|
|
|
7
|
|
|
$
|
2,695
|
|
|
$
|
2,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the twelve months ended June 30, 2018, five loans modified as troubled debt restructurings were in
default and had an investment value of $904,000 as of June 30, 2018.
The following table shows troubled debt restructurings which
the Company entered into during the quarter ended June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Number of Loans
|
|
|
Pre-
Modification
Investment
|
|
|
Post-
Modification
Investment
|
|
Medallion loans
|
|
|
12
|
|
|
$
|
8,249
|
|
|
$
|
8,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows troubled debt restructurings which the Company entered into during the six months
ended June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Number of Loans
|
|
|
Pre-
Modification
Investment
|
|
|
Post-
Modification
Investment
|
|
Medallion loans
|
|
|
47
|
|
|
$
|
31,911
|
|
|
$
|
31,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
2
|
|
|
|
6,547
|
|
|
|
6,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
49
|
|
|
$
|
38,458
|
|
|
$
|
38,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the twelve months ended June 30, 2017, ten loans modified as troubled debt restructurings were in
default and had an investment value of $3,503,000 as of June 30, 2017, net of $2,456,000 of unrealized depreciation.
Page 26 of 97
(5) UNREALIZED APPRECIATION (DEPRECIATION) AND REALIZED GAINS (LOSSES) ON INVESTMENTS (Investment Company
Accounting)
The following table sets forth the
pre-tax
change in the Companys
unrealized appreciation (depreciation) on investments under Investment Company Accounting for the three months ended March 31, 2018 and the three and six months ended June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Medallion
Loans
|
|
|
Commercial
Loans
|
|
|
Investments in
Subsidiaries
|
|
|
Equity
Investments
|
|
|
Investments
Other
Than Securities
|
|
|
Total
|
|
Balance December 31, 2017
|
|
($
|
20,338
|
)
|
|
($
|
513
|
)
|
|
$
|
158,920
|
|
|
$
|
3,121
|
|
|
($
|
1,490
|
)
|
|
$
|
139,700
|
|
Net change in unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appreciation on investments
|
|
|
|
|
|
|
|
|
|
|
38,795
|
|
|
|
(998
|
)
|
|
|
|
|
|
|
37,797
|
|
Depreciation on investments
|
|
|
(38,170
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
(1,915
|
)
|
|
|
(40,067
|
)
|
Reversal of unrealized appreciation (depreciation) related to realized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses on investments
|
|
|
34,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2018
|
|
($
|
23,761
|
)
|
|
($
|
495
|
)
|
|
$
|
197,715
|
|
|
$
|
2,123
|
|
|
($
|
3,405
|
)
|
|
$
|
172,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Medallion
Loans
|
|
|
Commercial
Loans
|
|
|
Investment in
Subsidiaries
|
|
|
Equity
Investments
|
|
|
Investment
Securities
|
|
|
Investments
Other
Than Securities
|
|
|
Total
|
|
Balance December 31, 2016
|
|
($
|
28,523
|
)
|
|
($
|
1,378
|
)
|
|
$
|
152,750
|
|
|
$
|
3,934
|
|
|
$
|
|
|
|
$
|
584
|
|
|
$
|
127,367
|
|
Net change in unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appreciation on investments
|
|
|
|
|
|
|
|
|
|
|
3,751
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
5,012
|
|
Depreciation on investments
|
|
|
(8,670
|
)
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,002
|
)
|
Reversal of unrealized
appreciation (depreciation) related to realized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,093
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,093
|
)
|
Losses on investments
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
486
|
|
|
|
|
|
|
|
|
|
|
|
1,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2017
|
|
($
|
36,368
|
)
|
|
($
|
1,710
|
)
|
|
$
|
156,501
|
|
|
$
|
3,588
|
|
|
$
|
|
|
|
$
|
584
|
|
|
$
|
122,595
|
|
Net change in unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appreciation on investments
|
|
|
|
|
|
|
|
|
|
|
(771
|
)
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
(651
|
)
|
Depreciation on investments
|
|
|
(12,425
|
)
|
|
|
(118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,543
|
)
|
Reversal of unrealized appreciation (depreciation) related to realized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses on investments
|
|
|
337
|
|
|
|
636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
973
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2017
|
|
($
|
48,456
|
)
|
|
($
|
1,192
|
)
|
|
$
|
155,730
|
|
|
$
|
3,708
|
|
|
$
|
|
|
|
$
|
584
|
|
|
$
|
110,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarizes
pre-tax
components of unrealized and
realized gains and losses in the investment portfolio for the three months ended March 31, 2018 and the three and six months ended June 30, 2017 under Investment Company Accounting.
Page 27 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2018
|
|
|
June 30, 2017
|
|
|
Six Months Ended
June 30, 2017
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized appreciation
|
|
($
|
998
|
)
|
|
$
|
235
|
|
|
$
|
1,493
|
|
Unrealized depreciation
|
|
|
(38,152
|
)
|
|
|
(12,659
|
)
|
|
|
(21,661
|
)
|
Net unrealized appreciation on investment in Medallion Bank and other controlled
subsidiaries
|
|
|
29,115
|
|
|
|
930
|
|
|
|
9,054
|
|
Realized gains
|
|
|
|
|
|
|
|
|
|
|
(2,090
|
)
|
Realized losses
|
|
|
34,747
|
|
|
|
974
|
|
|
|
2,285
|
|
Net unrealized losses on investments other than securities and other assets
|
|
|
(1,915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22,797
|
|
|
$
|
(10,520
|
)
|
|
$
|
(10,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
2,091
|
|
Realized losses
|
|
|
(34,747
|
)
|
|
|
(974
|
)
|
|
|
(2,285
|
)
|
Other gains
|
|
|
|
|
|
|
2,958
|
|
|
|
3,002
|
|
Direct recoveries
|
|
|
2
|
|
|
|
11
|
|
|
|
33
|
|
Realized gains on investments other than securities and other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
($
|
34,745
|
)
|
|
$
|
1,996
|
|
|
$
|
2,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 28 of 97
(6) MEDALLION BANK
The following note is included for informational purposes as it relates to the prior periods when the Company reported under Investment Company
Accounting and as such, was not able to consolidate Medallion Banks results.
The following table presents information derived from
Medallion Banks statement of comprehensive income and other valuation adjustments on other controlled subsidiaries for the three and six months ended June 30, 2017.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
June 30, 2017
|
|
|
June 30, 2017
|
|
Statement of comprehensive income
|
|
|
|
|
|
|
|
|
Investment income
|
|
$
|
26,660
|
|
|
$
|
52,989
|
|
Interest expense
|
|
|
3,186
|
|
|
|
6,293
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
23,474
|
|
|
|
46,696
|
|
Noninterest income
|
|
|
37
|
|
|
|
72
|
|
Operating expenses
|
|
|
6,650
|
|
|
|
12,700
|
|
|
|
|
|
|
|
|
|
|
Net investment income before income taxes
|
|
|
16,861
|
|
|
|
34,068
|
|
Income tax (provision)
|
|
|
(1,638
|
)
|
|
|
(4,095
|
)
|
|
|
|
|
|
|
|
|
|
Net investment income after income taxes
|
|
|
15,223
|
|
|
|
29,973
|
|
Net realized/unrealized losses of Medallion Bank
|
|
|
(13,306
|
)
|
|
|
(23,728
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations of Medallion Bank
|
|
|
1,917
|
|
|
|
6,245
|
|
Unrealized depreciation on Medallion
Bank
(1)
|
|
|
(592
|
)
|
|
|
(620
|
)
|
Net realized/unrealized gains (losses) on controlled subsidiaries other than Medallion
Bank
|
|
|
(395
|
)
|
|
|
3,429
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations of Medallion Bank and other controlled
subsidiaries
|
|
$
|
930
|
|
|
$
|
9,054
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Unrealized depreciation on Medallion Bank reflects the adjustment to the investment carrying amount to reflect
the dividends declared to the Company and the US Treasury, and the fair value adjustments to the carrying amount of Medallion Bank.
|
The following table presents Medallion Banks balance sheet and the net investment in other controlled subsidiaries as of
December 31, 2017.
|
|
|
|
|
(Dollars
in
thousands)
|
|
December 31,
2017
|
|
Loans
|
|
$
|
864,819
|
|
Investment securities, at fair value
|
|
|
43,478
|
|
|
|
|
|
|
Net investments
|
|
|
908,297
|
|
Cash
|
|
|
110,233
|
|
Other assets, net
|
|
|
58,827
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,077,357
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
3,836
|
|
Due to affiliates
|
|
|
1,055
|
|
Deposits and other borrowings, including accrued interest payable
|
|
|
908,236
|
|
|
|
|
|
|
Total liabilities
|
|
|
913,127
|
|
Medallion Bank equity
(2)
|
|
|
164,230
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,077,357
|
|
|
|
|
|
|
Investment in other controlled subsidiaries
|
|
$
|
11,449
|
|
Total investment in Medallion Bank and other controlled subsidiaries
(3)
|
|
$
|
302,147
|
|
|
|
|
|
|
(1)
|
Includes $26,303 of preferred stock issued to the US Treasury under the Small Business Lending Fund Program
(SBLF).
|
(2)
|
Includes $152,267 of unrealized appreciation on Medallion Bank, in excess of Medallion Banks book value
as of December 31, 2017.
|
Page 29 of 97
(7) FUNDS BORROWED
The outstanding balances of funds borrowed were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due for the Fiscal Year Ending June 30,
|
|
|
Bank
Holding
Company
Accounting
June 30,
|
|
|
Investment
Company
Accounting
December 31,
|
|
|
Interest
|
|
(Dollars
in
thousands)
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
Thereafter
|
|
|
2018
|
|
|
2017
|
|
|
Rate
(1)
|
|
Deposits
|
|
$
|
330,290
|
|
|
$
|
255,172
|
|
|
$
|
128,143
|
|
|
$
|
142,250
|
|
|
$
|
40,547
|
|
|
$
|
|
|
|
$
|
896,402
|
|
|
$
|
|
|
|
|
1.91
|
%
|
DZ loan
|
|
|
96,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,925
|
|
|
|
99,984
|
|
|
|
3.75
|
%
|
SBA debentures and borrowings
|
|
|
3,716
|
|
|
|
25,881
|
|
|
|
8,500
|
|
|
|
|
|
|
|
5,000
|
|
|
|
35,000
|
|
|
|
78,097
|
|
|
|
79,564
|
|
|
|
3.39
|
%
|
Notes payable to banks
|
|
|
70,551
|
|
|
|
2,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,715
|
|
|
|
81,450
|
|
|
|
4.19
|
%
|
Retail notes
|
|
|
|
|
|
|
|
|
|
|
33,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,625
|
|
|
|
33,625
|
|
|
|
9.00
|
%
|
Preferred securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,000
|
|
|
|
33,000
|
|
|
|
33,000
|
|
|
|
4.44
|
%
|
Other borrowings
|
|
|
8,500
|
|
|
|
7,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,578
|
|
|
|
|
|
|
|
2.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
509,982
|
|
|
$
|
290,295
|
|
|
$
|
170,268
|
|
|
$
|
142,250
|
|
|
$
|
45,547
|
|
|
$
|
68,000
|
|
|
$
|
1,226,342
|
|
|
$
|
327,623
|
|
|
|
2.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Weighted average contractual rate as of June 30, 2018.
|
(A) DEPOSITS
Deposits are raised through the use of investment brokerage firms who package deposits qualifying for FDIC insurance into 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. All time deposits are in denominations of less than $250,000 and have been originated through certificates of deposit broker relationships. The table presents
time deposits of $100,000 or more by their maturity:
|
|
|
|
|
(Dollars
in
thousands)
|
|
June 30, 2018
|
|
Three months or less
|
|
$
|
109,148
|
|
Over three months to six months
|
|
|
65,750
|
|
Over six months through one year
|
|
|
155,392
|
|
Over one year
|
|
|
566,112
|
|
|
|
|
|
|
Total deposits
|
|
$
|
896,402
|
|
|
|
|
|
|
(B) DZ LOAN
In December 2008, Trust III entered into a loan agreement with DZ Bank, to provide up to $200,000,000 of financing through a commercial paper
conduit to acquire medallion loans from MFC (DZ loan), which was extended in December 2013 until December 2016, and which has been further extended several times and currently terminates in December 2018. The line was reduced to $150,000,000, and
was further reduced in stages to $125,000,000 on July 1, 2016, and remains as an amortizing facility, with $96,925,000 outstanding at June 30, 2018. During 2017 and 2018, the DZ loan was amended several times, for the most part to improve
Trust IIIs flexibility under the credit facility. Also, see Note 7(H) below.
Borrowings under Trust IIIs DZ loan are
collateralized by Trust IIIs assets. MFC is the servicer of the loans owned by Trust III. The DZ loan includes a borrowing base covenant and rapid amortization in certain circumstances. In addition, if certain financial tests are not met, MFC
can be replaced as the servicer. The interest rate with the 2013 extension is a pooled short-term commercial paper rate which approximates LIBOR (30 day LIBOR was 2.09% at June 30, 2018) plus 1.65%.
Page 30 of 97
(C) 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, which was paid. During
2017, the SBA restructured FSVCs debentures with SBA totaling $33,485,000 in principal into a new loan by the SBA to FSVC in the principal amount of $34,024,756 (the SBA Loan). In connection with the SBA Loan, FSVC executed a Note (the SBA
Note), with an effective date of March 1, 2017, in favor of SBA, in the principal amount of $34,024,756. The SBA Loan bears interest at a rate of 3.25% per annum, required a minimum of $5,000,000 of principal and interest to be paid on or
before February 1, 2018 (which was paid), and requires a minimum of $10,000,000 of principal and interest to be paid on or before February 1, 2019, and all remaining unpaid principal and interest on or before February 1, 2020, the
final maturity date. The SBA Loan agreement contains covenants and events of defaults, including, without limitation, payment defaults, breaches of representations and warranties and covenants defaults. As of June 30, 2018, $169,985,000 of
commitments had been fully utilized, there were $5,500,000 of commitments available, and $78,097,000 was outstanding, including $29,597,000 under the SBA Note.
(D) NOTES PAYABLE TO BANKS
The Company and its subsidiaries have entered into note agreements with a variety of local and regional banking institutions over the years, as
well as other
non-bank
lenders. The notes are typically secured by various assets of the underlying borrower.
