MEDALLION FINANCIAL CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS (Form 10-Q)

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GOAL


The information contained in this section should be read in conjunction with the
consolidated financial statements and the accompanying notes thereto for the
three months ended March 31, 2022 and the year ended December 31, 2021. This
section is intended to provide management's perspective of our financial
condition and results of operations. In addition, this section contains
forward-looking statements. These forward-looking statements are subject to the
inherent uncertainties in predicting future results and conditions. Certain
factors that could cause actual results and conditions to differ materially from
those projected in these forward-looking statements are described in the Risk
Factors in our Annual Report on Form 10-K.

GENERAL

We are a finance company whose direction and growth has been primarily through Medallion Bank, or the Bank, (a wholly owned subsidiary), which issues consumer loans for the purchase of hobbies, boats, motorcycles, and home improvements, and provides origination loans and other services to fintech partners.


Our strategic focus is on growing our consumer finance and commercial lending
portfolios operated by the Bank and Medallion Capital, Inc., respectively. As of
March 31, 2022, our consumer loans represented 94% of our gross loan portfolio,
with commercial loans representing 5%. Total assets were $1.97 billion and 1.87
billion as of March 31, 2022 and December 31, 2021.

Our loan-related earnings depend primarily on our level of net interest income.
Net interest income is the difference between the total yield on our loan
portfolio and the average cost of borrowed funds. We fund our operations through
a wide variety of interest-bearing sources, including bank certificates of
deposit issued to customers, debentures issued to and guaranteed by the SBA,
privately placed notes, and preferred securities. Net interest income fluctuates
with changes in the yield on our loan portfolio and changes in the cost of
borrowed funds, as well as changes in the amount of interest-earning assets and
interest-bearing liabilities held by us. Net interest income is also affected by
economic, regulatory, and competitive factors that influence interest rates,
loan demand, and the availability of funding to finance our lending activities.
We, like other financial institutions, are subject to interest rate risk to the
degree that our interest-earning assets reprice, either due to inflation or
other factors, on a different basis than our interest-bearing liabilities.

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

In 2019, the Bank started building a strategic partnership program to provide
lending and other services to financial technology, or fintech, companies. The
Bank entered into an initial partnership in 2020 and began issuing its first
loans, then entered into a second and third strategic partnership in 2021 and
2022. The Bank continues to explore opportunities with additional fintech
companies.

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

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

COVID-19[feminine]


The ongoing coronavirus, or COVID-19, pandemic, its broad impact and preventive
measures taken to contain or mitigate the outbreak have had, and may continue to
have, significant negative effects on the US and global economy, employment
levels, employee productivity, and financial market conditions. This has had,
and may continue to have negative effects on the ability of our borrowers to
repay outstanding loans, the value of collateral securing loans, the demand for
loans and other financial services products and consumer discretionary spending.
As a result of these or other consequences, the outbreak has adversely and
materially affected our business, results of operations and financial condition.
Although we continue to see signs of recovery, it remains uncertain, and the
effects of the outbreak on us could be exacerbated given that our business model
is largely consumer and small business directed, which are more severely
affected by COVID-19 and the preventative measures taken to contain or mitigate
the outbreak, including its significant negative effects on consumer
discretionary spending. The full extent to which the outbreak will continue to
impact our operations will depend on future developments, including the impact
of the Omicron and other potential variants, which are highly

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uncertain and cannot be predicted at this time, and include the duration,
severity and scope of the continued outbreak, the actions taken to contain or
mitigate the outbreak and how long, and to what extent the economic recovery
from its effects will take.

We have taken steps to operate through this crisis, including having had our
workforce work remotely on a part-time basis in New York, though our employees
outside of New York largely continue to work remotely. In addition, we
implemented several cost-cutting measures, such as reducing employee headcount
at our parent company, Medallion Financial Corp., and closing satellite offices
in Long Island City, Chicago and Boston.

In March 2020, we adjusted the payment policies and procedures with our consumer
and medallion businesses, and allowed borrowers to defer payments up to 180
days. As of March 31, 2022, no consumer or medallion loans remained on deferral
related to COVID-19. For our medallion portfolio, we determined that anticipated
payment activity on our medallion portfolio was impossible to quantify upon the
end of the deferral moratorium, and therefore all medallion loans were deemed
impaired, placed on nonaccrual status, and written down to each market's net
collateral value in the 2020 third quarter, with additional write-offs taken
during 2021. We will continue to monitor our medallion portfolio and related
assets, which may result in additional write-downs, charge-offs or impairments,
the impact of which could be material to our results of operations and financial
condition.

Substantially all our medallion loans and related assets are concentrated in the
New York City metropolitan area. As a result of the COVID-19 pandemic, economic
activity and taxi ridership decreased dramatically in New York City and despite
the reopening of New York City, there has not been a substantial increase in
ridership and gross meter fares. The extent to which the COVID-19 pandemic will
continue to adversely affect taxi medallion owners and, by extension, our
medallion loans and related assets, will depend on future developments, which
are highly uncertain and cannot be predicted, including the scope and duration
of the pandemic, actions taken by governmental authorities, and the direct and
indirect impact of the pandemic on taxi medallion owners and the behaviors of
people who have historically taken taxis.

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Average balances and rates

The following table sets out our average consolidated balance sheet, interest income and expense, and average interest-producing/interest-bearing assets and liabilities, which reflects the average return on assets and average cost of liabilities for the three months ended March 31, 2022 and 2021.

                                                                Three Months Ended March 31,
                                                    2022                                            2021
                                   Average                        Average          Average                        Average
(Dollars in thousands)             Balance        Interest       Yield/Cost        Balance        Interest       Yield/Cost
Interest-earning assets
Interest earning cash
equivalents                      $     4,276     $       46             4.36 %   $     2,993     $       18             2.44 %
Federal funds sold                    63,606             15             0.10          44,873              5             0.05
Investment securities                 44,434            219             2.00          42,046            202             1.95
Loans
Recreation                           946,024         31,135            13.35         774,823         27,442            14.36
Home improvement                     446,644          9,700             8.81         332,270          7,918             9.66
Commercial                            77,318          2,028            10.64          61,244          1,560            10.33
Medallion                              4,730            146            12.52          11,945            (69 )          (2.34 )
Strategic partnerships                   180             14            31.54              27              4            60.08
Total loans                        1,474,896         43,023            11.83       1,180,309         36,855            12.66
Total interest-earning assets      1,587,212         43,303            11.08       1,270,221         37,080            11.84
Non-interest-earning assets
Cash                                  56,823                                          61,370
Equity investments                    10,063                                           9,583
Loan collateral in process of
foreclosure(1)                        35,602                                

53,543

Goodwill and intangible assets       174,105                                         201,715
Other assets                          44,275                                          46,220
Total non-interest-earning
assets                               320,868                                         372,431
Total assets                     $ 1,908,080                                     $ 1,642,652
Interest-bearing liabilities
Deposits                         $ 1,279,429     $    4,154             1.32 %   $ 1,045,381     $    4,711             1.83 %
Retail and privately placed
notes                                121,000          2,498             8.37         125,372          2,632             8.51
SBA debentures and borrowings         69,840            523             3.04          65,080            572             3.56
Preferred securities                  33,000            200             2.46          33,000            193             2.37
Notes payable to banks                     -              -                -          27,622            258             3.79
Other borrowings                           -              -                -           8,707             41             1.91
Total interest-bearing
liabilities                        1,503,269          7,375             1.99       1,305,162          8,407             2.61
Non-interest-bearing
liabilities
Deferred tax liability                18,875                                           1,304
Other liabilities (2)                 25,491                                          27,788
Total non-interest-bearing
liabilities                           44,366                                          29,092
Total liabilities                  1,547,635                                       1,334,254
Non-controlling interest              69,166                                          73,040
Total stockholders' equity           291,279                                         235,358
Total liabilities and
stockholders' equity             $ 1,908,080                                     $ 1,642,652
Net interest income                              $   35,928                                      $   28,673
Net interest margin                                                     9.20 %                                          9.18 %


(1)
Includes financed sales of this collateral to third parties reported separately
from the loan portfolio, and that are conducted by Medallion Bank of $7.7
million and $3.8 million as of March 31, 2022 and 2021.
(2)
Includes deferred financing costs of $7.2 million and $6.5 million as of March
31, 2022 and 2021.