The table below summarizes the key attributes of the Companys various borrowing arrangements with these lenders as of June 30,
2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Borrower
|
|
# of Lenders
/ Notes
|
|
|
Note
Dates
|
|
|
Maturity
Dates
|
|
|
Type
|
|
|
Note
Amounts
|
|
|
Balance
Outstanding at
June 30,
2018
|
|
|
Monthly Payment
|
|
|
Average
Interest
Rate at
June 30,
2018
|
|
|
Interest
Rate
Index
(1)
|
|
The Company
|
|
|
6/6
|
|
|
|
4/11 - 8/14
|
|
|
|
7/18 - 8/19
|
|
|
|
Term
loans and
demand
notes
secured by
pledged
loans
(2)
|
|
|
$
|
51,217
|
|
|
$
|
51,217
|
|
|
|
Interest
(3)
|
|
|
|
4.54%
|
|
|
|
Various
(2)
|
|
Medallion Chicago
|
|
|
3/28
|
|
|
|
11/11 - 12/11
|
|
|
|
10/16 - 6/19
|
|
|
|
Term
loans
secured by
owned
Chicago
medallions
(4)
|
|
|
|
25,708
|
|
|
|
21,498
|
|
|
|
$181 principal &
interest
|
|
|
|
3.34%
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
76,925
|
|
|
$
|
72,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At June 30, 2018, 30 day LIBOR was 2.09%, 360 day LIBOR was 2.76%, and the prime rate was 5.00%.
|
(2)
|
One note has an interest rate of Prime, one note has an interest rate of Prime plus 0.50%, one note has a fixed
interest rate of 3.75%, one note has an interest rate of LIBOR plus 3.75%, and the other interest rates on these borrowings are LIBOR plus 2%.
|
(3)
|
Various agreements call for remittance of all principal received on pledged loans subject to minimum monthly
payments ranging from $0 to $75.
|
(4)
|
$12,708 guaranteed by the Company.
|
(E) RETAIL NOTES
In April 2016, the Company issued a total of $33,625,000 aggregate principal amount of 9.00% unsecured notes due 2021, with interest payable
quarterly in arrears. The Company used the net proceeds from the offering of approximately $31,786,000 to make loans and other investments in portfolio companies and for general corporate purposes, including repaying borrowings under its DZ loan in
the ordinary course of business.
(F) PREFERRED SECURITIES
In June 2007, the Company issued and sold $36,083,000 aggregate principal amount of unsecured junior subordinated notes to Fin Trust which, in
turn, sold $35,000,000 of preferred securities to Merrill Lynch International and issued 1,083 shares of common stock to the Company. The notes bear a variable rate of interest of 90 day LIBOR (2.34% at June 30, 2018) plus 2.13%. The notes
mature in September 2037 and are prepayable at par. Interest is payable quarterly in arrears. The terms of the preferred securities and the notes are substantially identical. In December 2007, $2,000,000 of the preferred securities were
repurchased from a third party investor. At June 30, 2018, $33,000,000 was outstanding on the preferred securities.
Page 31 of 97
(G) OTHER BORROWINGS
In November and December 2017, RPAC amended the terms of various promissory notes with affiliate Richard Petty (refer to Note 13 for more
details). At December 31, 2017, the total outstanding on these notes was $7,007,894 at a 2.00% annual interest rate compounded monthly and due March 31, 2020. As of June 30, 2018, $7,078,000 was outstanding on these notes.
Additionally, RPAC has a short term promissory note to Travis Burt, an unrelated party, for $500,000 due on December 31, 2018.
In
June 2018, the Company issued federal funds of $8,000,000 at a 2.50% interest rate that was repaid in July 2018.
(H) COVENANT
COMPLIANCE
Certain of the Companys debt agreements contain restrictions that require the Company and its subsidiaries to
maintain certain financial ratios, including debt to equity and minimum net worth. The Company was not in compliance with a financial covenant in the DZ loan agreement as of June 30, 2018. The Company is currently in the process of working with
DZ Bank to amend such covenant in the DZ loan agreement. Historically the Company has received approvals for similar amendments. While there can be no assurance that it will be received, the Company has received preliminary indication from DZ Bank
that it will obtain approval for such an amendment. Except as previously set forth, the Company is in compliance with such restrictions as of June 30, 2018.
(8) INCOME TAXES
The Company is subject
to federal and applicable state corporate income taxes on its taxable ordinary income and capital gains. As a corporation taxed under Subchapter C, the Company is able, and intends, to file a consolidated federal income tax return with corporate
subsidiaries, in which it holds 80 percent or more of the outstanding equity interest measured by both vote and fair value.
The
following table sets forth the significant components of our deferred and other tax assets and liabilities as of June 30, 2018 and December 31, 2017.
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Bank Holding Company
Accounting
June 30, 2018
|
|
|
Investment Company
Accounting
December 31, 2017
|
|
Goodwill and other intangibles/unrealized gain on investments in Medallion Bank
|
|
($
|
46,089
|
)
|
|
($
|
35,297
|
)
|
Provision for loan losses/unrealized losses on loans and nonaccrual interest
|
|
|
31,152
|
|
|
|
10,071
|
|
Net operating loss carryforwards
(1)
|
|
|
2,133
|
|
|
|
615
|
|
Unrealized gains on investments in other controlled subsidiaries
|
|
|
|
|
|
|
(3,617
|
)
|
Unrealized gains on investments other than securities
|
|
|
|
|
|
|
(1,395
|
)
|
Accrued expenses, compensation, and other
|
|
|
1,218
|
|
|
|
782
|
|
Unrealized gains on investments and other assets
|
|
|
(3,958
|
)
|
|
|
(542
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
|
(15,544
|
)
|
|
|
(29,383
|
)
|
Valuation allowance
|
|
|
(108
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax liability, net
|
|
|
(15,652
|
)
|
|
|
(29,422
|
)
|
Taxes receivable
|
|
|
19,112
|
|
|
|
16,886
|
|
|
|
|
|
|
|
|
|
|
Net deferred and other tax assets (liabilities)
|
|
$
|
3,460
|
|
|
($
|
12,536
|
)
|
|
|
|
|
|
|
|
|
|
(1)
|
As of June 30, 2018, the Company had $11,148 of net operating loss carryforwards that expire at various
dates between December 31, 2026 and December 31, 2035.
|
The components of our tax benefit for the three and
six months ended June 30, 2018 and 2017 were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
418
|
|
|
$
|
780
|
|
|
$
|
6,313
|
|
|
$
|
1,549
|
|
State
|
|
|
58
|
|
|
|
185
|
|
|
|
1,240
|
|
|
|
363
|
|
Page 32 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
2,919
|
|
|
|
4,785
|
|
|
|
(972
|
)
|
|
|
5,666
|
|
State
|
|
|
626
|
|
|
|
1,268
|
|
|
|
(1,920
|
)
|
|
|
1,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net benefit for income taxes
|
|
$
|
4,021
|
|
|
$
|
7,018
|
|
|
$
|
4,661
|
|
|
$
|
8,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a reconciliation of statutory federal income tax benefit to consolidated actual
income tax benefit reported in net income/net increase in net assets for the three and six months ended June 30, 2018 and 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Statutory Federal Income tax benefit at 21% (35% in 2017)
|
|
$
|
3,971
|
|
|
$
|
4,135
|
|
|
$
|
7,229
|
|
|
$
|
4,437
|
|
State and local income taxes, net of federal income tax benefit
|
|
|
598
|
|
|
|
652
|
|
|
|
1,101
|
|
|
|
699
|
|
Appreciation of Medallion Bank
|
|
|
|
|
|
|
537
|
|
|
|
(1,974
|
)
|
|
|
2,061
|
|
Utilization of carry forwards
|
|
|
(663
|
)
|
|
|
1,338
|
|
|
|
(663
|
)
|
|
|
2,256
|
|
Change in effective state income tax rate
|
|
|
|
|
|
|
|
|
|
|
(1,358
|
)
|
|
|
|
|
Other
|
|
|
115
|
|
|
|
356
|
|
|
|
326
|
|
|
|
(463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit
|
|
$
|
4,021
|
|
|
$
|
7,018
|
|
|
$
|
4,661
|
|
|
$
|
8,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On December 22, 2017, the US Government signed into law the Tax Cuts and Jobs Act which,
starting in 2018, reduced the Companys corporate statutory income tax rate from 35% to 21%, but eliminated or increased certain permanent differences.
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 Companys 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 has determined the valuation allowance as of
June 30, 2018.
The Company has filed tax returns in many states. Federal, New York State, New York City, and Utah tax filings of the
Company for the tax years 2014 through the present are the more significant filings that are open for examination. Currently the Company and the Bank are undergoing various state exams covering the years 2009 to 2011 and 2013 to 2016.
(9) STOCK OPTIONS AND RESTRICTED STOCK
The Company has a stock option plan (2006 Stock Option Plan) available to grant both incentive and nonqualified stock options to employees. The
2006 Stock Option Plan, which was approved by the Board of Directors on February 15, 2006 and the Companys shareholders on June 16, 2006, provided for the issuance of a maximum of 800,000 shares of common stock of the Company. No
additional shares are available for issuance under the 2006 Stock Option Plan. The 2006 Stock Option Plan is administered by the Compensation Committee of the Board of Directors. The option price per share may not be less than the current market
value of the Companys common stock on the date the option is granted. The term and vesting periods of the options are determined by the Compensation Committee, provided that the maximum term of an option may not exceed a period of ten years.
The Companys Board of Directors approved the 2018 Equity Incentive Plan (2018 Plan), which was approved by the Companys
shareholders on June 15, 2018. The terms of 2018 Plan provide for grants of a variety of different type of stock awards to the Companys employees, including options, restricted stock, stock appreciation rights, etc. A total of 1,494,558
shares of the Companys common stock are issuable under the 2018 Plan, and 1,470,558 remained issuable as of June 30, 2018. 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 first occurs.
The Companys Board of Directors approved the 2015 Employee Restricted Stock Plan (2015 Restricted Stock Plan) on February 13, 2015,
which was approved by the Companys shareholders on June 5, 2015. The 2015 Restricted Stock Plan became effective upon the Companys receipt of exemptive relief from the SEC on March 1, 2016. The terms of 2015 Restricted Stock
Plan provide for grants of restricted stock awards to the Companys employees. A grant of restricted stock is a grant of shares of the Companys common stock which, at the time of issuance, is subject to certain forfeiture provisions, and
thus is restricted as to
Page 33 of 97
transferability until such forfeiture restrictions have lapsed. A total of 700,000 shares of the Companys common stock are issuable under the 2015 Restricted Stock Plan, and 236,224
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. Awards under the 2015 Restricted Stock Plan are subject to certain limitations as set
forth in the 2015 Restricted Stock Plan. The 2015 Restricted Stock Plan will terminate when all shares of common stock authorized for delivery under the 2015 Restricted Stock Plan have been delivered and the forfeiture restrictions on all awards
have lapsed, or by action of the Board of Directors pursuant to the 2015 Restricted Stock Plan, whichever first occurs.
The
Companys Board of Directors approved the 2015
Non-Employee
Director Stock Option Plan (2015 Director Plan) on March 12, 2015, which was approved by the Companys 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 Companys common stock are 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 will grant options to purchase 12,000 shares of the Companys common stock to a
non-employee
director upon election to the Board of Directors, with an adjustment for directors who are elected to serve less than a full term. The option price per share may not be less than the current market value of the Companys common stock on the
date the option is granted. Options granted under the 2015 Director Plan are exercisable annually, as defined in the 2015 Director Plan. The term of the options may not exceed ten years.
The Companys Board of Directors approved the First Amended and Restated 2006 Director Plan (the Amended Director Plan) on April 16,
2009, which was approved by the Companys 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 Companys
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 will grant options to purchase 9,000 shares of the Companys common stock to an Eligible Director upon election to the Board of Directors, with
an adjustment for directors who are elected to serve less than a full term. The option price per share may not be less than the current market value of the Companys common stock on the date the option is granted. Options granted under the
Amended Director Plan are exercisable annually, as defined in the Amended Director Plan. The term of the options may not exceed ten years.
Additional shares are only available for future issuance under the 2018 Plan. At June 30, 2018, 129,666 options on the Companys
common stock were outstanding under the 2006 Stock Option Plan, and 2015 Director Plan, of which 76,000 options were exercisable, and there were 208,008 unvested shares of the Companys common stock outstanding under the 2015 Restricted Stock
Plan.
The fair value of each restricted stock grant is determined on the date of grant by the closing market price of the Companys
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. The following assumption categories are used to determine the value of any option grants.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Risk free interest rate
|
|
|
2.82
|
%
|
|
|
1.84
|
%
|
Expected dividend yield
|
|
|
4.86
|
|
|
|
7.39
|
|
Expected life of option in years
(1)
|
|
|
6.00
|
|
|
|
6.00
|
|
Expected volatility
(2)
|
|
|
30.00
|
|
|
|
30.00
|
|
(1)
|
Expected life is calculated using the simplified method.
|
(2)
|
We determine our expected volatility based on our historical volatility.
|
The following table presents the activity for the stock option programs for the 2018 quarters and the 2017 full year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options
|
|
|
Exercise
Price Per
Share
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding at December 31, 2016
|
|
|
345,518
|
|
|
$
|
7.10-13.84
|
|
|
$
|
9.67
|
|
Granted
|
|
|
29,666
|
|
|
|
2.14-2.61
|
|
|
|
2.35
|
|
Cancelled
|
|
|
(54,558
|
)
|
|
|
10.76-11.21
|
|
|
|
10.94
|
|
Exercised
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
320,626
|
|
|
|
2.14-13.84
|
|
|
|
8.78
|
|
Page 34 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options
|
|
|
Exercise
Price Per
Share
|
|
|
Weighted
Average
Exercise Price
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
|
320,626
|
|
|
|
2.14-13.84
|
|
|
|
8.78
|
|
Granted
|
|
|
24,000
|
|
|
|
5.58
|
|
|
|
5.58
|
|
Cancelled
|
|
|
(214,960
|
)
|
|
|
9.22-9.24
|
|
|
|
9.22
|
|
Exercised
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2018
(2)
|
|
|
129,666
|
|
|
$
|
2.14-13.84
|
|
|
$
|
7.45
|
|
Options exercisable at June 30, 2018
(2)
|
|
|
76,000
|
|
|
$
|
2.22-13.84
|
|
|
$
|
9.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate intrinsic value, which represents the difference between the price of the Companys common
stock at the exercise date and the related exercise price of the underlying options, was $0 and $0 for the 2018 and 2017 second quarter and six months.
|
(2)
|
The aggregate intrinsic value, which represents the difference between the price of the Companys common
stock at June 30, 2018 and the related exercise price of the underlying options, was $93,000 for outstanding options and $13,000 for exercisable options as of June 30, 2018. The remaining contractual life was 7.17 years for outstanding
options and 5.59 years for exercisable options at June 30, 2018.
|
The following table presents the activity for the
restricted stock programs for the 2018 quarters and the 2017 full year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Exercise
Price Per
Share
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding at December 31, 2016
|
|
|
167,703
|
|
|
$
|
3.95-13.46
|
|
|
$
|
8.88
|
|
Granted
|
|
|
327,251
|
|
|
|
2.06-3.93
|
|
|
|
2.48
|
|
Cancelled
|
|
|
(8,988
|
)
|
|
|
2.14-10.08
|
|
|
|
3.07
|
|
Vested
(1)
|
|
|
(77,384
|
)
|
|
|
9.08-13.46
|
|
|
|
11.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
408,582
|
|
|
|
2.06-10.38
|
|
|
|
3.45
|
|
Granted
|
|
|
97,952
|
|
|
|
4.39
|
|
|
|
4.39
|
|
Cancelled
|
|
|
(2,226
|
)
|
|
|
3.93-9.08
|
|
|
|
5.86
|
|
Vested
(1)
|
|
|
(296,313
|
)
|
|
|
2.06-10.38
|
|
|
|
3.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
|
207,995
|
|
|
|
2.06-7.98
|
|
|
|
4.16
|
|
Granted
|
|
|
212
|
|
|
|
3.93
|
|
|
|
3.93
|
|
Cancelled
|
|
|
(199
|
)
|
|
|
3.93
|
|
|
|
3.93
|
|
Vested
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2018
(2)
|
|
|
208,008
|
|
|
$
|
2.06-13.84
|
|
|
$
|
7.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate fair value of the restricted stock vested was $0 and $1,209,000 for the three and six months
ended June 30, 2018, and was $15,000 and $151,000 for the comparable 2017 periods.
|
(2)
|
The aggregate fair value of the restricted stock was $1,140,000 as of June 30, 2018. The remaining vesting
period was 1.75 years at June 30, 2018.
|
The following table presents the activity for the unvested options
outstanding under the plans for the quarter ended June 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Exercise Price
Per Share
|
|
|
Weighted Average Exercise
Price
|
|
Outstanding at December 31, 2017 and March 31, 2018
|
|
|
46,666
|
|
|
$
|
2.14-9.38
|
|
|
$
|
4.52
|
|
Granted
|
|
|
24,000
|
|
|
|
5.58
|
|
|
|
5.58
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(17,000
|
)
|
|
|
2.22-9.38
|
|
|
|
7.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2018
|
|
|
53,666
|
|
|
$
|
2.14-7.10
|
|
|
$
|
4.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 35 of 97
The intrinsic value of the options vested was $14,000 for the three and six months ended
June 30, 2018.
(10) SEGMENT REPORTING (Bank Holding Company Accounting)
Under Bank Holding Company Accounting, the Company has six business segments, which include four lending and two
non-operating
segments, which are reflective of how Company management makes decisions about its business and operations.
Prior to April 2, 2018, the Company had one business segment, its lending and investing operations. This segment originated and serviced
medallion, secured commercial and consumer loans, and invested in both marketable and nonmarketable securities.
The four lending segments
reflect the main types of lending performed at the Company, which are recreation, home improvement, commercial, and medallion. The recreation and home improvement lending segments are conducted by the Bank in all fifty states, with the highest
concentrations in Texas, California, and Florida, at 17%, 11%, and 11% of loans outstanding and no other states over 10%. 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. The home improvement lending segment works with contractors and financial service providers to finance residential home improvements concentrated in pools,
solar panels, and roofing, at 38%, 15%, 11% of total loans outstanding, and no other product lines over 10%. The commercial lending segment focuses on enterprise wide industries, including manufacturing, retail trade, information, recreation and
various other industries, in which 47% of these loans are made in the Midwest. The medallion lending segment arose in connection with the financing of the taxicab medallions, taxicabs, and related assets, of which 88% were in New York City as of
June 30, 2018.
In addition, our
non-operating
segments include RPAC which is a race car team
and our corporate and other segment which includes items not allocated to our operating segments such as investment securities, equity investments, intercompany eliminations, and other corporate elements.
The following table presents segment data at June 30, 2018 and for the three months then ended.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Lending
|
|
|
Commercial
Lending
|
|
|
Medallion
Lending
|
|
|
RPAC
|
|
|
Corp.
and
Other
|
|
|
Consolidated
|
|
(dollars in thousands)
|
|
Recreation
|
|
|
Home
Improvement
|
|
Total interest income
|
|
$
|
22,132
|
|
|
$
|
4,637
|
|
|
$
|
2,322
|
|
|
$
|
3,189
|
|
|
$
|
|
|
|
$
|
364
|
|
|
$
|
32,644
|
|
Total interest expense
|
|
|
2,136
|
|
|
|
739
|
|
|
|
655
|
|
|
|
3,373
|
|
|
|
41
|
|
|
|
981
|
|
|
|
7,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (loss)
|
|
|
19,996
|
|
|
|
3,898
|
|
|
|
1,667
|
|
|
|
(184
|
)
|
|
|
(41
|
)
|
|
|
(617
|
)
|
|
|
24,719
|
|
Provision for loan losses
|
|
|
4,710
|
|
|
|
877
|
|
|
|
175
|
|
|
|
24,814
|
|
|
|
|
|
|
|
|
|
|
|
30,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after loss provision
|
|
|
15,286
|
|
|
|
3,021
|
|
|
|
1,492
|
|
|
|
(24,998
|
)
|
|
|
(41
|
)
|
|
|
(617
|
)
|
|
|
(5,857
|
)
|
Sponsorship and race winning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,228
|
|
|
|
|
|
|
|
5,228
|
|
Race team related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,540
|
)
|
|
|
|
|
|
|
(2,540
|
)
|
Other income (expense)
|
|
|
(5,520
|
)
|
|
|
(1,685
|
)
|
|
|
(1,110
|
)
|
|
|
(2,811
|
)
|
|
|
(2,237
|
)
|
|
|
(1,373
|
)
|
|
|
(14,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before taxes
|
|
|
9,766
|
|
|
|
1,336
|
|
|
|
382
|
|
|
|
(27,809
|
)
|
|
|
410
|
|
|
|
(1,990
|
)
|
|
|
(17,905
|
)
|
Income tax benefit (provision)
|
|
|
(2,162
|
)
|
|
|
(296
|
)
|
|
|
(85
|
)
|
|
|
6,157
|
|
|
|
(43
|
)
|
|
|
450
|
|
|
|
4,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) after tax
|
|
$
|
7,604
|
|
|
$
|
1,040
|
|
|
$
|
297
|
|
|
($
|
21,652
|
)
|
|
$
|
367
|
|
|
($
|
1,540
|
)
|
|
($
|
13,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans net
|
|
$
|
595,385
|
|
|
$
|
195,321
|
|
|
$
|
79,930
|
|
|
$
|
258,062
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,128,698
|
|
Total assets
|
|
|
599,960
|
|
|
|
206,298
|
|
|
|
109,261
|
|
|
|
386,225
|
|
|
|
37,861
|
|
|
|
194,924
|
|
|
|
1,534,529
|
|
Total funds borrowed
|
|
|
456,955
|
|
|
|
159,913
|
|
|
|
68,224
|
|
|
|
402,955
|
|
|
|
7,578
|
|
|
|
130,717
|
|
|
|
1,226,342
|
|
Page 36 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on assets
|
|
|
5.32
|
%
|
|
|
2.13
|
%
|
|
|
1.05
|
%
|
|
|
(21.69
|
%)
|
|
|
3.89
|
%
|
|
|
(2.99
|
%)
|
|
|
(4.53
|
%)
|
Return on equity
|
|
|
23.33
|
|
|
|
9.74
|
|
|
|
2.53
|
|
|
|
NM
|
|
|
|
22.38
|
|
|
|
(8.15
|
)
|
|
|
(22.00
|
)
|
Interest yield
|
|
|
15.62
|
|
|
|
10.02
|
|
|
|
10.54
|
|
|
|
4.43
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
11.23
|
|
Net interest margin
|
|
|
14.12
|
|
|
|
8.43
|
|
|
|
7.57
|
|
|
|
(0.26
|
)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
8.57
|
|
Reserve coverage
|
|
|
0.33
|
|
|
|
0.28
|
|
|
|
0.22
|
|
|
|
6.77
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1.86
|
|
Delinquency ratio
|
|
|
0.40
|
|
|
|
0.06
|
|
|
|
0.27
|
|
|
|
4.49
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1.32
|
|
Charge off ratio
|
|
|
0.82
|
|
|
|
0.30
|
|
|
|
0.00
|
|
|
|
2.18
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3.19
|
|
(11) OTHER OPERATING EXPENSES (Investment Company Accounting)
The major components of other operating expenses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
For the Three
Months Ended
March 31, 2018
|
|
|
For the Three
Months Ended
June 30, 2017
|
|
|
For the Six
Months Ended
June 30, 2017
|
|
Directors fees
|
|
$
|
89
|
|
|
$
|
114
|
|
|
$
|
129
|
|
Miscellaneous taxes
|
|
|
120
|
|
|
|
69
|
|
|
|
87
|
|
Computer expenses
|
|
|
74
|
|
|
|
65
|
|
|
|
125
|
|
Depreciation and amortization
|
|
|
23
|
|
|
|
24
|
|
|
|
49
|
|
Other expenses
|
|
|
281
|
|
|
|
215
|
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other operating expenses
|
|
$
|
587
|
|
|
$
|
487
|
|
|
$
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) SELECTED FINANCIAL RATIOS AND OTHER DATA (Investment Company Accounting)
The following table provides selected financial ratios and other data for the three months ended March 31, 2018 and June 30, 2017 and
the six months ended June 30, 2017 under Investment Company Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
Six Months Ended,
|
|
(Dollars in thousands, except per share
data)
|
|
March 31, 2018
|
|
|
June 30, 2017
|
|
|
June 30, 2017
|
|
Net share data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value at the beginning of the period
|
|
$
|
11.80
|
|
|
$
|
11.91
|
|
|
$
|
11.91
|
|
Net investment loss
|
|
|
(0.15
|
)
|
|
|
(0.14
|
)
|
|
|
(0.19
|
)
|
Income tax benefit
|
|
|
0.03
|
|
|
|
0.29
|
|
|
|
0.37
|
|
Net realized gains (losses) on investments
|
|
|
(1.44
|
)
|
|
|
0.08
|
|
|
|
0.12
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
0.94
|
|
|
|
(0.43
|
)
|
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
|
(0.62
|
)
|
|
|
(0.20
|
)
|
|
|
(0.15
|
)
|
Issuance of common stock
|
|
|
(0.03
|
)
|
|
|
(0.06
|
)
|
|
|
(0.11
|
)
|
Repurchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total decrease in net asset value
|
|
|
(0.65
|
)
|
|
|
(0.26
|
)
|
|
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value at the end of the period
(1)
|
|
$
|
11.15
|
|
|
$
|
11.65
|
|
|
$
|
11.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market value at beginning of period
|
|
$
|
3.53
|
|
|
$
|
1.98
|
|
|
$
|
3.02
|
|
Page 37 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
Six Months Ended,
|
|
(Dollars in thousands, except per share
data)
|
|
March 31, 2018
|
|
|
June 30, 2017
|
|
|
June 30, 2017
|
|
Per share market value at end of period
|
|
|
4.65
|
|
|
|
2.39
|
|
|
|
2.39
|
|
Total return
(2)
|
|
|
129
|
%
|
|
|
83
|
%
|
|
|
(42
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/supplemental data
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity (net assets)
|
|
$
|
272,437
|
|
|
$
|
282,739
|
|
|
$
|
282,739
|
|
Average net assets
|
|
$
|
284,021
|
|
|
$
|
287,153
|
|
|
$
|
286,123
|
|
Total expense ratio
(3) (4)
|
|
|
10.02
|
%
|
|
|
0.10
|
%
|
|
|
2.58
|
%
|
Operating expenses to average net assets
(4)
|
|
|
5.87
|
|
|
|
5.14
|
|
|
|
4.16
|
|
Net investment loss after income taxes to average net assets
(4)
|
|
|
(4.61
|
%)
|
|
|
(1.81
|
%)
|
|
|
(1.22
|
%)
|
(1)
|
Includes $0 and $0 of undistributed net investment income per share and $0 and $0 of undistributed net realized
gains per share as of March 31, 2018 and June 30, 2017.
|
(2)
|
Total return is calculated by dividing the change in market value of a share of common stock during the period,
assuming the reinvestment of distributions on the payment date, by the per share market value at the beginning of the period.
|
(3)
|
Total expense ratio represents total expenses (interest expense, operating expenses, and income taxes) divided
by average net assets.
|
(4)
|
MSC has assumed certain of the Companys servicing obligations, and as a result, servicing fee income of
$1,290 and $1,295, and operating expenses of $1,150 and $925, which formerly were the Companys were now MSCs for the three months ended March 31, 2018 and June 30, 2017 and were $2,608 of servicing fee income, and $2,092 of
operating expenses for the six months ended June 30, 2017. Excluding the impact of the MSC amounts, the total expense ratio, operating expense ratio, and net investment income ratio would have been 11.75%, 6.88%, and 7.51% in the March 31,
2018 quarter, 1.66%, 6.44%, and (1.56%) in the June 30, 2017 quarter, and 4.25%, 5.64%, and (1.22%) in the six months ended June 30, 2017.
|
(13) RELATED PARTY TRANSACTIONS
Certain
directors, officers and shareholders of the Company are also directors and officers of its main consolidated subsidiaries, MFC, MCI, FSVC, and Medallion 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 Companys directors, is an officer of LAX Group, LLC (LAX), one of the
Companys equity investments. Mr. Rudnick receives a salary from LAX of $172,000 per year, and certain equity from LAX consisting of 10% ownership in LAX Class B stock, vesting at 3.34% per year; 5% of any new equity raised from
outside investors at a valuation of $1,500,000 or higher; and 10% of LAXs profits as a year end bonus. In addition, Mr. Rudnick provides consulting services to the Company directly for a monthly retainer of $4,200.