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Rate/volume analysis


During the quarter, our net loans receivable had a yield of 11.83% (compared to
12.66% in the prior year's first quarter), mainly driven by the growth in the
home improvement portfolio which has a lower yield than our recreation
portfolio, offset by contraction in the medallion portfolio, all of which is on
non-accrual. The debt, mainly certificates of deposit, helps fund our growing
consumer loan business and as market rates decreased through 2021, so has
average cost of borrowings, despite recent increases in newly issued deposits in
the 2022 first quarter. In addition, privately placed notes issued between
December 2020 and April 2021 were at lower rates compared to prior issuances.

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

                                                                 Three Months Ended March 31,
                                                    2022                                               2021
                                 Increase         Increase                          Increase         Increase
                                (Decrease)       (Decrease)                        (Decrease)       (Decrease)
(Dollars in thousands)          In Volume         In Rate         Net Change       In Volume         In Rate         Net Change
Interest-earning assets
Interest earning cash and
cash equivalents               $         18     $         20     $         38     $         27     $       (112 )   $        (85 )
Investment securities                    12                5               17              (35 )            (94 )           (129 )
Loans
Recreation                            5,634           (1,941 )          3,693            2,494           (1,386 )          1,108
Home improvement                      2,484             (702 )          1,782            1,951               80            2,031
Commercial                              422               46              468             (187 )           (132 )           (320 )
Medallion                              (223 )            438              215             (485 )           (586 )         (1,071 )
Strategic partnerships                   12               (2 )             10                4                -                4
Total loans                    $      8,329     $     (2,161 )   $      6,168     $      3,776     $     (2,024 )   $      1,752
Total interest-earning
assets                         $      8,359     $     (2,136 )   $     

6,223 $3,768 ($2,230) $1,538
Interest-bearing debt Deposits

                       $        760     $     (1,317 )   $       (557 )   $        597     $     (1,827 )   $     (1,230 )
Retail and privately placed
notes                                   (90 )            (44 )           (134 )          1,156             (206 )            950
SBA debentures and
borrowings                               36              (85 )            (49 )            (62 )            (52 )           (114 )
Notes payable to banks                    -             (258 )           (258 )            (55 )            (23 )            (78 )
Preferred securities                      -                7                7                -             (121 )           (121 )
Other borrowings                          -              (41 )            (41 )              4               (3 )              1
Total interest-bearing
liabilities                    $        706     $     (1,738 )   $     (1,032 )   $      1,639     $     (2,232 )   $       (593 )
Net                            $      7,653     $       (398 )   $      7,255     $      2,129     $          2     $      2,131


During the three months ended March 31, 2022, the increase in the interest
earning assets was mainly driven by the increase in volume of consumer loans,
even as the yield declined. The debt change similarly was driven by the increase
in the borrowings, mainly driven by deposits, which are used to fund the
consumer loans, along with new privately placed notes, offset by the repayment
of retail notes.

Our interest expense is driven by the interest rates payable on our bank
certificates of deposit, short-term credit facilities with banks, fixed-rate,
long-term debentures issued to the SBA, and other short-term notes payable. The
Bank issues brokered time certificates of deposit, which are our lowest
borrowing costs. The Bank is able to bid on these deposits at a variety of
maturity options, which allows for improved interest rate management strategies.

Our cost of funds is primarily driven by the rates paid on our various debt
instruments and their relative mix, and changes in the levels of average
borrowings outstanding. See Note 5 to the consolidated financial statements for
details on the terms of our outstanding debt. Our debentures issued to the SBA
typically have terms of ten years.

We measure our borrowing costs as our aggregate interest expense for all of our
interest-bearing liabilities divided by the average amount of such liabilities
outstanding during the period. The tables above show the average borrowings and
related borrowing costs for the three months ended March 31, 2022 and 2021.

We continue to seek SBA funding through Medallion Capital, Inc., to the extent
it offers attractive rates. SBA financing subjects its recipients to limits on
the amount of secured bank debt they may incur. We use SBA funding to fund loans
that qualify under the Small Business Investment Act of 1985, as amended, or the
SBIA, and SBA regulations. In July 2020, we obtained a $25,000,000 commitment
from the SBA. We believe that financing operations primarily with short-term
floating rate secured bank debt has generally decreased our interest expense,
but has also increased our exposure to the risk of increases in market interest
rates, which we mitigate with certain interest rate strategies. At March 31,
2022 and 2021, adjustable rate debt constituted 2% and 3% of total debt.

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Loans


Loans are reported at the principal amount outstanding, inclusive of deferred
loan acquisition costs, which primarily includes deferred fees paid to loan
originators, and which are amortized to interest income over the life of the
loan. During the three months ended March 31, 2022, there was continued growth
in the consumer lending segments along with recoveries in the medallion segment,
which was partly offset by consumer and medallion charge-offs during the period,
the continuing of loans aged over 120 days transferred to loan collateral in
process of foreclosure and payments received from borrowers.

Three Months Ended March 31,
2022                                                Home                                             Strategic
(Dollars in thousands)          Recreation       Improvement       Commercial       Medallion       Partnership         Total
Gross loans - December 31,
2021                            $   961,320     $     436,772     $     76,696     $    14,046     $          90     $ 1,488,924
Loan originations                   114,406            89,820            4,400              92             5,009         213,727
Principal payments, sales,
maturities, and recoveries          (65,116 )         (52,164 )         (1,817 )           (85 )          (4,873 )      (124,055 )
Charge-offs                          (5,067 )          (1,060 )         (1,584 )           (75 )               -          (7,786 )
Transfer to loan collateral
in process of foreclosure,
net                                  (2,911 )               -                -            (129 )               -          (3,040 )
Amortization of origination
costs                                (2,439 )             320                -               -                 -          (2,119 )
Amortization of loan premium            (60 )             (90 )              -               -                 -            (150 )
FASB origination costs, net           3,958              (190 )              -               -                 -           3,768
Paid-in-kind interest                     -                 -              172               -                 -             172
Gross loans - March 31, 2022    $ 1,004,091     $     473,408     $     77,867     $    13,849     $         226     $ 1,569,441



Three Months Ended December
31, 2021                                              Home                                             Strategic
(Dollars in thousands)            Recreation       Improvement       Commercial       Medallion       Partnership         Total
Gross loans - December 31,
2020                             $    792,686     $     334,033     $     65,327     $    37,768     $          24     $ 1,229,838
Loan originations                      93,850            48,059            4,156               -             1,944         148,009
Principal payments, sales,
maturities, and recoveries            (55,958 )         (39,637 )        (10,965 )          (636 )          (1,910 )      (109,106 )
Charge-offs                            (5,053 )            (681 )              -          (1,114 )               -          (6,848 )
Transfer to loan collateral in
process of foreclosure, net            (3,053 )               -                -            (696 )               -          (3,749 )
Amortization of origination
costs                                  (2,162 )             497               11              (2 )               -          (1,656 )
Amortization of loan premium              (41 )             (76 )              -             (70 )               -            (187 )
FASB origination costs, net             2,663               (74 )              -               -                 -           2,589
Paid-in-kind interest                       -                 -              325               -                 -             325

Gross loans – March 31, 2021 $822,932 $342,121 $58,854 $35,250 $58 $1,259,215

The following table shows the approximate maturities and sensitivity to changes in interest rates of our loans to March 31, 2022.

                                                                   Loan Maturity
                                                      After 1 to       After 5 to       After 15
(Dollars in thousands)             Within 1 year        5 years         15 years         years           Total
Fixed-rate                        $        33,648     $   183,894     $  1,200,524     $  114,152     $ 1,532,218
Recreation                                  2,262          95,408          861,575          8,759         968,004
Home improvement                           20,960          24,307          324,867        105,393         475,527
Commercial                                  7,324          54,681           14,082              -          76,087
Medallion                                   3,102           9,498                -              -          12,600
Adjustable-rate                   $         6,755     $     1,443     $          -     $        -     $     8,198
Recreation                                  3,725           1,443                -              -           5,168
Commercial                                  1,780               -                -              -           1,780
Medallion                                   1,250               -                -              -           1,250
Total loans(1)                    $        40,403     $   185,337     $  1,200,524     $  114,152     $ 1,540,416


(1)

Excludes strategic partnership loans.

Allowance and provision for loan loss


During the three months ended March 31, 2022, we continued to utilize a value of
$79,500 for New York City taxi medallion values, despite reported transfer
prices exceeding that level at various points during the period, as we continue
to deem the entire medallion portfolio as impaired. In addition, the consumer
loan allowance percentages remained relatively stable for the three months ended
March 31, 2022, decreasing 13 basis points for recreation and increasing 2 basis
points for home improvement.

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The following table shows the loan loss provision activity for the three months ended March 31, 2022 and 2021.


                                                    Three Months Ended March 31,
(Dollars in thousands)                                2022                 

2021

Allowance for loan losses – opening balance $50,166 $

  57,548
Charge-offs
Recreation                                               (5,067 )             (5,053 )
Home improvement                                         (1,060 )               (681 )
Commercial                                               (1,584 )                  -
Medallion                                                   (75 )             (1,114 )
Total charge-offs                                        (7,786 )             (6,848 )
Recoveries
Recreation                                                3,510                2,469
Home improvement                                            559                  432
Commercial                                                   34                    -
Medallion                                                   963                1,189
Total recoveries                                          5,066                4,090
Net charge-offs (1)                                      (2,720 )             (2,758 )
Provision for loan losses                                 3,240                3,019

Allowance for loan losses – closing balance (2) $50,686 $

57,809

(1)

As of March 31, 2022, cumulative net charge-offs of loans and loan collateral in
process of foreclosure in the medallion portfolio were $257.0 million, some of
which may represent collection opportunities for us.
(2)
As of March 31, 2022, there was no allowance for loan loss and net charge-offs
related to the strategic partnership loans.

The following tables present the allowance for loan losses by type as at March 31, 2022 and December 31, 2021.


                                                                        Allowance as        Allowance as a
March 31, 2022                                        Percentage        a Percent of          Percent of
(Dollars in thousands)                  Amount       of Allowance       Loan Category         Nonaccrual
Recreation                            $   32,558                64 %              3.24 %              98.99 %
Home improvement                           8,059                16                1.70                24.50
Commercial                                   828                 2                1.06                 2.52
Medallion                                  9,241                18               66.73                28.10
Total                                 $   50,686               100 %              3.23 %             154.10 %



                                                                         Allowance as        Allowance as a
December 31, 2021                                      Percentage        a Percent of          Percent of
(Dollars in thousands)                   Amount       of Allowance       Loan Category         Nonaccrual
Recreation                             $   32,435                64 %              3.37 %              91.18 %
Home improvement                            7,356                15                1.68                20.68
Commercial                                  1,141                 2                1.49                 3.21
Medallion                                   9,234                19               65.74                25.96
Total                                  $   50,166               100 %              3.37 %             141.03 %


As of March 31, 2022, the allowance for loan losses had remained relatively in
line with December 31, 2021. For recreation and home improvement loans, as of
March 31, 2022 the allowances exclude $3.1 million and $0.4 million of loan loss
allowances which have been netted within loans as a result of the consolidation
of Medallion Bank.

For the recreation loan portfolio, the process to repossess the collateral is
generally started at 60 days past due. If the collateral is not located and the
account reaches 120 days delinquent, the account is charged-off in full. If the
collateral is repossessed, a loss is recorded to write the collateral down to
its net realizable value, 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 as a realized loss, and any excess proceeds are
recorded as a recovery. Proceeds collected on charged off accounts are recorded
as recoveries. All collection, repossession, and recovery efforts are handled on
behalf of the Bank by the contracted servicer.

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

                                          March 31, 2021           December 31, 2021
(Dollars in thousands)                  Amount       % (1)        Amount         % (1)
Recreation                             $   3,802        0.2 %   $     3,818         0.3 %
Home improvement                             297        0.0             132         0.0
Commercial                                    74        0.0              74         0.0
Medallion                                      -          -               -           -

Total loans past due 90 days or more $4,173 0.3% $4,024

0.3%

(1)

Percentages are calculated relative to the total loan portfolio.

We estimate that the weighted average loan-to-value ratio of our medallion loans was approximately 295% at March 31, 2022 and December 31, 2021.

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Recreation and medallion loans that reach 120 days past due are charged down to
collateral value and reclassified to loan collateral in process of foreclosure.
The following tables show the activity of loan collateral in process of
foreclosure for the three months ended March 31, 2022 and 2021.

Three Months Ended March 31, 2022
(Dollars in thousands)                       Recreation         Medallion   

Total

Loan collateral in process of foreclosure
- December 31, 2021                         $       1,720     $      35,710     $     37,430
Transfer from loans, net                            2,911               129            3,040
Sales                                              (2,252 )            (116 )         (2,368 )
Cash payments received                                  -            (2,872 )         (2,872 )
Collateral valuation adjustments                   (1,010 )            (386 )         (1,396 )
Loan collateral in process of foreclosure
- March 31, 2022                            $       1,369     $      32,465     $     33,834



Three Months Ended March 31, 2021
(Dollars in thousands)                       Recreation         Medallion   

Total

Loan collateral in process of foreclosure
- December 31, 2020                         $       1,432     $      53,128     $     54,560
Transfer from loans, net                            3,053               749            3,802
Sales                                              (2,298 )               -           (2,298 )
Cash payments received                                  -            (1,329 )         (1,329 )
Collateral valuation adjustments                   (1,217 )          (2,785 )         (4,002 )
Loan collateral in process of foreclosure
- March 31, 2021                            $         970     $      49,763     $     50,733


SEGMENT RESULTS

We manage our financial results under four operating segments; recreation
lending, home improvement lending, commercial lending, and medallion lending. We
also show results for two non-operating segments; RPAC and corporate and other
investments. As mentioned earlier, the Company disposed of its investment in
RPAC on December 1, 2021 and, as a result, all presented segment results are
through such date. All results are for the three months ended March 31, 2022 and
2021.