The Companys consolidated subsidiary RPAC, has an agreement with minority shareholder Richard Petty, in which they make an annual
payment of $700,000 per year for services provided to the entity. In addition, RPAC has a note payable to a trust controlled by Petty of $7,078,000 that earns interest at an annual rate of 2% as of June 30, 2018.
The Company and MSC serviced $311,988,000 and $318,961,000 of loans for Medallion Bank at December 31, 2017 and June 30, 2017. Under
Investment Company Accounting, included in net investment income were amounts as described in the table below that were received from Medallion Bank for services rendered in originating and servicing loans, and also for reimbursement of certain
expenses incurred on their behalf.
The Company had assigned its servicing rights to the Medallion Bank portfolio to MSC, a wholly-owned
entity that had been unconsolidated under Investment Company Accounting. The costs of servicing are allocated to MSC by the Company, and the servicing fee income is billed and collected from Medallion Bank by MSC. As a result, in the three months
ended March 31, 2018 and the three and six months ended June 30, 2017, $1,290,000, $1,295,000 and $2,608,000 of servicing fee income were earned by MSC.
Page 38 of 97
The following table summarizes the net revenues received from Medallion Bank not eliminated under
Investment Company Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
Six Months Ended,
June 30, 2017
|
|
(Dollars in thousands)
|
|
March 31, 2018
|
|
|
June 30, 2017
|
|
Reimbursement of operating expenses
|
|
$
|
250
|
|
|
$
|
227
|
|
|
$
|
454
|
|
Loan origination and servicing fees
|
|
|
6
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
$
|
256
|
|
|
$
|
230
|
|
|
$
|
457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had a loan to Medallion Fine Art, Inc. in the amount of $999,000 as of December 31, 2017,
which was repaid in full during the 2018 first quarter. The loan bore interest at a rate of 12%, all of which was paid in kind. During 2017, the Company advanced $0, and was repaid $2,015,000 with respect to this loan. Additionally, the Company
recognized $10,000 of interest income not eliminated for the three and six months ended June 30, 2018, and $44,000 and $126,000 in the three and six months ended June 30, 2017 with respect to this loan.
The Company and MCI have loans to RPAC, an affiliate of Medallion Motorsports LLC, which totaled $16,472,000 as of December 31, 2017 and
under Investment Company Accounting had not been eliminated, and which were placed on nonaccrual during 2017. These loans have been eliminated in consolidation for the three months ended as of June 30, 2018. The loans bear interest at 2%,
inclusive of cash and paid in kind interest. The Company and MCI recognized $0 of interest income for the three months ended March 31, 2018, and $118,000 and $208,000 for the three and six months ended June 30, 2017 with respect to these
loans.
(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
Book value equals market value.
(b)
Equity securities
The Companys equity securities are recorded at cost less impairment, which approximated fair
value.
(c)
Investment securities
The Companys investments are recorded at the estimated fair value of such
investments.
(d)
Loans receivable
The Companys 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 June 30, 2018 and December 31, 2017, the estimated fair value of these
off-balance-sheet
instruments was not material.
Page 39 of 97
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Holding Company Accounting
June 30, 2018
|
|
|
Investment Company Accounting
December 31, 2017
|
|
(Dollars
in
thousands)
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and federal funds sold
(1)
|
|
$
|
35,581
|
|
|
$
|
35,581
|
|
|
$
|
12,690
|
|
|
$
|
12,690
|
|
Equity investments
|
|
|
10,773
|
|
|
|
10,773
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
44,717
|
|
|
|
44,717
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
|
1,128,698
|
|
|
|
1,128,698
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
|
610,135
|
|
|
|
610,135
|
|
Accrued interest receivable
(2)
|
|
|
7,360
|
|
|
|
7,360
|
|
|
|
547
|
|
|
|
547
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds borrowed
(3)
|
|
|
1,226,342
|
|
|
|
1,226,694
|
|
|
|
327,623
|
|
|
|
330,084
|
|
Accrued interest payable
|
|
|
4,246
|
|
|
|
4,246
|
|
|
|
3,831
|
|
|
|
3,831
|
|
(1)
|
Categorized as level 1 within the fair value hierarchy.
|
(2)
|
Categorized as level 3 within the fair value hierarchy.
|
(3)
|
As of June 30, 2018 and December 31, 2017, publicly traded retail notes traded at a premium to par of
$352 and $2,461.
|
(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). Our 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 (level 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 (level 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 US 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
|
Page 40 of 97
|
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 managements own assumptions about the assumptions a market participant would use in pricing the assets or liability (examples include certain private equity
investments, and certain residential and commercial mortgage-related assets, including loans, securities, and derivatives).
A review of
fair value hierarchy classification is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain assets or liabilities. Reclassifications impacting level 3 of the fair value
hierarchy are reported as transfers in/out of the level 3 category as of the beginning of the quarter in which the reclassifications occur. The following paragraphs describe the sensitivity of the various level 3 valuations to the factors
that are relevant in their valuation analysis under both Bank Holding Company Accounting (applicable as of June 30, 2018 and for the quarter then ended) and Investment Company Accounting (applicable to prior periods).
Bank Holding Company Accounting
Commencing with the quarter ended June 30, 2018, equity investments are recorded at cost and are evaluated for impairment periodically.
The following table presents the Companys fair value hierarchy for those assets and liabilities measured at fair value on a
recurring basis as of June 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Holding Company Accounting
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,773
|
|
|
$
|
10,773
|
|
Available for sale investment
securities
(1)
|
|
|
|
|
|
|
44,717
|
|
|
|
|
|
|
|
44,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
44,717
|
|
|
$
|
10,773
|
|
|
$
|
55,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total unrealized losses of $255, net of tax, was included in accumulated other comprehensive income (loss) for
the three months ended June 30, 2018 related to these assets.
|
Investment Company Accounting
Medallion loans are primarily collateral-based lending, whereby the collateral value exceeds the amount of the loan, providing sufficient
excess collateral to protect against losses to the Company. As a result, the initial valuation assessment is that as long as the loan is current and performing, its fair value approximates the par value of the loan. To the extent a loan becomes
nonperforming, the collateral value has been adequate to result in a complete recovery. In a case where the collateral value was inadequate, an unrealized loss would be recorded to reflect any shortfall. Collateral values for medallion loans are
typically obtained from transfer prices reported by the regulatory agency in a particular local market (e.g. New York City Taxi and Limousine Commission). Those portfolios had historically been at very low loan to collateral value ratios, and as a
result, historically have not been highly sensitive to changes in collateral values. Over the last few years, as medallion collateral values have declined, the impact on the Companys valuation analysis has become more significant, which could
result in a significantly lower fair value measurement.
The mezzanine and other secured commercial portions of the commercial loan
portfolio are a combination of cash flow and collateral based lending. The initial valuation assessment is that as long as the loan is current and performing, its fair value approximates the par value of the loan. If a loan becomes nonperforming, an
evaluation is performed which considers and analyzes a variety of factors which may include the financial condition and operating performance of the borrower, the adequacy of the collateral, individual credit risks, historical loss experience, the
relationships between current and projected market rates and portfolio rates of interest and maturities, as well as general market trends for businesses in the same industry. Since each individual nonperforming loan has its own unique attributes,
the factors analyzed, and their relative importance to each valuation analysis, differ between each asset, and may differ from period to period for a particular asset. The valuation is highly sensitive to changes in the assumptions used. To the
extent that any assumption in the analysis changes significantly from one period to another, that change could result in a significantly lower or higher fair market value measurement. For example, if a borrowers valuation was determined
primarily on the cash flow generated from their business, then if that cash flow deteriorated significantly from a prior period valuation, that could have a material impact on the valuation in the current period.
Page 41 of 97
The investment in Medallion Bank was subject to a thorough valuation analysis as described
previously, and on at least an annual basis, the Company also received an opinion regarding the valuation from an independent third party to assist the Board of Directors in its determination of the fair value. The Company determined whether any
factors gave rise to a valuation different than recorded book value, including various regulatory restrictions that were established at Medallion Banks inception, by the FDIC and State of Utah, and also by additional regulatory restrictions,
such as the prior moratorium imposed by the Dodd-Frank Act on the acquisition of control of an industrial bank by a commercial firm (a company whose gross revenues are primarily derived from
non-financial
activities) which expired in July 2013, and the lack of any new charter issuances since the moratoriums expiration. Because of these restrictions and other factors, the Companys Board
of Directors had previously determined that Medallion Bank had little value beyond its recorded book value. As a result of this valuation process, the Company had previously used Medallion Banks actual results of operations as the best
estimate of changes in fair value, and recorded the results as a component of unrealized appreciation (depreciation) on investments In the 2015 second quarter, the Company first became aware of external interest in Medallion Bank and its portfolio
assets at values in excess of their book value. Expression of interest in Medallion Bank from both investment bankers and interested parties has continued. The Company incorporated these new factors in the Medallion Banks fair value analysis
and the Board of Directors determined that Medallion Bank had a fair value in excess of book value. In addition, in the 2016 third quarter there was a court ruling involving a marketplace lender that the Company believes heightens the interest of
marketplace lenders to acquire or merge with Utah industrial banks. The Company also engaged a valuation specialist to assist the Board of Directors in their determination of Medallion Banks fair value, and this appreciation of $15,500,000 was
thereby recorded in 2015, and additional appreciation of $128,918,000 was recorded in 2016, $7,489,000 was recorded in 2017 and $39,826,000 was recorded in 2018.
Investments in controlled subsidiaries, other than Medallion Bank, equity investments, and investments other than securities were valued
similarly, while also considering available current market data, including relevant and applicable market trading and transaction comparables, the nature and realizable value of any collateral, applicable interest rates and market yields, the
portfolio companys ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, and borrower financial analysis, among other factors. As a result of this valuation process, the Company used
the actual results of operations of the controlled subsidiaries as the best estimate of changes in fair value, in most cases, and records the results as a component of unrealized appreciation (depreciation) on investments. For the balance of
controlled subsidiary investments, equity investments, and investments other than securities positions, the result of the analysis resulted in changes to the value of the position if there is clear evidence that its value has either decreased or
increased in light of the specific facts considered for each investment. The valuation is highly sensitive to changes in the assumptions used. To the extent that any assumption in the analysis changes significantly from one period to another, that
change could result in a significantly lower or higher fair market value measurement. For example, if an investees valuation was determined primarily on the cash flow generated from their business, then if that cash flow deteriorated
significantly from a prior period valuation, that could have a material impact on the valuation in the current period.
The following
table presents the Companys fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Company Accounting
(Dollars
in
thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medallion loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
208,279
|
|
|
$
|
208,279
|
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
90,188
|
|
|
|
90,188
|
|
Investments in Medallion Bank and other controlled subsidiaries
|
|
|
|
|
|
|
|
|
|
|
302,147
|
|
|
|
302,147
|
|
Equity investments
|
|
|
|
|
|
|
|
|
|
|
9,521
|
|
|
|
9,521
|
|
Investments other than securities
|
|
|
|
|
|
|
|
|
|
|
7,450
|
|
|
|
7,450
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
339
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in level 3 investments as of December 31, 2017 is primarily the investment in Medallion
Bank, as well as other consolidated subsidiaries such as MSC, and other investments detailed in the consolidated summary schedule of investments following these footnotes. Included in level 3 equity investments are unregistered shares of common
stock in a publicly-held company, as well as certain private equity positions in
non-marketable
securities.
Page 42 of 97
The following tables provide a summary of changes in fair value of the Companys level 3
assets and liabilities for the quarter ended June 30, 2018, under Bank Holding Company Accounting, and for the quarters ended March 31, 2018 and June 30, 2017 and the six months ended June 30, 2017 under Investment Company
Accounting.
|
|
|
|
|
(Dollars
in
thousands)
|
|
Equity
Investments
|
|
March 31, 2018
|
|
$
|
9,458
|
|
Gains (losses) included in earnings
|
|
|
(374
|
)
|
Purchases, investments, and issuances
|
|
|
529
|
|
Sales, maturities, settlements, and distributions
|
|
|
(217
|
)
|
Transfers in
(1)
|
|
|
1,377
|
|
|
|
|
|
|
June 30, 2018
|
|
$
|
10,773
|
|
|
|
|
|
|
Amounts related to held assets
(2)
|
|
($
|
374
|
)
|
|
|
|
|
|
(1)
|
Represents the removal of RPAC Racing investments eliminated in consolidation as well as the transfer of LAX
from controlled subsidiaries during the 2018 second quarter.