Recreation Lending

The recreation lending segment is a high-growth prime and non-prime consumer
finance business which is a significant source of income for us, accounting for
72% of our interest income for the three months ended March 31, 2022, and 74%
for the three months ended March 31, 2021. The loans are secured primarily by
RVs, boats, and trailers, with RV loans making up 59% of the portfolio, boat
loans making up 19% of the portfolio, and trailer loans 8% as of March 31, 2022,
compared to 60%, 19% and 19% as of March 31, 2021. Recreation loans are made to
borrowers residing in all fifty states, with the highest concentrations in
Texas, Florida, and California at 16%, 10%, and 10% of loans outstanding,
compared to 17%, 10%, and 10% as of March 31, 2021, and with no other states
over 10%.

During the three months ended March 31, 2022, the recreation portfolio grew,
with the interest yield in both the current and prior periods decreasing as a
result of the change in portfolio mix toward higher credit quality but lower
yielding assets. Additionally, reserve rates decreased 21 basis points from
March 31, 2021 as we continue to see delinquencies and net charge-offs at near
historic lows.


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The following table presents certain financial data and ratios as at and for the three months ended March 31, 2022 and 2021.

                                             Three Months Ended March 31,
(Dollars in thousands)                           2022                2021
Selected Earnings Data
Total interest income                      $         31,135       $   27,442
Total interest expense                                3,601            2,794
Net interest income                                  27,534           24,648
Provision for loan losses                             1,680            3,613
Net interest income after loss provision             25,854           

21,035

Total other income (expense), net                    (6,820 )         (5,463 )
Net income before taxes                              19,034           15,572
Income tax provision                                 (5,681 )         (4,010 )
Net income after taxes                     $         13,353       $   11,562
Balance Sheet Data
Total loans, gross                         $      1,004,091       $  822,932
Total loan allowance                                 32,558           28,378
Total loans, net                                    971,533          794,554
Total assets                                        984,535          807,244
Total borrowings                                    780,621          641,993
Selected Financial Ratios
Return on average assets                               5.62 %           5.92 %
Return on average equity                              29.27            29.59
Interest yield                                        13.30            14.36
Net interest margin                                   11.76            12.90
Reserve coverage                                       3.24             3.45
Delinquency status (1)                                 0.39             0.40
Charge-off%                                            0.67             1.35


(1)

Loans past due 90 days or more.

Home Improvement Loans


The home improvement lending segment is a consumer finance business that works
with contractors and financial service providers to finance home improvements
and is concentrated in roofs, swimming pools, and windows at 33%, 26%, and 12%
of total loans outstanding as of March 31, 2022, as compared to 25%, 25%, and
13% as of March 31, 2021, with no other collateral types over 10%. Home
improvement loans are made to borrowers residing in all fifty states, with the
highest concentrations in Florida, Texas, and Ohio at 16%, 10%, and 10% of loans
outstanding March 31, 2022, compared to 11%, 11%, and 9% as of March 31, 2021,
and with no other states over 6%.

During the three months ended March 31, 2022, the home improvement lending
segment grew substantially with the net portfolio increasing 38% from the prior
year. Reserve rates increased 13 basis points from a year ago. The interest
yield decreased slightly from the prior year period, while net interest margins
decreased, reflecting lower rates on borrowings and CD's issued in the current
year as compared to the prior year.


                                 Page 38 of 51
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The following table presents certain financial data and ratios as at and for the three months ended March 31, 2022 and 2021.

                                              Three Months Ended March 31,
(Dollars in thousands)                          2022                 2021
Selected Earnings Data
Total interest income                      $        9,700       $        7,918
Total interest expense                              1,341                1,208
Net interest income                                 8,359                6,710
Provision for loan losses                           1,204                  450
Net interest income after loss provision            7,155                6,260
Other income (expense), net                        (2,896 )             (1,914 )
Net income before taxes                             4,259                4,346
Income tax provision                               (1,271 )             (1,119 )
Net income after taxes                     $        2,988       $        3,227
Balance Sheet Data
Total loans, gross                         $      473,408       $      342,121
Total loan allowance                                8,059                5,358
Total loans, net                                  465,349              336,763
Total assets                                      469,886              348,456
Total borrowings                                  372,565              277,672
Selected Financial Ratios
Return on average assets                             2.66 %               3.80 %
Return on average equity                            13.85                19.00
Interest yield                                       8.71                 9.66
Net interest margin                                  7.50                 8.19
Reserve coverage                                     1.70                 1.57
Delinquency status (1)                               0.06                 0.04
Charge-off%                                          0.46                 0.30


(1)

Loans past due 90 days or more.

Commercial loans


We originate both senior and subordinated loans nationwide to businesses in a
variety of industries, more than 49% of which are located in the Midwest region,
with the rest scattered across the country. These mezzanine loans are primarily
secured by a second position on all assets of the businesses and generally range
in amount from $2,000,000 to $5,000,000 at origination, and typically include an
equity component as part of the financing. The commercial lending business has
concentrations in manufacturing, wholesale trade, administrative and support
services, and construction making up 40%, 14%, 13%, and 12% of the loans
outstanding as of March 31, 2022.

In the three months ended March 31, 2022the commercial portfolio continued to grow, with $4.4 million new origins. In addition, reserve rates reflected specific reserves on aging investments.

                                 Page 39 of 51
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The following table presents certain financial data and ratios as of and for the
three months ended March 31, 2022 and 2021. The commercial segment encompasses
the mezzanine lending business, and the other legacy commercial loans
(immaterial to total) have been allocated to corporate and other investments.
The commercial segment increased in the current year as originations exceeded
repayments. Net income decreased to a $1.0 million loss due to exits of two aged
investments.

                                                          Three Months Ended March 31,
(Dollars in thousands)                                    2022                    2021
Selected Earnings Data
Total interest income                                $         1,930         $        1,482
Total interest expense                                           722                    572
Net interest income                                            1,208                    910
Provision for loan losses                                      1,255                      -
Net interest (expense) income after loss provision               (47 )                  910
Other expense, net                                            (1,330 )                 (460 )
Net income (loss) before taxes                                (1,377 )                  450
Income tax (provision) benefit                                   411                   (113 )
Net (loss) income after taxes                        $          (966 )       $          337
Balance Sheet Data
Total loans, gross                                   $        77,615         $       55,567
Total loan allowance                                             828                      -
Total loans, net                                              76,787                 55,567
Total assets                                                  86,461                 71,922
Total borrowings                                              68,553                 59,533
Selected Financial Ratios
Return on average assets                                       (3.83 )%                1.79 %
Return on average equity                                      (12.33 )                 8.96
Interest yield                                                 10.12                  10.37
Net interest margin                                             6.34                   6.37
Reserve coverage(1)                                             1.06                   0.00
Delinquency status (1) (2)                                      0.10                   0.13
Charge-off% (3)                                                 8.13                   0.00


(1)
Ratio is based off of total commercial balances, and relates solely to the
legacy commercial loan balances.
(2)
Loans 90 days or more past due.
(3)
Ratio is based on total commercial lending balances, and relates to the total
loan business.