|
(2)
|
Total realized and unrealized gains (losses) included in income for the period which relate to assets held as
of June 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Medallion
Loans
|
|
|
Commercial
Loans
|
|
|
Investments in
Medallion
Bank & Other
Controlled
Subsidiaries
|
|
|
Equity
Investments
|
|
|
Investments
Other Than
Securities
|
|
|
Other
Assets
|
|
December 31, 2017
|
|
$
|
208,279
|
|
|
$
|
90,188
|
|
|
$
|
302,147
|
|
|
$
|
9,521
|
|
|
$
|
7,450
|
|
|
$
|
339
|
|
Gains (losses) included in earnings
|
|
|
(38,190
|
)
|
|
|
(8
|
)
|
|
|
29,143
|
|
|
|
(993
|
)
|
|
|
(1,915
|
)
|
|
|
|
|
Purchases, investments, and issuances
|
|
|
7
|
|
|
|
7,252
|
|
|
|
462
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
Sales, maturities, settlements, and distributions
|
|
|
(8,941
|
)
|
|
|
(3,812
|
)
|
|
|
(583
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
Transfers in (out)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
$
|
161,155
|
|
|
$
|
93,620
|
|
|
$
|
331,169
|
|
|
$
|
9,458
|
|
|
$
|
5,535
|
|
|
$
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts related to held assets
(1)
|
|
($
|
38,190
|
)
|
|
($
|
10
|
)
|
|
$
|
29,143
|
|
|
($
|
993
|
)
|
|
($
|
1,915
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total realized and unrealized gains (losses) included in income for the period which relate to assets held as
of March 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Medallion
Loans
|
|
|
Commercial
Loans
|
|
|
Investments in
Medallion
Bank & Other
Controlled
Subsidiaries
|
|
|
Equity
Investments
|
|
|
Investments
Other Than
Securities
|
|
|
Other
Assets
|
|
March 31, 2017
|
|
$
|
250,976
|
|
|
$
|
73,748
|
|
|
$
|
300,886
|
|
|
$
|
9,640
|
|
|
$
|
9,510
|
|
|
$
|
354
|
|
Gains (losses) included in earnings
|
|
|
(12,452
|
)
|
|
|
(109
|
)
|
|
|
930
|
|
|
|
2,894
|
|
|
|
|
|
|
|
|
|
Purchases, investments, and issuances
|
|
|
320
|
|
|
|
7,720
|
|
|
|
402
|
|
|
|
856
|
|
|
|
|
|
|
|
|
|
Sales, maturities, settlements, and distributions
|
|
|
(5,429
|
)
|
|
|
(3,267
|
)
|
|
|
(399
|
)
|
|
|
(3,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
$
|
233,415
|
|
|
$
|
78,092
|
|
|
$
|
301,819
|
|
|
$
|
10,316
|
|
|
$
|
9,510
|
|
|
$
|
354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts related to held assets
(1)
|
|
($
|
12,426
|
)
|
|
($
|
118
|
)
|
|
$
|
930
|
|
|
$
|
120
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total realized and unrealized gains (losses) included in income for the period which relate to assets held as
of June 30, 2017.
|
Page 43 of 97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Medallion
Loans
|
|
|
Commercial
Loans
|
|
|
Investments in
Medallion
Bank & Other
Controlled
Subs
|
|
|
Equity
Investments
|
|
|
Investments
Other Than
Securities
|
|
|
Other
Assets
|
|
December 31, 2016
|
|
$
|
266,816
|
|
|
$
|
83,634
|
|
|
$
|
293,360
|
|
|
$
|
8,407
|
|
|
$
|
9,510
|
|
|
$
|
354
|
|
Gains (losses) included in earnings
|
|
|
(21,147
|
)
|
|
|
(403
|
)
|
|
|
9,054
|
|
|
|
4,155
|
|
|
|
|
|
|
|
|
|
Purchases, investments, and issuances
|
|
|
320
|
|
|
|
7,816
|
|
|
|
402
|
|
|
|
856
|
|
|
|
|
|
|
|
|
|
Sales, maturities, settlements, and distributions
|
|
|
(12,574
|
)
|
|
|
(12,955
|
)
|
|
|
(997
|
)
|
|
|
(3,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
$
|
233,415
|
|
|
$
|
78,092
|
|
|
$
|
301,819
|
|
|
$
|
10,316
|
|
|
$
|
9,510
|
|
|
$
|
354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts related to held assets
(1)
|
|
($
|
21,095
|
)
|
|
($
|
450
|
)
|
|
$
|
9,054
|
|
|
$
|
1,381
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total realized and unrealized gains (losses) included in income for the period which relate to assets held as
of June 30, 2017.
|
The following table presents the Companys fair value hierarchy for those assets and
liabilities measured at fair value on a
non-recurring
basis as of June 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
49,558
|
|
|
$
|
49,558
|
|
Loan collateral in process of foreclosure
|
|
|
|
|
|
|
|
|
|
|
60,052
|
|
|
|
60,052
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
115,110
|
|
|
$
|
115,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 recurring Level 3 fair value
measurements of assets and liabilities as of June 30, 2018 were as follows under Bank Holding Company Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Fair Value
at 6/30/18
|
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Range
(Weighted Average)
|
|
Equity Investments
|
|
|
6,306
|
|
|
Investee financial analysis
|
|
Financial condition and operating performance of the borrower
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Collateral support
|
|
|
N/A
|
|
|
|
|
2,556
|
|
|
Investee book value adjusted for market appreciation
|
|
Financial condition and operating performance of the investee
|
|
|
N/A
|
|
|
|
|
|
|
|
Precedent arms length offer
|
|
Business enterprise value
|
|
$
|
6,018 $7,218
|
|
|
|
|
|
|
|
|
|
Business enterprise value/revenue multiples
|
|
|
0.94x 4.42x
|
|
|
|
|
1,455
|
|
|
Precedent market transaction
|
|
Offering price
|
|
$
|
8.73 / share
|
|
|
|
|
456
|
|
|
Investee book value
|
|
Valuation indicated by investee filings
|
|
|
N/A
|
|
Page 44 of 97
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair
value measurements of assets and liabilities as of December 31, 2017 were as follows under Investment Company Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in
thousands)
|
|
Fair Value
at 12/31/17
|
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Range
(Weighted Average)
|
|
Medallion Loans
|
|
|
$208,279
|
|
|
Precedent market transactions
|
|
Adequacy of collateral (loan to value)
|
|
|
1% - 420% (131%)
|
|
Commercial Loans Mezzanine and Other
|
|
|
90,188
|
|
|
Borrower financial analysis
|
|
Financial condition and operating performance of
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
the borrower
Portfolio yields
|
|
|
2% -19.00% (12.02%)
|
|
Investment in Medallion Bank
|
|
|
290,548
|
|
|
Precedent M&A transactions
|
|
Price / book value multiples
|
|
|
2.1x to 2.5x
|
|
|
|
|
|
|
|
|
|
Price / earnings multiples
|
|
|
8.7x to 10.6x
|
|
|
|
|
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
17.50%
|
|
|
|
|
|
|
|
|
|
Terminal value
|
|
$
|
470,964 to $623,007
|
|
Investment in Other Controlled Subsidiaries
|
|
|
4,623
|
|
|
Investee financial analysis
|
|
Financial condition and operating performance
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Enterprise value
|
|
$
|
37,500 - $41,500
|
|
|
|
|
|
|
|
|
|
Equity value
|
|
$
|
2,000 - $5,000
|
|
|
|
|
3,878
|
|
|
Investee book value adjusted for asset appreciation
|
|
Financial condition and operating performance of the investee
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Third party valuation/ offer to purchase asset
|
|
|
N/A
|
|
|
|
|
3,001
|
|
|
Investee book value adjusted for market appreciation
|
|
Financial condition and operating performance of the investee
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Third party offer to purchase investment
|
|
|
N/A
|
|
|
|
|
97
|
|
|
Investee book value and equity pickup
|
|
Financial condition and
operating
performance of the investee
|
|
|
N/A
|
|
Equity Investments
|
|
|
5,417
|
|
|
Investee financial analysis
|
|
Financial condition and operating performance of the borrower
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Collateral support
|
|
|
N/A
|
|
|
|
|
2,193
|
|
|
Investee financial analysis
|
|
Equity value
|
|
$
|
2,000 - $5,000
|
|
|
|
|
|
|
|
|
|
Preferred equity yield
|
|
|
12%
|
|
|
|
|
1,455
|
|
|
Precedent market transaction
|
|
Offering price
|
|
$
|
8.73/share
|
|
|
|
|
456
|
|
|
Investee book value
|
|
Valuation indicated by investee filings
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments Other Than Securities
|
|
|
7,450
|
|
|
Precedent market transaction
|
|
Transfer prices of Chicago medallions
|
|
|
N/A
|
|
|
|
|
|
|
|
Cash flow analysis
|
|
Discount rate in cash flow analysis
|
|
|
6%
|
|
Other Assets
|
|
|
339
|
|
|
Borrower collateral analysis
|
|
Adequacy of collateral (loan to value)
|
|
|
0%
|
|
(16) INVESTMENTS OTHER THAN SECURITIES (Investment Company Accounting)
The following table presents the Companys investments other than securities as of December 31, 2017 under Investment Company
Accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Type
(Dollars
in thousands)
|
|
Number of
Investments
|
|
|
Investment
Cost
|
|
|
Value as of
12/31/17
|
|
City of Chicago Taxicab Medallions
|
|
|
154
|
(1)
|
|
$
|
8,411
|
|
|
$
|
7,238
|
(2)
|
City of Chicago Taxicab Medallions (handicap accessible)
|
|
|
5
|
(1)
|
|
|
278
|
|
|
|
212
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments Other Than Securities
|
|
|
|
|
|
$
|
8,689
|
|
|
$
|
7,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 45 of 97
(1)
|
Investment is not readily marketable, is considered income producing, is not subject to option, and is a
non-qualifying
asset under Investment Company Accounting.
|
(2)
|
Gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation for Federal
income tax purposes was $5,846, $0, and $5,846 as of December 31, 2017. The aggregate cost for Federal income tax purposes was $1,392 at December 31, 2017.
|
(3)
|
Gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation for Federal
income tax purposes was $172, $0, and $172 as of December 31, 2017. The aggregate cost for Federal income tax purposes was $40 at December 31, 2017.
|
(17) SMALL BUSINESS LENDING FUND PROGRAM (SBLF) AND TROUBLED ASSETS RELIEF PROGRAM (TARP)
On February 27, 2009 and December 22, 2009, Medallion Bank issued, and the US Treasury purchased under the TARP Capital Purchase
Program (the CPP) Medallion Banks fixed
rate non-cumulative Perpetual
Preferred Stock, Series A, B, C, and D for an aggregate purchase price of $21,498,000 in cash. On July 21, 2011,
Medallion Bank issued, and the US Treasury purchased 26,303 shares of
Senior Non-Cumulative Perpetual
Preferred Stock, Series E (Series E) for an aggregate purchase price of $26,303,000 under the
SBLF. The SBLF is a voluntary program intended to encourage small business lending by providing capital to qualified smaller banks at favorable rates. In connection with the issuance of the Series E, the Bank exited the CPP by redeeming the Series
A, B, C, and D; and received approximately $4,000,000, net of dividends due on the repaid securities. The Bank previously paid a dividend rate of 1% on the Series E, which increased to 9% in first quarter of 2016.
(18) SUBSEQUENT EVENTS
On August 3,
2018, a credit facility with a maturity date of July 31, 2018 was extended until November 30, 2018.
Page 46 of 97
Medallion Financial Corp.
Consolidated Summary Schedule of Investments
December 31, 2017
Investment Company Accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands)
|
|
Obligor
Name/Interest Rate
Range
|
|
Security
Type (all
restricted
unless
otherwise
noted)
|
|
|
Acquisition
Date
|
|
|
Maturity
Date
|
|
|
No. of
Invest.
|
|
|
% of
Net
Assets
|
|
|
Interest
Rate
(1)
|
|
|
Original
Cost of 2017
Acquisitions
(5)
|
|
|
Principal
Outstanding
|
|
|
Cost
(4)
|
|
|
Fair
Value
|
|
Medallion Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350
|
|
|
|
53
|
%
|
|
|
4.23
|
%
|
|
$
|
10,898
|
|
|
$
|
168,710
|
|
|
$
|
167,226
|
|
|
$
|
151,309
|
|
|
|
Sean Cab Corp ##
|
|
|
Term Loan
|
|
|
|
12/09/11
|
|
|
|
11/23/18
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
4.63
|
%
|
|
|
|
|
|
$
|
3,159
|
|
|
$
|
3,159
|
|
|
$
|
3,159
|
|
|
|
Real Cab Corp ##
|
|
|
Term Loan
|
|
|
|
07/20/07
|
|
|
|
12/20/17
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
2,545
|
|
|
$
|
2,545
|
|
|
$
|
2,545
|
|
|
|
Real Cab Corp ##
|
|
|
Term Loan
|
|
|
|
07/20/07
|
|
|
|
12/20/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
350
|
|
|
$
|
350
|
|
|
$
|
350
|
|
|
|
Slo Cab Corp ##
|
|
|
Term Loan
|
|
|
|
07/20/07
|
|
|
|
12/20/17
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
1,527
|
|
|
$
|
1,527
|
|
|
$
|
1,527
|
|
|
|
Slo Cab Corp ##
|
|
|
Term Loan
|
|
|
|
07/20/07
|
|
|
|
12/20/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
210
|
|
|
$
|
210
|
|
|
$
|
210
|
|
|
|
Junaid Trans Corp ## & {Annually-Prime plus 1.00%}
|
|
|
Term Loan
|
|
|
|
04/30/13
|
|
|
|
04/29/19
|
|
|
|
1
|
|
|
|
*
|
|
|
|
5.00
|
%
|
|
|
|
|
|
$
|
1,379
|
|
|
$
|
1,379
|
|
|
$
|
1,379
|
|
|
|
Avi Taxi Corporation ##
|
|
|
Term Loan
|
|
|
|
04/11/14
|
|
|
|
12/10/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.25
|
%
|
|
|
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
|
Hj Taxi Corp ##
|
|
|
Term Loan
|
|
|
|
04/11/14
|
|
|
|
12/10/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.25
|
%
|
|
|
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
|
Anniversary Taxi Corp ##
|
|
|
Term Loan
|
|
|
|
04/11/14
|
|
|
|
12/10/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.25
|
%
|
|
|
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
|
Kby Taxi Inc ##
|
|
|
Term Loan
|
|
|
|
04/11/14
|
|
|
|
12/10/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.25
|
%
|
|
|
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
|
Apple Cab Corp ##
|
|
|
Term Loan
|
|
|
|
04/11/14
|
|
|
|
12/10/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.25
|
%
|
|
|
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
$
|
1,329
|
|
|
|
Penegali Taxi LLC ##
|
|
|
Term Loan
|
|
|
|
12/11/14
|
|
|
|
12/10/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.75
|
%
|
|
|
|
|
|
$
|
1,294
|
|
|
$
|
1,294
|
|
|
$
|
1,294
|
|
|
|
Uddin Taxi Corp ## &
|
|
|
Term Loan
|
|
|
|
11/05/15
|
|
|
|
11/05/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
4.75
|
%
|
|
|
|
|
|
$
|
1,284
|
|
|
$
|
1,284
|
|
|
$
|
1,284
|
|
|
|
Waylon Transit LLC ##
|
|
|
Term Loan
|
|
|
|
09/27/17
|
|
|
|
09/27/22
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
1,275
|
|
|
$
|
1,275
|
|
|
$
|
1,275
|
|
|
$
|
1,277
|
|
|
|
Sonu-Seema Corp ## (interest rate includes deferred interest of 2.50%)
|
|
|
Term Loan
|
|
|
|
12/07/12
|
|
|
|
12/20/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
5.00
|
%
|
|
|
|
|
|
$
|
1,275
|
|
|
$
|
1,275
|
|
|
$
|
1,275
|
|
|
|
(deferred interest of $34 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bunty & Jyoti Inc ## (interest rate includes deferred interest of 2.50%)
|
|
|
Term Loan
|
|
|
|
03/13/13
|
|
|
|
12/13/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
5.00
|
%
|
|
|
|
|
|
$
|
1,259
|
|
|
$
|
1,259
|
|
|
$
|
1,259
|
|
|
|
(deferred interest of $35 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perem Hacking Corp ## & {Annually-Prime plus .25%}
|
|
|
Term Loan
|
|
|
|
05/01/16
|
|
|
|
05/01/21
|
|
|
|
1
|
|
|
|
*
|
|
|
|
4.25
|
%
|
|
|
|
|
|
$
|
1,223
|
|
|
$
|
1,223
|
|
|
$
|
1,225
|
|
|
|
S600 Service Co Inc ## & {Annually-Prime plus .25%}
|
|
|
Term Loan
|
|
|
|
05/01/16
|
|
|
|
05/01/21
|
|
|
|
1
|
|
|
|
*
|
|
|
|
4.25
|
%
|
|
|
|
|
|
$
|
1,223
|
|
|
$
|
1,223
|
|
|
$
|
1,225
|
|
|
|
Ela Papou LLC ##
|
|
|
Term Loan
|
|
|
|
06/27/14
|
|
|
|
12/15/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
4.00
|
%
|
|
|
|
|
|
$
|
1,213
|
|
|
$
|
1,213
|
|
|
$
|
1,213
|
|
|
|
Earie Hacking LLC ##
|
|
|
Term Loan
|
|
|
|
12/28/15
|
|
|
|
12/28/20
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.60
|
%
|
|
|
|
|
|
$
|
1,173
|
|
|
$
|
1,173
|
|
|
$
|
1,174
|
|
|
|
Amme Taxi Inc ##
|
|
|
Term Loan
|
|
|
|
10/21/13
|
|
|
|
10/21/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
3.70
|
%
|
|
|
|
|
|
$
|
1,162
|
|
|
$
|
1,162
|
|
|
$
|
1,162
|
|
|
|
Yosi Transit Inc ##
|
|
|
Term Loan
|
|
|
|
07/20/07
|
|
|
|
12/20/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
1,018
|
|
|
$
|
1,018
|
|
|
$
|
1,018
|
|
|
|
Yosi Transit Inc ##
|
|
|
Term Loan
|
|
|
|
07/20/07
|
|
|
|
12/20/17
|
|
|
|
1
|
|
|
|
*
|
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
140
|
|
|
$
|
140
|
|
|
$
|
140
|
|
Various New York && ##
|
|
0.00% to 18.38% (interest rate includes deferred interest 1.00% to 9.19%)
|
|
|
Term
Loan
|
|
|
|
03/23/01
to
12/22/17
|
|
|
|
05/28/16
to
12/21/26
|
|
|
|
327
|
|
|
|
42
|
%
|
|
|
4.36
|
%
|
|
$
|
9,623
|
|
|
$
|
139,356
|
|
|
$
|
137,872
|
|
|
$
|
121,948
|
|
|
|
(deferred interest of $1,281 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
5
|
%
|
|
|
4.74
|
%
|
|
$
|
0
|
|
|
$
|
20,172
|
|
|
$
|
19,436
|
|
|
$
|
15,602
|
|
|
|
Sweetgrass Peach &Chadwick Cap ## (interest rate includes deferred interest of 1.00%)
|
|
|
Term Loan
|
|
|
|
08/28/12
|
|
|
|
02/24/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
6.00
|
%
|
|
|
|
|
|
$
|
1,374
|
|
|
$
|
1,374
|
|
|
$
|
1,374
|
|
|
|
(deferred interest of $20 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various Chicago && ##
|
|
0.00% to 7.00% (interest rate includes deferred interest .75% to 2.75%)
|
|
|
Term Loan
|
|
|
|
01/22/10
to
08/08/16
|
|
|
|
03/12/16
to
12/22/20
|
|
|
|
106
|
|
|
|
5
|
%
|
|
|
4.65
|
%
|
|
$
|
0
|
|
|
$
|
18,798
|
|
|
$
|
18,062
|
|
|
$
|
14,228
|
|
|
|
(deferred interest of $207 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newark && ##
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
|
|
|
|
8
|
%
|
|
|
5.34
|
%
|
|
$
|
1,047
|
|
|
$
|
21,999
|
|
|
$
|
21,935
|
|
|
$
|
21,684
|
|
|
|
Viergella Inc ##
|
|
|
Term Loan
|
|
|
|
02/20/14
|
|
|
|
02/20/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
4.75
|
%
|
|
|
|
|
|
$
|
1,278
|
|
|
$
|
1,278
|
|
|
$
|
1,278
|
|
Various Newark && ##
|
|
4.50% to 7.00% (interest rate includes deferred interest 1.50%)
|
|
|
Term Loan
|
|
|
|
04/09/10
to
10/12/17
|
|
|
|
10/17/17
to
05/14/25
|
|
|
|
109
|
|
|
|
7
|
%
|
|
|
5.38
|
%
|
|
$
|
1,047
|
|
|
$
|
20,721
|
|
|
$
|
20,657
|
|
|
$
|
20,406
|
|
|
|
(deferred interest of $2 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston && ##
|
|
2.75% to 6.15%
|
|
|
Term Loan
|
|
|
|
06/12/07
to
10/04/17
|
|
|
|
12/07/15
to
11/06/25
|
|
|
|
59
|
|
|
|
6
|
%
|
|
|
4.51
|
%
|
|
$
|
633
|
|
|
$
|
18,907
|
|
|
$
|
18,564
|
|
|
$
|
18,504
|
|
Cambridge && ##
|
|
3.75% to 5.50%
|
|
|
Term Loan
|
|
|
|
05/06/11
to
12/15/15
|
|
|
|
03/29/16
to
01/26/20
|
|
|
|
13
|
|
|
|
0
|
%
|
|
|
4.55
|
%
|
|
$
|
0
|
|
|
$
|
824
|
|
|
$
|
773
|
|
|
$
|
693
|
|
Various Other && ##
|
|
4.75% to 9.00%
|
|
|
Term Loan
|
|
|
|
04/28/08
to
07/30/15
|
|
|
|
01/03/17
to
09/01/23
|
|
|
|
9
|
|
|
|
0
|
%
|
|
|
7.95
|
%
|
|
$
|
0
|
|
|
$
|
500
|
|
|
$
|
482
|
|
|
$
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total medallion loans ($183,529 pledged as collateral under borrowing
arrangements)
|
|
|
|
|
|
|
|
|
|
|
|
648
|
|
|
|
73
|
%
|
|
|
4.41
|
%
|
|
$
|
12,578
|
|
|
$
|
231,112
|
|
|
$
|
228,416
|
|
|
$
|
208,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured mezzanine
(22% North Carolina, 16% Minnesota, 7% Ohio, 6% Texas, 6%
Delaware 6% California, 5% Oklahoma, 5% Oregon, 4% Kansas, 4% North Dakota, 4% Pennsylvania, and 15% all other states)
(2)
|
|
Manufacturing (37% of the total)
|
|
Innovative Metal, Inc. dba Southwest Data Products (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
04/06/17
|
|
|
|
04/06/24
|
|
|
|
1
|
|
|
|
2
|
%
|
|
|
14.00
|
%
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
$
|
4,980
|
|
|
|
Stride Tool Holdings, LLC (interest rate includes PIK interest of 3.00%)
|
|
|
Term Loan
|
|
|
|
04/05/16
|
|
|
|
04/05/21
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
15.00
|
%
|
|
|
|
|
|
$
|
4,217
|
|
|
$
|
4,217
|
|
|
$
|
4,179
|
|
|
|
(capitalized interest of $217 per footnote 2)
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Page 47 of 97
Medallion Financial Corp.
Consolidated Summary Schedule of Investments
December 31, 2017
Investment Company Accounting
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(Dollars in
thousands)
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Obligor
Name/Interest Rate
Range
|
|
Security
Type (all
restricted
unless
otherwise
noted)
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Acquisition
Date
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|
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Maturity
Date
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|
No. of
Invest.
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|
% of
Net
Assets
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|
Interest
Rate
(1)
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Original
Cost of 2017
Acquisitions
(5)
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Principal
Outstanding
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Cost
(4)
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Fair
Value
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AA Plush Holdings, LLC (interest rate includes PIK interest of 6.00%)
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Term Loan
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|
08/15/14
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|
08/15/19
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1
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|
1
|
%
|
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14.00
|
%
|
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|
$
|
3,397
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|
$
|
3,397
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|
$
|
3,393
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|
(capitalized interest of $397 per footnote 2)
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Pinnacle Products International, Inc. (interest rate includes PIK interest of 3.00%)
|
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Term Loan
|
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|
10/09/15
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|
10/09/20
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|
1
|
|
|
|
1
|
%
|
|
|
15.00
|
%
|
|
|
|
|
|
$
|
3,249
|
|
|
$
|
3,249
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|
$
|
3,249
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|
(capitalized interest of $449 per footnote 2)
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Liberty Paper Products Acquisition, LLC (interest rate includes PIK interest of 2.00%)
|
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Term Loan
|
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|
|
06/09/16
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|
06/09/21
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|
1
|
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|
|
1
|
%
|
|
|
14.00
|
%
|
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|
|
|
|
$
|
3,096
|
|
|
$
|
3,096
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|
$
|
3,096
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|
|
(capitalized interest of $101 per footnote 2)
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|
EMI Porta Opco, LLC (interest rate includes PIK interest of 1.00%)
|
|
|
Term Loan
|
|
|
|
12/11/17
|
|
|
|
03/11/23
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
13.00
|
%
|
|
$
|
3,000
|
|
|
$
|
3,002
|
|
|
$
|
3,002
|
|
|
$
|
3,002
|
|
|
|
|
|
(capitalized interest of $2 per footnote 2)
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|
BB Opco, LLC d/b/a BreathableBaby, LLC (interest rate includes PIK interest of 3.00%)
|
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|
Term Loan
|
|
|
|
08/01/14
|
|
|
|
08/01/19
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
15.00
|
%
|
|
|
|
|
|
$
|
2,718
|
|
|
$
|
2,718
|
|
|
$
|
2,718
|
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|
|
(capitalized interest of $218 per footnote 2)
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|
EGC Operating Company, LLC (interest rate includes PIK interest of 1.00%)
|
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|
Term Loan
|
|
|
|
09/30/14
|
|
|
|
09/30/19
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
13.00
|
%
|
|
|
|
|
|
$
|
1,959
|
|
|
$
|
1,959
|
|
|
$
|
1,959
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|
|
(capitalized interest of $49 per footnote 2)
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|
American Cylinder, Inc. d/b/a All Safe (interest rate includes PIK interest of 7.00%)
|
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|
Term Loan
|
|
|
|
07/03/13
|
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|
|
09/30/18
|
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|
1
|
|
|
|
1
|
%
|
|
|
19.00
|
%
|
|
|
|
|
|
$
|
1,782
|
|
|
$
|
1,782
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|
|
$
|
1,782
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|
|
(capitalized interest of $282 per footnote 2)
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|
Tri-Tech
Forensics, Inc. (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
06/15/17
|
|
|
|
06/15/22
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
14.00
|
%
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
|
|
|
Orchard Holdings, Inc. &
|
|
|
Term Loan
|
|
|
|
03/10/99
|
|
|
|
03/31/10
|
|
|
|
1
|
|
|
|
*
|
|
|
|
13.00
|
%
|
|
|
|
|
|
$
|
1,390
|
|
|
$
|
1,390
|
|
|
$
|
1,390
|
|
|
|
|
|
Filter Holdings, Inc. (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
05/05/17
|
|
|
|
05/05/22
|
|
|
|
1
|
|
|
|
*
|
|
|
|
14.00
|
%
|
|
$
|
1,250
|
|
|
$
|
1,250
|
|
|
$
|
1,250
|
|
|
$
|
1,250
|
|
|
|
|
|
Various Other 10.00%
|
|
|
Term Loan
|
|
|
|
03/28/17
|
|
|
|
03/28/22
|
|
|
|
1
|
|
|
|
*
|
|
|
|
10.00
|
%
|
|
$
|
200
|
|
|
$
|
200
|
|
|
$
|
200
|
|
|
$
|
200
|
|
Arts, Entertainment, and Recreation (19% of the total)
|
|
|
|
RPAC Racing LLC & (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
11/27/17
|
|
|
|
03/31/20
|
|
|
|
1
|
|
|
|
3
|
%
|
|
|
2.00
|
%
|
|
$
|
7,827
|
|
|
$
|
7,827
|
|
|
$
|
7,827
|
|
|
$
|
7,827
|
|
|
|
|
|
(capitalized interest of $15 per footnote 2)
|
|
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|
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|
|
|
RPAC Racing LLC & (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
06/22/16
|
|
|
|
03/31/20
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
2.00
|
%
|
|
|
|
|
|
$
|
2,034
|
|
|
$
|
2,034
|
|
|
$
|
2,034
|
|
|
|
|
|
(capitalized interest of $278 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPAC Racing LLC & (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
09/14/16
|
|
|
|
03/31/20
|
|
|
|
1
|
|
|
|
*
|
|
|
|
2.00
|
%
|
|
|
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
|
|
|
(capitalized interest of $120 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPAC Racing LLC & (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
11/19/10
|
|
|
|
03/30/20
|
|
|
|
1
|
|
|
|
2
|
%
|
|
|
2.00
|
%
|
|
|
|
|
|
$
|
5,611
|
|
|
$
|
5,611
|
|
|
$
|
5,611
|
|
|
|
|
|
(capitalized interest of $2,572 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional, Scientific, and Technical Services (18% of the total)
|
|
|
|
Weather Decision Technologies, Inc. (interest rate includes PIK interest of 9.00%)
|
|
|
Term Loan
|
|
|
|
12/11/15
|
|
|
|
12/11/20
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
18.00
|
%
|
|
|
|
|
|
$
|
4,221
|
|
|
$
|
4,221
|
|
|
$
|
4,214
|
|
|
|
|
|
(capitalized interest of $721 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weather Decision Technologies, Inc. (interest rate includes PIK interest of 7.00%)
|
|
|
Term Loan
|
|
|
|
11/08/17
|
|
|
|
06/30/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
14.00
|
%
|
|
$
|
325
|
|
|
$
|
327
|
|
|
$
|
327
|
|
|
$
|
327
|
|
|
|
|
|
(capitalized interest of $2 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADSCO Opco, LLC (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
10/25/16
|
|
|
|
10/25/21
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
13.00
|
%
|
|
|
|
|
|
$
|
3,687
|
|
|
$
|
3,687
|
|
|
$
|
3,677
|
|
|
|
|
|
(capitalized interest of $87 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Technologies, LLC (interest rate includes PIK interest of 1.00%)
|
|
|
Term Loan
|
|
|
|
01/29/16
|
|
|
|
01/29/23
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
13.00
|
%
|
|
|
|
|
|
$
|
3,670
|
|
|
$
|
3,670
|
|
|
$
|
3,670
|
|
|
|
|
|
(capitalized interest of $70 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+
|
|
DPIS Engineering, LLC
|
|
|
Term Loan
|
|
|
|
12/01/14
|
|
|
|
06/30/20
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
12.00
|
%
|
|
|
|
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
|
$
|
1,998
|
|
|
|
+
|
|
Portu-Sunberg Marketing LLC
|
|
|
Term Loan
|
|
|
|
10/21/16
|
|
|
|
02/21/22
|
|
|
|
1
|
|
|
|
*
|
|
|
|
12.00
|
%
|
|
|
|
|
|
$
|
1,250
|
|
|
$
|
1,250
|
|
|
$
|
1,245
|
|
|
|
|
|
Various Other 14.00%
|
|
|
Term Loan
|
|
|
|
05/21/15
|
|
|
|
05/21/22
|
|
|
|
1
|
|
|
|
*
|
|
|
|
14.00
|
%
|
|
|
|
|
|
$
|
1,156
|
|
|
$
|
1,156
|
|
|
$
|
1,156
|
|
|
|
|
|
(capitalized interest of $11 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information (9% of the total)
|
|
|
|
US Internet Corp.