                                          Three Months Ended March 31,
                                       2022                           2021
                             Total Gross        % of        Total Gross        % of
Geographic Concentrations       Loans          Market          Loans          Market
Illinois                    $      13,109           17 %   $      11,146           20 %
California                         10,072           13                 -            -
Minnesota                           9,583           13             8,208           15
Michigan                            6,300            8            10,502           19
North Carolina                      5,850            8             5,849           11
Texas                               5,570            7             5,569           10
New Hampshire                       5,517            7                 -            -
New Jersey                          4,164            5             4,164            7
Kansas                              4,107            5             4,107            7
Other (1)                          13,595           17             6,022           11
Total                       $      77,867          100 %   $      55,567          100 %


(1)

Includes four other states, all of which were below 5% at March 31, 2022and four other states, all below 6% in March 31, 2021.

                                 Page 40 of 51
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Loan of medallions


The medallion lending segment operates mainly in the New York City, Newark, and
Chicago markets. We have a long history of owning, managing, and financing taxi
fleets, taxi medallions, and corporate car services. During the three months
ended March 31, 2022, taxi medallion values remained consistent in the New York
City market even as other markets saw declines. We continue to not recognize
interest income with all loans being placed on nonaccrual as of the third
quarter 2020, and by transferring underperforming loans from the portfolio to
loan collateral in process of foreclosure with charge-offs to collateral value,
once loans become more than 120 days past due. All the loans are secured by taxi
medallions and enhanced by personal guarantees of the shareholders and owners.

The following table presents certain financial data and ratios as at and for the three months ended March 31, 2022 and 2021.

                                                        Three Months Ended March 31,
(Dollars in thousands)                                   2022                  2021
Selected Earnings Data
Total interest income (loss)                        $           146       $           (69 )
Total interest expense                                          153                 1,370
Net interest loss                                                (7 )              (1,439 )
(Benefit) provision for loan losses                            (869 )              (1,044 )
Net interest income (loss) after loss provision                 862                  (395 )
Other expense, net                                             (806 )              (2,144 )
Net income (loss) before taxes                                   56                (2,539 )
Income tax (provision) benefit                                  (17 )       

637

Net income (loss) after taxes                       $            39       $        (1,902 )
Balance Sheet Data
Total loans, gross                                  $        13,849       $        35,250
Total loan allowance                                          9,241                24,073
Total loans, net                                              4,608                11,177
Total assets                                                 37,752               116,639
Total borrowings                                             29,933                92,469
Selected Financial Ratios
Return on average assets                                       0.25 %               (6.40 )%
Return on average equity                                       1.30                (31.98 )
Interest yield                                                12.49                 (2.34 )
Net interest margin                                           (0.67 )              (48.86 )
Reserve coverage                                              66.73                 68.29
Delinquency status (1)                                            -                  2.20
Charge-off Recovery%                                         (76.13 )               (2.55 )


(1)

Loans past due 90 days or more.

                                          Three Months Ended March 31,
                                     2022                             2021
                            Total Gross       % of          Total Gross        % of
Geographic Concentration       Loans         Market            Loans          Market
New York City              $      12,540          91 %     $      32,037           91 %
Newark                             1,265           9               2,939            8
All Other                             44           0   (1)           274            1
Total                      $      13,849           - %     $      35,250          100 %


(1)
Less than 1%.

                                                             Three Months Ended March 31,
                                                      2022                                   2021
                                           Total Loan                             Total Loan
                                         Collateral in                          Collateral in
                                           Process of            % of             Process of            % of
Geographic Concentration                  Foreclosure           Market           Foreclosure           Market
New York City                          $           26,902              83 %   $           38,383              77 %
Newark                                              3,959              12                  6,267              13
Chicago                                             1,411               4                  4,824              10
All Other                                             193               1                    289               1
Total                                  $           32,465             100 %   $           49,763             100 %




                                 Page 41 of 51
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CCPR


Until December 1, 2021, when we disposed of our entire investment, we were the
majority owner and managing member of RPAC Racing, LLC, a performance and
marketing company for NASCAR. Revenues were mainly earned through sponsorships
and race winning activity over the ten month race season (February through
November) during the year.

The following table presents selected financial data and ratios as at and for the three months ended March 31, 2021.


                                                Three Months Ended
(Dollars in thousands)                            March 31, 2021
Selected Earnings Data
Sponsorship, race winnings, and other income   $              2,473
Race and other expenses                                       3,883
Interest expense                                                 41
Total expenses                                                3,924
Net loss before taxes                                        (1,451 )
Income tax benefit                                              364
Net loss after taxes                           $             (1,087 )

Balance Sheet Data
Total assets                                   $             32,724
Total borrowings                                              8,726
Selected Financial Ratios
Return on average assets                                     (13.27 )%
Return on average equity                                    (378.20 )

Corporate and other investments


This non-operating segment relates to our equity and investment securities as
well as our legacy commercial business, and other assets, liabilities, revenues,
and expenses, both interest and operating, which are not specifically allocated
to the operating segments. Commencing with the 2020 second quarter, the Bank
began issuing loans related to the new strategic partnership business, which is
currently included within this segment. Strategic partnerships represent $0.2
million in net loans as of March 31, 2022, compared to less than $0.1 million as
of March 31, 2021, having originations of $5.0 million and $1.9 million during
the three months ended March 31, 2022 and 2021. This segment also reflects the
elimination of all intercompany activity among the consolidated entities, as
well as the gains (losses) on the dispositions of certain non-core assets.

The following table presents certain financial data and ratios as at and for the three months ended March 31, 2022 and 2021.

(Dollars in thousands)          Three Months Ended March 31,
                                 2022                  2021
Selected Earnings Data
Total interest income       $          392        $          307
Total interest expense               1,558                 2,422
Net interest loss                   (1,166 )              (2,115 )
Total interest expense                 (30 )                   -
Net interest loss                   (1,136 )              (2,115 )
Other expense, net                  (4,652 )              (1,314 )
Net loss before taxes               (5,788 )              (3,429 )
Income tax benefit                   1,727                   363
Net loss after taxes        $       (4,061 )      $       (3,066 )
Balance Sheet Data
Total loans, gross          $          478        $        3,345
Total loan allowance                     -                     -
Total loans, net            $          478                 3,345
Total assets                       387,991               311,765
Total borrowings                   307,632               266,366
Selected Financial Ratios
Return on average assets             (4.80 )%              (4.16 )%
Return on average equity            (28.30 )              (30.80 )




                                 Page 42 of 51
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Summary of consolidated financial data


The table below presents our selected financial data for the three months ended
March 31, 2022 and 2021.

                                                         Three Months Ended March 31,
(Dollars in thousands, Except per share data)             2022              

2021

Return on average assets (ROA)                                  2.41 %               2.08 %
Return on average stockholders' equity (ROE)                   13.70                11.09
Dividend payout ratio                                          20.77                    -
Net interest margin                                             9.20                 9.18
Other income ratio (1)                                          0.39                 0.62
Total expense ratio (2)                                         7.73                 8.60
Equity to assets (3)                                           18.41                18.48
Debt to equity (4)                                              4.3x                 4.3x
Loans receivable to assets                                        77 %                 71 %
Net charge-offs                                                2,720                2,758
Net charge-offs as a % of average loans receivable              0.75 %               0.95 %
Allowance coverage ratio                                        3.23                 4.59


(1)
Other income ratio represents other income divided by average interest earning
assets.
(2)
Total expense ratio represents total expenses (interest expense, operating
expenses, and income taxes) divided by average interest earning assets.
(3)
Includes $68.8 million and $72.3 million related to non-controlling interests in
consolidated subsidiaries as of March 31, 2022 and 2021.
(4)
Excludes deferred financing costs of $7.2 million and $6.5 million as of March
31, 2022 and 2021.