|
|
|
Term Loan
|
|
|
|
03/14/17
|
|
|
|
03/14/22
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
14.50
|
%
|
|
$
|
5,650
|
|
|
$
|
4,075
|
|
|
$
|
4,075
|
|
|
$
|
4,062
|
|
|
|
|
|
US Internet Corp. (interest rate includes PIK interest of 17.00%)
|
|
|
Term Loan
|
|
|
|
03/14/17
|
|
|
|
03/14/22
|
|
|
|
1
|
|
|
|
*
|
|
|
|
19.00
|
%
|
|
$
|
1,000
|
|
|
$
|
1,147
|
|
|
$
|
1,147
|
|
|
$
|
1,147
|
|
|
|
|
|
(capitalized interest of $147 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centare Holdings, Inc. (interest rate includes PIK interest of 2.00%)
|
|
|
Term Loan
|
|
|
|
08/30/13
|
|
|
|
08/30/18
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
14.00
|
%
|
|
|
|
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
2,497
|
|
Wholesale Trade (6% of the total)
|
|
+
|
|
Classic Brands, LLC
|
|
|
Term Loan
|
|
|
|
01/08/16
|
|
|
|
04/30/23
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
12.00
|
%
|
|
|
|
|
|
$
|
2,880
|
|
|
$
|
2,880
|
|
|
$
|
2,880
|
|
Page 48 of 97
Medallion Financial Corp.
Consolidated Summary Schedule of Investments
December 31, 2017
Investment Company Accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands)
|
|
|
|
Obligor
Name/Interest Rate
Range
|
|
Security
Type (all
restricted
unless
otherwise
noted)
|
|
|
Acquisition
Date
|
|
|
Maturity
Date
|
|
|
No. of
Invest.
|
|
|
% of
Net
Assets
|
|
|
Interest
Rate
(1)
|
|
|
Original
Cost of 2017
Acquisitions
(5)
|
|
|
Principal
Outstanding
|
|
|
Cost
(4)
|
|
|
Fair
Value
|
|
|
|
|
|
Harrells Car Wash Systems, Inc. (interest rate includes PIK interest of 3.00%)
|
|
|
Term Loan
|
|
|
|
07/03/17
|
|
|
|
09/03/22
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
15.00
|
%
|
|
$
|
2,000
|
|
|
$
|
2,532
|
|
|
$
|
2,532
|
|
|
$
|
2,529
|
|
|
|
|
|
(capitalized interest of $32 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining, Quarrying, and Oil and Gas Extraction (5% of the total)
|
|
|
|
Green Diamond Performance Materials, Inc. (interest rate includes PIK interest of 4.50%)
|
|
|
Term Loan
|
|
|
|
09/08/17
|
|
|
|
09/08/24
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
16.50
|
%
|
|
$
|
4,000
|
|
|
$
|
4,057
|
|
|
$
|
4,057
|
|
|
$
|
4,057
|
|
|
|
|
|
(capitalized interest of $57 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation and Warehousing (4% of the total)
|
|
|
|
LLL Transport, Inc. (interest rate includes PIK interest of 3.00%)
|
|
|
Term Loan
|
|
|
|
10/23/15
|
|
|
|
04/23/21
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
15.00
|
%
|
|
|
|
|
|
$
|
3,914
|
|
|
$
|
3,914
|
|
|
$
|
3,912
|
|
|
|
|
|
(capitalized interest of $410 per footnote 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction (2% of the total)
|
|
|
|
Highland
Crossing-M,
LLC (interest rate includes PIK interest of 11.50%)
|
|
|
Term Loan
|
|
|
|
01/07/15
|
|
|
|
02/01/25
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
11.50
|
%
|
|
|
|
|
|
$
|
1,445
|
|
|
$
|
1,445
|
|
|
$
|
1,444
|
|
Accommodation and Food Services (0% of the total)
|
|
|
|
Various Other 9.25%
|
|
|
Term Loan
|
|
|
|
11/05/10
|
|
|
|
11/05/20
|
|
|
|
1
|
|
|
|
*
|
|
|
|
9.25
|
%
|
|
|
|
|
|
$
|
241
|
|
|
$
|
241
|
|
|
$
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total secured mezzanine
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
31
|
%
|
|
|
12.09
|
%
|
|
$
|
31,752
|
|
|
$
|
88,334
|
|
|
$
|
88,334
|
|
|
$
|
88,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other secured commercial
(51% New York, 42% New Jersey and 7% all other
states)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Trade (81% of the total)
|
|
|
|
Medallion Fine Art Inc (interest rate includes PIK interest of 12%)
|
|
|
Term Loan
|
|
|
|
12/17/12
|
|
|
|
03/17/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
12.00
|
%
|
|
|
|
|
|
$
|
999
|
|
|
$
|
999
|
|
|
$
|
999
|
|
|
|
|
|
Various Other && 4.75% to 10.50%
|
|
|
Term Loan
|
|
|
|
10/28/08
to
12/23/15
|
|
|
|
05/09/18
to
03/03/20
|
|
|
|
5
|
|
|
|
*
|
|
|
|
7.74
|
%
|
|
|
|
|
|
$
|
835
|
|
|
$
|
795
|
|
|
$
|
604
|
|
Accommodation and Food Services (12% of the total)
|
|
|
|
Various Other && 6.75% to 9.00%
|
|
|
Term Loan
|
|
|
|
11/29/05
to
06/06/14
|
|
|
|
04/18/17
to
09/06/19
|
|
|
|
3
|
|
|
|
*
|
|
|
|
8.26
|
%
|
|
|
|
|
|
$
|
644
|
|
|
$
|
544
|
|
|
$
|
228
|
|
Transportation and Warehousing (4% of the total)
|
|
|
|
Various Other && 4.25%
|
|
|
Term Loan
|
|
|
|
03/17/15
|
|
|
|
09/10/18
|
|
|
|
1
|
|
|
|
*
|
|
|
|
4.25
|
%
|
|
|
|
|
|
$
|
75
|
|
|
$
|
74
|
|
|
$
|
75
|
|
Real Estate and Rental and Leasing (3% of the total)
|
|
|
|
Various Other && 5.00%
|
|
|
Term Loan
|
|
|
|
03/31/15
|
|
|
|
03/31/20
|
|
|
|
1
|
|
|
|
*
|
|
|
|
5.00
|
%
|
|
|
|
|
|
$
|
69
|
|
|
$
|
65
|
|
|
$
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Commercial Loans
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
1
|
%
|
|
|
9.39
|
%
|
|
|
|
|
|
$
|
2,622
|
|
|
$
|
2,477
|
|
|
$
|
1,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
(2)
|
|
|
|
44
|
|
|
|
31
|
%
|
|
|
12.02
|
%
|
|
$
|
31,752
|
|
|
$
|
90,956
|
|
|
$
|
90,811
|
|
|
$
|
90,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Medallion Bank and other controlled subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banking
|
|
|
|
Medallion Bank **
|
|
|
100% of common stock
|
|
|
|
05/16/02
|
|
|
|
None
|
|
|
|
1
|
|
|
|
101
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
138,282
|
|
|
$
|
290,548
|
|
NASCAR Race Team
|
|
|
|
Medallion MotorSports, LLC
|
|
|
75% of LLC units
|
|
|
|
11/24/10
|
|
|
|
None
|
|
|
|
1
|
|
|
|
2
|
%
|
|
|
42.40
|
%
|
|
|
|
|
|
|
|
|
|
$
|
2,820
|
|
|
$
|
4,623
|
|
Art Dealer
|
|
|
|
Medallion Fine Art, Inc.
|
|
|
100% of common stock
|
|
|
|
12/03/12
|
|
|
|
None
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
1,777
|
|
|
$
|
3,878
|
|
Loan Servicing
|
|
|
|
Medallion Servicing Corp.
|
|
|
100% of common stock
|
|
|
|
11/05/10
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
97
|
|
|
$
|
97
|
|
Professional Sports Team
|
|
|
|
LAX Group LLC
|
|
|
44.97% of membership interests
|
|
|
|
05/23/12
|
|
|
|
None
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
251
|
|
|
$
|
3,001
|
|
Media
|
|
|
|
Medallion Taxi Media, Inc.
|
|
|
100% of common stock
|
|
|
|
01/01/17
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Medallion Bank and other controlled subsidiaries, net
|
|
|
|
|
|
|
|
6
|
|
|
|
105
|
%
|
|
|
0.83
|
%
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
143,227
|
|
|
$
|
302,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Finance
|
|
|
|
Convergent Capital, Ltd **
|
|
|
7% of limited
partnership interest
|
|
|
|
07/20/07
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
733
|
|
|
$
|
456
|
|
NASCAR Race Team
|
|
|
|
Rpac Racing LLC
|
|
|
1,000 shares of
Series D
|
|
|
|
08/25/15
|
|
|
|
None
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
2,193
|
|
Loan Servicing
|
|
|
|
Upgrade, Inc.
|
|
|
666,668 shares of Series A-1 preferred stock
|
|
|
|
09/30/16
|
|
|
|
None
|
|
|
|
1
|
|
|
|
1
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
250
|
|
|
$
|
1,455
|
|
Stuffed Toy Manufacturer
|
|
|
|
AA Plush Holdings, LLC d/b/a Animal Adventures
|
|
|
1.6% Common Units
|
|
|
|
08/15/14
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
300
|
|
|
$
|
300
|
|
Advertising Services
|
|
|
|
ADSCO Opco, LLC
|
|
|
7.9% Class A Series A-2 Units
|
|
|
|
10/25/16
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
400
|
|
|
$
|
400
|
|
Page 49 of 97
Medallion Financial Corp.
Consolidated Summary Schedule of Investments
December 31, 2017
Investment Company Accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands)
|
|
|
|
Obligor
Name/Interest Rate
Range
|
|
Security
Type (all
restricted
unless
otherwise
noted)
|
|
Acquisition
Date
|
|
|
Maturity
Date
|
|
|
No. of
Invest.
|
|
|
% of
Net
Assets
|
|
|
Interest
Rate
(1)
|
|
|
Original
Cost of 2017
Acquisitions
(5)
|
|
|
Principal
Outstanding
|
|
|
Cost
(4)
|
|
|
Fair
Value
|
|
Baby Sleep Products
|
|
|
|
BB Opco, LLC d/b/a BreathableBaby, LLC
|
|
3.6% Units
|
|
|
08/01/14
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
250
|
|
|
$
|
250
|
|
IT Services
|
|
|
|
Centare Holdings, Inc.
|
|
7.23% of common stock, 3.88% of preferred stock
|
|
|
08/30/13
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
103
|
|
|
$
|
103
|
|
Wholesale Hobbyists Supplies
|
|
|
|
Classic Brands, LLC
|
|
Warrant for 300,000 Class A units
|
|
|
01/08/16
|
|
|
|
01/08/26
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Engineering Design Services
|
|
|
|
DPIS Engineering LLC
|
|
Warrant for 180,000 Class C units
|
|
|
12/01/14
|
|
|
|
5th
anniversary
of note paid
in full
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Elevator Parts Manufacturer
|
|
|
|
EMI Porta HoldCo, LLC
|
|
3.56% of Series
A-2
Preferred Units
|
|
|
12/11/17
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
500
|
|
|
|
|
|
|
$
|
500
|
|
|
$
|
500
|
|
Industrial Filters Manufacturer
|
|
|
|
Filter Holdings, Inc.
|
|
7.14% of Common Stock, 7.14% of Preferred Stock
|
|
|
05/05/17
|
|
|
|
None
|
|
|
|
2
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
207
|
|
|
|
|
|
|
$
|
207
|
|
|
$
|
207
|
|
Specialty Sand Products
|
|
|
|
Green Diamond Performance Materials, Inc.
|
|
4.26% of Series A Preferred Stock
|
|
|
09/08/17
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
200
|
|
|
|
|
|
|
$
|
200
|
|
|
$
|
200
|
|
Car Wash Equipment Manufacturer
|
|
|
|
Harrells Car Wash Systems, Inc.