Consolidated operating results

Three months completed March 31, 2022 compared to the three months ended March 31, 2021


Net income attributable to shareholders was $9.8 million, or $0.39 per share for
the three months ended March 31, 2022, compared to $8.4 million, or $0.34 per
share for the three months ended March 31, 2021.

Total interest income was $43.3 million for the three months ended March 31,
2022 compared to $37.1 million for the three months ended March 31, 2021. The
increase in interest income reflected the continued growth in the recreation and
home improvement lending segments partially offset by lower margins associated
with these loans. The yield on interest earning assets was 11.48% for the three
months ended March 31, 2022, compared to 11.84% for the three months ended March
31, 2021. Average interest earning assets were $1.6 billion for the three months
ended March 31, 2022, an increase from $1.3 billion for the three months ended
March 31, 2021.

Loans before allowance for loan losses were $1,569.4 million as of March 31,
2022, comprised of recreation ($1,004.1 million), home improvement ($473.4
million), commercial ($77.9 million), medallion ($13.8 million), and strategic
partnership ($0.2 million) loans. We had an allowance for loan losses as of
March 31, 2022 of $50.7 million, which was attributable to the recreation (64%),
medallion (18%), home improvement (16%), and commercial (2%) loan portfolios.

Loans increased $80.5 million, or 5%, from December 31, 2021 as a result of
$213.7 million of loan originations, offset by principal payments, and to a
lesser extent transfers to loan collateral in process of foreclosure and net
charge-offs. The provision for loan losses was $3.2 million for the three months
ended March 31, 2022, compared to $3.0 million for the three months ended March
31, 2021. The charge-off ratios on the loan portfolios was 0.75% for the three
months ended March 31, 2022 compared to 0.95% for the three months ended March
31, 2021.

Interest expense was $7.4 million for the three months ended March 31, 2022, a
decrease from $8.4 million for the three months ended March 31, 2021, due to
lower average cost of borrowed funds, even as average borrowings have increased.
The average cost of borrowed funds was 1.99% for the three months ended March
31, 2022, compared to 2.61% for the three months ended March 31, 2021, mainly
driven by the decline in market rates for deposits throughout 2021, the
repayment of retail notes, offset to a lesser extent with the replacement of
notes payable to banks with higher fixed rate private notes. Cost of funds
decreased compared to the prior year quarter, despite increased costs in
deposits issued in the current quarter. We expect an increase in the cost of
funds throughout the remainder of 2022 as older deposits mature and newer
deposits are issued both to replace maturing deposits and to facilitate our
growth in our lending. Average debt outstanding was $1.5 billion for the three
months ended March 31, 2022, up from $1.3 billion for the three months ended
March 31, 2021, as we issued additional certificates of deposits to increase our
liquidity and loan growth. See page 33 for tables that show average balances and
cost of funds for our funding sources.

Net interest income was $35.9 million for the three months ended March 31, 2022,
compared to $28.7 million for the three months ended March 31, 2021. The net
interest margin was 9.20% for the three months ended March 31, 2022, compared to
9.18%, for the three months ended March 31, 2021, reflecting the above.

Net other income, which is comprised of net recoveries of loan collateral, a
majority of which relate to recoveries in the Medallion segment, prepayment
fees, servicing fee income, late charges, write-downs of loan collateral,
impairment of equity investments, and other miscellaneous income was $1.5
million for the three months ended March 31, 2022, compared to $1.9 million for
the three months ended March 31, 2021. The decrease was primarily due to the
absence of race team related revenue.

                                 Page 43 of 51
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Operating expenses were $18.0 million for the three months ended March 31, 2022,
compared to $14.6 million for the three months ended March 31, 2021. Salaries
and benefits were $7.6 million for the three months ended March 31, 2022,
compared to $5.7 million for the three months ended March 31, 2021, with the
increase primarily reflective of reduced bonus expense in the prior year.
Professional fees were $4.0 million for the three months ended March 31, 2022,
compared to $0.5 million for the three months ended March 31, 2021, primarily
reflecting higher legal and professional costs for a variety of corporate
matters inclusive of the SEC litigation.

The total income tax charge was $4.8 million for the three months ended March 31, 2022compared to $3.9 million for the three months ended March 31, 2021.

The loan guarantee being seized has been $33.8 million to March 31, 2022a drop $37.4 million to December 31, 2021. The decrease primarily reflects cash payments received and structured settlements during the period. See page 37 for a chart showing the changes during the quarter.

ASSET/LIABILITY MANAGEMENT

Sensitivity to interest rates


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

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

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

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


                                 Page 44 of 51
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The following table presents our interest rate sensitivity gap at March 31,
2022. The principal amounts of interest earning assets are assigned to the time
frames in which such principal amounts are contractually obligated to be
repriced. We have not reflected an assumed annual prepayment rate for such
assets in this table.

                                                          March 31, 2022 Cumulative Rate Gap (1)
                                                   More            More           More            More             More
                                                   Than           Than 2         Than 3          Than 4            Than
                                    Less        1 and Less       and Less       and Less        and Less        5 and Less
                                    Than          Than 2          Than 3         Than 4          Than 5           Than 6
(Dollars in thousands)             1 Year          Years          Years          Years           Years            Years         Thereafter         Total
Earning assets
Fixed-rate                       $   33,872     $    20,961     $   30,093     $   45,994     $     86,846     $     57,796     $ 1,256,880     $ 1,532,442
Adjustable rate                       6,755             576            845              -               22                -               -           8,198
Investment securities                 3,126             317          3,590          3,422               84            5,493          31,043          47,075
Cash                                137,544               -              -            500              750                -               -         138,794
Total earning assets             $  181,297     $    21,854     $   34,528     $   49,916     $     87,702     $     63,289     $ 1,287,923     $ 1,726,509
Interest bearing liabilities
Deposits                         $  405,783     $   254,340     $  343,449  

$170,965 $160,252 $-$- $1,334,789
Notes placed in private

                    -          36,000              -         31,250                -                -          53,750         

121,000

SBA debentures and borrowings         5,000           2,500         21,264         15,500            4,500                -          21,000          69,764
Preferred securities                      -               -              -              -                -                -          33,000          33,000
Total liabilities                $  410,783     $   292,840     $  364,713     $  217,715     $    164,752     $          -     $   107,750     $ 1,558,553
Interest rate gap                $ (229,486 )   $  (270,986 )   $ (330,185

) ($167,799) ($77,050) $63,289 $1,180,173 $167,956
Accumulated interest rate differential ($229,486) ($500,472) ($830,657) ($998,456) $(1,075,506) $(1,012,217) $167,956 $

December 31, 2021 (2)            $ (230,601 )   $  (455,807 )   $ (770,239 

) ($891,489) $(1,007,810) ($940,350) $153,539 $

   -
December 31, 2020 (2)            $ (366,801 )   $  (570,449 )   $ (719,385 )   $ (827,236 )   $   (907,295 )   $   (860,941 )   $    52,347     $         -


(1)
The ratio of the cumulative one year gap to total interest rate sensitive assets
was (13%) as of March 31, 2022, and was (14%) as of December 31, 2021
(2)
Excludes federal funds sold and investment securities.

Our interest rate sensitive assets were $1,726.5 million and interest rate
sensitive liabilities were $1,558.6 million at March 31, 2022. The one-year
cumulative interest rate gap was a negative $229.5 million or (13%) of interest
rate sensitive assets. We seek to manage interest rate risk by incurring
fixed-rate indebtedness, by evaluating appropriate derivatives, pursuing
securitization opportunities, by originating adjustable-rate loans, and by other
options consistent with managing interest rate risk.

We are currently reviewing the impact on our loans and borrowings with the
cessation of LIBOR at the end of 2021. We do not have lendings tied to LIBOR and
do not expect a significant impact on our loans. We have trust preferred
securities that bear a variable rate of interest of 90 day LIBOR (0.96% at March
31, 2022) plus 2.13%. We expect to rely on our lenders to adjust and communicate
rate adjustments; however, we do not expect a material impact on our borrowings.

Cash and capital resources


Our sources of liquidity include unfunded commitments to sell debentures to the
SBA, loan amortization and prepayments, private issuances of debt securities,
participations or sales of loans to third parties, the disposition of our other
assets, and dividends from Medallion Capital and the Bank, and are subject to
compliance with regulatory ratios. As of March 31, 2022, we had unfunded
commitments from the SBA of $9.5 million, all of which required the infusion of
$4.8 million of capital from either the capitalization of retained earnings or a
capital infusion from the Company.

Additionally, the Bank has access to independent sources of funds for our
business originated there, primarily through brokered certificates of deposit.
The Bank has up to $45.0 million available under Fed Funds lines with several
commercial banks.

In February 2021, we completed a private placement to certain institutional
investors of $25.0 million aggregate principal amount of 7.25% unsecured senior
notes due February 2026, with interest payable semiannually. Follow-on offerings
of these notes in March and April 2021 raised an additional $3.3 million and
$3.0 million.

In December 2020, we completed a private placement to certain institutional
investors of $33.6 million aggregate principal amount of 7.50% unsecured senior
notes due December 2027, with interest payable semiannually. Follow-on offerings
of these notes in February and March 2021 raised an additional $8.5 million. In
April 2021, we raised an additional $11.7 million in a follow-on offering, and
repaid substantially all of our remaining bank borrowings.

The net proceeds from the December 2020, February 2021, March 2021 and April
2021 private placements have been used for general corporate purposes, including
repayment of outstanding debt, including repayment of our 9.00% retail notes at
maturity in April 2021 and to pay down other borrowings, including some
borrowings at a discount.

In December 2019, the Bank closed an initial public offering of $46.0 million
aggregate liquidation amount, yielding net proceeds of $42.5 million, of its
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F.
Dividends are payable quarterly from the date of issuance to, but excluding
April 1, 2025, at a rate of 8% per annum, and from and including April 1, 2025,
at a floating rate equal to a benchmark rate (which is expected to be
three-month Secured Overnight Financing Rate, or SOFR) plus a spread of 6.46%
per annum.

                                 Page 45 of 51
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In March 2019we completed a private placement with certain institutional investors of $30.0 million 8.25% aggregate principal amount of unsecured notes due 2024, with interest payable semi-annually. A follow-up offering of these notes in the third quarter of 2019 raised an additional amount $6.0 million.


The table below presents the components of our debt were as of March 31, 2022,
exclusive of deferred financing costs of March 31, 2022. See Note 4 to the
consolidated financial statements for details of the contractual terms of our
borrowings.

(Dollars in thousands)            Balance        Percentage      Rate (1)
Deposits (2)                    $ 1,334,790               86 %           1 %
Privately placed notes              121,000                8             8
SBA debentures and borrowings        69,764                4             3
Preferred securities                 33,000                2             3
Total outstanding debt          $ 1,558,554              100 %           2 %


(1)
Weighted average contractual rate as of March 31, 2022.
(2)
Balance includes $0.8 million of strategic partner reserve deposits as of March
31, 2022.

Our contractual obligations expire on or mature at various dates through
September 2037. The following table shows all contractual obligations at March
31, 2022.

                                                             Payments due by period
                                Less than        1 - 2         2 - 3         3 - 4         4 - 5       More than
(Dollars in thousands)            1 year         years         years         years         years        5 years        Total (1)
Borrowings
Deposits (2)                    $  405,783     $ 254,340     $ 343,449     $ 170,965     $ 160,252     $        -     $ 1,334,789
Privately placed notes                   -        36,000             -        31,250             -         53,750         121,000

SBA bonds and loans 5,000 2,500 21,264

15,500 4,500 21,000 69,764 Preferred securities

                     -             -             -             -             -         33,000          33,000

Total outstanding borrowings 410,783 292,840 364,713

217,715 164,752 107,750 1,558 553 Operating lease obligations 1,823 2,356 2,373

2,390 2,408 1,164 12,514 Total contractual obligations $412,606 $295,196 $367,086 $220,105 $167,160 $108,914 $1,571,067

(1)

Total debt is exclusive of deferred financing costs of $7.2 million as of March
31, 2022.
(2)
Balance excludes $0.8 million of strategic partner reserve deposits as of March
31, 2022.

Approximately $703.6 million of our borrowings have maturity dates within the next two years, a large majority of which are traded CDs.


In addition, the illiquidity of portions of our loan portfolio and investments
may adversely affect our ability to dispose of them at times when it may be
advantageous for us to liquidate such portfolio or investments. In addition, if
we were required to liquidate some or all of our portfolio, the proceeds of such
liquidation may be significantly less than the current value of such
investments. Because we borrow money to make loans and investments, our net
operating income is dependent upon the difference between the rate at which we
borrow funds and the rate at which we invest these funds. As a result, there can
be no assurance that a significant change in market interest rates will not have
a material adverse effect on our interest income. In periods of sharply rising
interest rates, our cost of funds would increase, which would reduce our net
interest income.

We use a combination of long-term and short-term borrowings and equity capital
to finance our lending and investing activities. Our long-term fixed-rate
investments are financed primarily with fixed-rate debt. We may use interest
rate risk management techniques in an effort to limit our exposure to interest
rate fluctuations. We have analyzed the potential impact of changes in interest
rates on net interest income. Assuming that the balance sheet were to remain
constant and no actions were taken to alter the existing interest rate
sensitivity a hypothetical immediate 1% increase in interest rates would result
in an increase to net income as of March 31, 2022 by $1.4 million on an
annualized basis, and the impact of such an immediate increase of 1% over an one
year period would have been a reduction in net income by $0.7 million at March
31, 2022. Although management believes that this measure is indicative of our
sensitivity to interest rate changes, it does not adjust for potential changes
in credit quality, size, and composition of the assets on the balance sheet, and
other business developments that could affect net income from operations in a
particular quarter or for the year taken as a whole. Accordingly, no assurances
can be given that actual results would not differ materially from the potential
outcome simulated by these estimates.

                                 Page 46 of 51
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From time to time, we work with investment banking firms and other financial
intermediaries to investigate the viability of several other financing options
which include, among others, the sale or spinoff of certain assets or divisions,
the development of a securitization conduit program, and other independent
financing for certain subsidiaries or asset classes. These financing options
would also provide additional sources of funds for both external expansion and
continuation of internal growth.