|
|
0.89% of Common Stock
|
|
|
07/03/17
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
104
|
|
|
|
|
|
|
$
|
104
|
|
|
$
|
104
|
|
Sheet Metal Manufacturer
|
|
|
|
SWDP Acquisition Co., LLC
|
|
9.9875% of LLC Units
|
|
|
04/06/17
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
400
|
|
|
|
|
|
|
$
|
400
|
|
|
$
|
400
|
|
Paper Tapes Manufacturer
|
|
|
|
Liberty Paper Products Acquisition, LLC
|
|
100% of Series A Preferred Units12% TOTAL
|
|
|
06/09/16
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
350
|
|
|
$
|
350
|
|
Environmental Consulting Services
|
|
|
|
Northern Technologies, LLC
|
|
8.27% of LLC units
|
|
|
01/29/2016,
12/5/16 &
6/12/17
|
|
|
|
None
|
|
|
|
3
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
58
|
|
|
|
|
|
|
$
|
408
|
|
|
$
|
408
|
|
Space Heater Manufacturer
|
|
|
|
Pinnacle Products International, Inc.
|
|
0.5% common stock
|
|
|
10/09/15
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
135
|
|
|
$
|
135
|
|
Marketing Services
|
|
|
|
Portu-Sunberg Marketing LLC
|
|
0.86% LLC units
|
|
|
10/19/16
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
50
|
|
|
$
|
50
|
|
|
|
|
|
Portu-Sunberg Marketing LLC
|
|
Warrant for 2.85% of the outstanding stock
|
|
|
12/31/12
|
|
|
|
07/24/20
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Hand Tool Manufacturer
|
|
|
|
Stride Tool Holdings, LLC
|
|
7.14% of LLC units
|
|
|
04/05/16
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
500
|
|
|
$
|
500
|
|
Forensic Supplies
|
|
|
|
Tri-Tech
Forensics, Inc.
|
|
4.91% of Common Stock; 4.61% of Preferred Stock
|
|
|
06/15/17
|
|
|
|
None
|
|
|
|
3
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
$
|
192
|
|
|
|
|
|
|
$
|
192
|
|
|
$
|
192
|
|
Weather Forecasting Services
|
|
|
|
Weather Decision Technologies, Inc.
|
|
2.2% preferred stock
|
|
|
12/11/15
|
|
|
|
None
|
|
|
|
1
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
500
|
|
|
$
|
500
|
|
Various Other #
|
|
+
|
|
**
|
|
* Various
|
|
|
08/04/08 to
12/12/14
|
|
|
|
None to
2/5/23
|
|
|
|
5
|
|
|
|
*
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
$
|
818
|
|
|
$
|
818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
3
|
%
|
|
|
0.00
|
%
|
|
$
|
1,661
|
|
|
$
|
0
|
|
|
$
|
6,400
|
|
|
$
|
9,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0.00
|
%
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investments ($183,529 pledged as collateral under borrowing arrangements)
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730
|
|
|
|
212
|
%
|
|
|
4.73
|
%
|
|
$
|
45,991
|
|
|
$
|
322,068
|
|
|
$
|
468,854
|
|
|
$
|
610,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the actual or weighted average interest or dividend rate of the respective security or portfolio as
of the date indicated. Investments without an interest rate or with a rate of 0.00% are considered
non-income
producing.
|
(2)
|
Included in secured mezzanine commercial loans and other commercial loans was $6,237 of interest income
capitalized into the outstanding investment balances, and $1,579 of deferred interest income, in accordance with the terms of the investment contract.
|
(3)
|
The ratio of restricted securities fair value to net assets is 212%.
|
(4)
|
Gross unrealized appreciation, gross unrealized depreciation, and net appreciation for federal income tax
purposes totaled $220,597, $21,306 and $199,291, respectively. The tax cost of investments was $410,844.
|
(5)
|
For revolving lines of credit the amount shown is the cost at December 31, 2017.
|
**
|
Not an eligible portfolio company as such term is defined in Section 2(a)(46) of the 1940 Act. The
percentage value of all
non-eligible
portfolio companies to total assets of Medallion Financial on an unconsolidated basis was up to 59% and up to 48% on a consolidated basis. Under the 1940 Act, we were not
allowed to acquire any
non-qualifying
assets, unless at the time such acquisition is made, qualifying assets, which include securities of eligible portfolio companies, represent at least 70% of our total
assets. The status of these assets under the 1940 Act are subject to change. We monitor the status of these assets on an ongoing basis.
|
&
|
Loan is on nonaccrual status, or past due on contractual payments, and is therefore considered
non-income
producing.
|
&&
|
Some or all of the securities are
non-income
producing as
per & above.
|
#
|
Publicly traded but sales subject to applicable Rule 144 limitations.
|
Page 50 of 97
|
## Pledged as collateral under borrowing arrangements.
+ Includes various warrants, all of which have a cost and fair value of zero at December 31,
2017.
The Summary Schedule of Investments does not reflect the Companys
complete portfolio holdings. It includes the Companys 50 largest holdings and each investment of any issuer that exceeds 1% of the Companys net assets. Various Other represents all issues not required to be disclosed under
the rules adopted by the U.S. Securities and Exchange Commission (SEC). Footnotes above may apply to securities that are included in Various Other. For further detail, the complete schedule of portfolio holdings is available
(i) without charge, upon request, by calling (877) MEDALLION; and (ii) on the SECs website at http://www.sec.gov. Filed as Exhibit 99.1 to the Annual Report on Form
10-K
for the
fiscal year ended December 31, 2017, filed on March 14, 2018 (File
No. 814-00188).
|
Page 51 of 97
Medallion Financial Corp.
CONSOLIDATED SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFIILIATES
As of and for the year ended December 31, 2017 under Investment Company Accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of issuer and title of issue
(Dollars
in
thousands)
|
|
Number of shares (all restricted unless
otherwise noted)
|
|
Equity in
net profit
and (loss)
|
|
|
Amount of
dividends
or interest
(1)
|
|
|
Value as of
12/31/17
|
|
Medallion Bank common stock
|
|
1,000,000 shares100% of common stock
|
|
$
|
10,193
|
|
|
$
|
0
|
|
|
$
|
290,548
|
|
Medallion Motorsports, LLC membership interest
(2)
|
|
75% of membership interest
|
|
|
(2,357
|
)
|
|
|
1,201
|
|
|
|
4,623
|
|
Medallion Fine Art, Inc. common
stock
(3)
|
|
1,000 shares100% of common stock
|
|
|
231
|
|
|
|
0
|
|
|
|
3,878
|
|
LAX Group LLC membership interest
|
|
45% of membership interest
|
|
|
870
|
|
|
|
0
|
|
|
|
3,001
|
|
Medallion Servicing Corp. common stock
|
|
1,000 shares100% of common stock
|
|
|
546
|
|
|
|
0
|
|
|
|
97
|
|
Medallion Taxi Media, Inc. common stock
|
|
1,000 shares100% of common stock
|
|
|
0
|
|
|
|
77
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments in Medallion Bank and other controlled subsidiaries
|
|
|
|
|
9,483
|
|
|
|
1,278
|
|
|
|
302,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPAC Racing LLC
(2)
|
|
100% of Series D units
|
|
|
0
|
|
|
|
0
|
|
|
|
2,193
|
|
Stride Tool Holdings LLC
(4)
membership interest
|
|
7.14% of membership interest
|
|
|
0
|
|
|
|
0
|
|
|
|
500
|
|
Northern Technologies LLC membership interest
(5)
|
|
8.3% of membership interest
|
|
|
0
|
|
|
|
0
|
|
|
|
408
|
|
ADSCO Holdco LLC membership
interest
(6)
|
|
7.7% of Class A Series
A-2
LLC units
|
|
|
0
|
|
|
|
0
|
|
|
|
400
|
|
SWDP Acquisition Co LLC
(7)
|
|
10% of membership interest
|
|
|
0
|
|
|
|
0
|
|
|
|
400
|
|
Appliance Recycling Centers of America Inc. common stock
|
|
0% of common stock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Filter Holdings INC.
(8)
|
|
7.14% of common & preferred stock
|
|
|
0
|
|
|
|
0
|
|
|
|
207
|
|
Third Century JRT, Inc.
(9)
|
|
13% of common stock
|
|
|
0
|
|
|
|
0
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity investments in affiliates
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Investments with an amount of $0 are considered
non-income
producing.
|
(2)
|
The Company and a controlled subsidiary of the Company have 4 loans due from RPAC Racing LLC, an affiliate of
Medallion Motorsports, LLC, in the amount of $16,472 as of December 31, 2017, and on which $56 of interest income was earned during the year ended December 31, 2017 as the loans are on
non-accrual
status.
|
(3)
|
The Company has a loan due from Medallion Fine Art, Inc. in the amount of $999 as of December 31, 2017,
and on which $165 of interest income was earned during the year ended December 31, 2017.
|
(4)
|
The Company has a loan due from Stride Tool Holding LLC in the amount of $4,217 as of December 31, 2017,
and on which $631 of interest income was earned during the year ended December 31, 2017.
|
(5)
|
The Company has a loan due from Northern Technologies LLC in the amount of $3,670 as of December 31, 2017,
on which $477 of interest income was earned during the year ended December 31, 2017.
|
(6)
|
The Company has a loan due from ADSCO Holdco LLC in the amount of $ 3,687 as of December 31, 2017, and on
which $475 of interest income was earned during the year ended December 31, 2017.
|
(7)
|
The Company has a loan due from Innovative Metal Inc., an affiliate of SWDP Acquisition Co LLC in the amount of
$5,000 as of December 31, 2017, on which $523 of interest income was earned during the year ended December 31, 2017.
|
(8)
|
The Company has a loan due from Filter Holdings Inc. in the amount of $1,250 as of December 31, 2017, on
which $117 of interest income was earned during the year ended December 31, 2017.
|
(9)
|
The Company has a loan due from JR Thompson Company LLC, an affiliate of Third Century JRT, Inc., in the amount
of $1,156 as of December 31, 2017, on which $204 of interest income was earned during the year ended December 31, 2017.
|
Page 52 of 97
The table below provides a summary of the changes in the investment in the respective issuers for the year ended
December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Name of Issuer
|
|
Medallion
Bank
|
|
|
Medallion
Fine Art,
Inc.
(1)
|
|
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Medallion
Motorsports,
LLC
(2)
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|
Appliance
Recycling
Centers
of
America,
Inc.
|
|
|
Medallion
Servicing
Corp.
|
|
|
LAX
Group, LLC
|
|
|
Medallion
Taxi Media,
Inc.
|
|
|
Third
Century
JRT,
Inc.
(3)
|
|
|
Northern
Technologies,
LLC
(4)
|
|
|
Stride Tool
Holding
LLC
(5)
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|
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ADSCO Holdco
LLC
(6)
|
|
|
RPAC Racing
LLC
(2)
|
|
|
Filter
Holdings
Inc.
(7)
|
|
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SWDP
ACQUISITION
Co LLC
(8)
|
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Title of Issue
|
|
Common
Stock
|
|
|
Common
Stock
|
|
|
Membership
Interest
|
|
|
Common
Stock
|
|
|
Common
Stock
|
|
|
Membership
Interest
|
|
|
Common
Stock
|
|
|
Common
Stock
|
|
|
Membership
Interest
|
|
|
Membership
Interest
|
|
|
Membership
Interest
|
|
|
Membership
Interest
|
|
|
Common &
Preferred
Stock
|
|
|
Membership
Interest
|
|
(Dollars in thousands)
|
|
Value as of 12/31/16
|
|
$
|
280,589
|
|
|
$
|
3,647
|
|
|
$
|
6,980
|
|
|
$
|
475
|
|
|
$
|
454
|
|
|
$
|
1,690
|
|
|
$
|
|
|
|
$
|
200
|
|
|
$
|
351
|
|
|
$
|
500
|
|
|
$
|
400
|
|
|
$
|
1,351
|
|
|
$
|
|
|
|
$
|
|
|
Gross additions / investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
441
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207
|
|
|
|
400
|
|
Gross reductions / distributions
|
|
|
(234
|
)
|
|
|
|
|
|
|
(1,201
|
)
|
|
|
(351
|
)
|
|
|
(903
|
)
|
|
|
|
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Net equity in profit and loss, and unrealized appreciation and (depreciation)
|
|
|
10,193
|
|
|
|
231
|
|
|
|
(1,156
|
)
|
|
|
(124
|
)
|
|
|
546
|
|
|
|
870
|
|
|
|
77
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
842
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value as of 12/31/17
|
|
$
|
290,548
|
|
|
$
|
3,878
|
|
|
$
|
4,623
|
|
|
$
|
|
|
|
$
|
97
|
|
|
$
|
3,001
|
|
|
$
|
|
|
|
$
|
200
|
|
|
$
|
408
|
|
|
$
|
500
|
|
|
$
|
400
|
|
|
$
|
2,193
|
|
|
$
|
207
|
|
|
$
|
400
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
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|
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(1)
|
The Company has a loan due from Medallion Fine Art, Inc. in the amount of $999 as of December 31, 2017, $0
of which was advanced during 2017, and for which $2,325 was repaid.
|
(2)
|
In addition to the equity ownership, the Company and a controlled subsidiary of the Company have four loans due
from RPAC Racing LLC, an affiliate of Medallion Motorsports, LLC, in the amount of $16,472, $7,883 of which was advanced during 2017.
|
(3)
|
The Company has a loan due from J. R. Thompson Company, LLC, an affiliate of Third Century JRT, Inc. in the
amount of $1,156 as of December 31, 2017, $469 of which was repaid during 2017.
|
(4)
|
The Company has a loan due from Northern Technologies LLC in the amount of $3,670 as of December 31, 2017,
$137 of which was advanced during 2017.
|
(5)
|
The Company has a loan due from Stride Tool Holdings LLC in the amount of $4,217 as of December 31, 2017,
$126 of which was advanced during 2017.
|
(6)
|
The Company has a loan due from ADSCO Holdco LLC in the amount of $3,687 as of December 31, 2017, $74 of
which was advanced during 2017.
|
(7)
|
The Company has a loan due from Filter Holdings Inc. in the amount of $1,250 as of December 31, 2017, all
of which was advanced during 2017.
|
(8)
|
The Company has a loan due from Innovative Metals, Inc., an affiliate of SWDP Acquisition Co LLC in the amount
of $5,000 as of December 31, 2017, all of which was advanced during 2017.
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Page 53 of 97