The following table illustrates sources of available funds for us and each of
our subsidiaries, and amounts outstanding under credit facilities and their
respective end of period weighted average interest rates at March 31, 2022. See
Note 5 to the consolidated financial statements for additional information about
each credit facility.

                         Medallion
(Dollars in              Financial                                                                                          March 31,       December 31,
thousands)                 Corp.          MFC            MCI               FSVC              MB             All Other         2022              2021
Cash, cash                                                           (1)             (1)
equivalents and
federal funds sold      $    36,221     $    210     $     18,877        $    315        $    83,148        $       23     $   138,794     $      124,484
Preferred Securities         33,000                                                                                             33,000             33,000
Average interest rate          2.71 %                                                                                             2.71 %             2.31 %
Maturity                       9/37                                                                                               9/37               9/37
Retailed notes and
privately placed
borrowings                  121,000                                                                                            121,000            121,000
Average interest rate          7.66 %                                                                                             7.66 %             7.66 %
Maturity                 3/24-12/27                                                                                         3/24-12/27         3/24-12/27
SBA debentures &
borrowings                                                                                                                           -             79,463
Amounts available                                           9,500                                                                    -              9,500
Amounts outstanding                                        61,000           8,764                                               69,764             69,963
Average interest rate                                        2.90 %          3.25 %                                               2.95 %             2.72 %
Maturity                                               3/23- 3/32          45,412                                           3/23- 3/32         3/23- 3/32
Brokered CD's & other                                                                                   (2)
funds borrowed                                                                             1,335,539                         1,335,539          1,254,038
Average interest rate                                                                           1.24 %                            1.24 %             1.20 %
Maturity                                                                                   4/22-3/27                         4/22-3/27        
1/22-12/26
Total Cash              $    36,221     $    210     $     18,877        $    315        $    83,148        $       23     $   138,794     $      124,484
Total debt
outstanding             $   154,000     $      -     $     61,000        $ 
8,764        $ 1,335,539        $        -     $ 1,559,303     $    1,478,001


(1)
Cash resides in the applicable SBIC and is generally not available for corporate
use.
(2)
Includes deposits of $0.8 million related to the strategic partnership business
and $8.7 million related to listing services.

Loan amortization, prepayments, and sales also provide a source of funding for
us. Prepayments on loans are influenced significantly by general interest rates,
medallion loan market values, economic conditions, and competition.

We also generate liquidity through deposits generated at the Bank, borrowing
arrangements with other banks, and through the issuance of SBA debentures, as
well as from cash flow from operations. In addition, we may choose to
participate a greater portion of our loan portfolio to third parties. We
regularly seek additional sources of liquidity; however, given current market
conditions, there can be no assurance that we will be able to secure additional
liquidity on terms favorable to us or at all. If that occurs, we may decline to
underwrite lower yielding loans in order to conserve capital until credit
conditions in the market become more favorable; or we may be required to dispose
of assets when we would not otherwise do so, and at prices which may be below
the net book value of such assets in order for us to repay indebtedness on a
timely basis.

Recently issued accounting standards


In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses,
or Topic 326: Measurement of Credit Losses on Financial Instruments, or ASU
2016-13. 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. Under the 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, with early adoption permitted. In November 2019, the FASB
issued ASU 2019-10 to defer implementation of the standard for smaller reporting
companies, such as us, to fiscal years beginning after December 15, 2022. We are
assessing the impact the update will have on our financial statements, and
expect the update to have a material impact on our accounting for estimated
credit losses on our loans.

In August 2021, the FASB issued ASU 2021-06, Presentation of Financial
Statements, or Topic 205: Depository and Lending, or Topic 942: and Financial
Services - Investment Companies, or Topic 946: Measurement of Credit Losses on
Financial Instruments, or ASU 2021-06. This new standard amends certain SEC
paragraphs from the Codification in response to the issuance of SEC Final Rule
No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed
Businesses and SEC Rule No. 33-10835, Update

                                 Page 47 of 51
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of Statistical Disclosures for Bank and Savings and Loan Registrants. We have
assessed the impact the update and determined it does not have a material impact
on the accompanying financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit
Losses, or Topic 326: Troubled Debt Restructurings and Vintage Disclosures, or
ASU 2022-02. The main objective of this new standard is to amend ASU 2016-13 in
response to feedback received from the post-implementation review process. The
amendments update ASU 2016-13 to require that an entity measure and record the
lifetime expected credit losses on an asset upon origination or acquisition,
and, as a result, credit losses from loans modified as troubled debt
restructurings (TDRs) have been incorporated into the allowance for credit
losses. The amendments also require the disclosure of current period gross
write-offs, by year of origination, for financing receivables. We are assessing
the impact the update will have on our financial statements.

Dividends


The Board of Directors has reinstated our quarterly dividend, with a dividend of
$0.08 per share, paid in March 2022. We may, however, re-evaluate this new
dividend policy in the future depending on market conditions. There can be no
assurance that we will continue to pay any cash distributions, as we may retain
our earnings to facilitate the growth of our business, to finance our
investments, to provide liquidity, or for other corporate purposes

Control statuses


Because the Bank is an "insured depository institution" within the meaning of
the Federal Deposit Insurance Act and the Change in Bank Control Act and we are
a "financial institution holding company" within the meaning of the Utah
Financial Institutions Act, federal and Utah law and regulations prohibit any
person or company from acquiring control of us and, indirectly, the Bank,
without, in most cases, prior written approval of the FDIC or the Commissioner
of Utah Department of Financial Institutions, as applicable. Under the Change in
Bank Control Act, control is conclusively presumed if, among other things, a
person or company acquires 25% or more of any class of our voting stock. A
rebuttable presumption of control arises if a person or company acquires 10% or
more of any class of voting stock and is subject to a number of specified
"control factors" as set forth in the applicable regulations. Although the Bank
is an "insured depository institution" within the meaning of the Federal Deposit
Insurance Act and the Change in Bank Control Act, your investment in the Company
is not insured or guaranteed by the FDIC, or any other agency, and is subject to
loss. Under the Utah Financial Institutions Act, control is defined as the power
directly or indirectly or through or in concert with one or more persons to (1)
direct or exercise a controlling influence over the management or policies of us
or the election of a majority of the directors of us, or (2) to vote 20% or more
of any class of our voting securities by an individual or to vote more than 10%
of any class of our voting securities by a person other than an individual. If
any holder of any series of the Bank's preferred stock is or becomes entitled to
vote for the election of the Bank's directors, such series will be deemed a
class of voting stock, and any other person will be required to obtain the
non-objection of the FDIC under the Change in Bank Control Act to acquire or
maintain 10% or more of that series. Investors are responsible for ensuring that
they do not, directly or indirectly, acquire shares of our common stock in
excess of the amount which can be acquired without regulatory approval.

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

regulate credit granting activities, including establishing licensing requirements, where applicable, in various jurisdictions;

establish maximum interest rates, finance charges and other charges;

require disclosures to customers;

govern secure transactions;

establish collection, foreclosure, repossession and claims handling procedures and other business practices;

prohibit discrimination in the granting of credit and the administration of loans; and

regulate the use and disclosure of information relating to a borrower’s credit experience and the collection of other data.


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

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