MEDALLION FINANCIAL CORP Fair Value Disclosure
(14) FAIR VALUE OF ASSETS AND LIABILITIES
The Company follows the provisions of FASB ASC 820, which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.
In accordance with FASB ASC 820, the Company has categorized its assets and liabilities measured at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The Company's assessment and classification of an investment within a level can change over time based upon maturity or liquidity of the investment and would be reflected at the beginning of the quarter in which the change occurred.
As required by FASB ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a level 3 fair value measurement may include inputs that are observable (levels 1 and 2) and unobservable (level 3). Therefore, gains and losses for such assets and liabilities categorized within the level 3 table below may include changes in fair value that are attributable to both observable inputs (levels 1 and 2) and unobservable inputs (level 3).
Assets and liabilities measured at fair value, recorded on the consolidated balance sheets, are categorized based on the inputs to the valuation techniques as follows:
Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations).
Level 2. Assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
The Company’s investment securities are recorded at the estimated fair value of such investments.
Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the assets or liability (examples include certain private equity investments, and certain residential and commercial mortgage-related assets, including loans, securities, and derivatives).
A review of fair value hierarchy classification is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain assets or liabilities. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in/out of the level 3 category as of the beginning of the quarter in which the reclassifications occur.
Equity investments were recorded at cost less impairment plus or minus observable price changes. Commencing in 2020, the Company elected to measure equity investments at fair value on a non-recurring basis.
The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024.
December 31, 2025 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities (1) |
|
$ |
— |
|
|
$ |
60,183 |
|
|
$ |
— |
|
|
$ |
60,183 |
|
Equity securities (2) |
|
|
1,787 |
|
|
|
— |
|
|
|
— |
|
|
|
1,787 |
|
Total |
|
$ |
1,787 |
|
|
$ |
60,183 |
|
|
$ |
— |
|
|
$ |
61,970 |
|
December 31, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities (1) |
|
$ |
— |
|
|
$ |
54,805 |
|
|
$ |
— |
|
|
$ |
54,805 |
|
Equity securities (2) |
|
|
1,732 |
|
|
|
— |
|
|
|
— |
|
|
|
1,732 |
|
Total |
|
$ |
1,732 |
|
|
$ |
54,805 |
|
|
$ |
— |
|
|
$ |
56,537 |
|
The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2025 and 2024.
December 31, 2025 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity investments (1) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
December 31, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity investments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,374 |
|
|
$ |
1,374 |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,374 |
|
|
$ |
1,374 |
|
Significant Unobservable Inputs
ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as level 3 within the fair value hierarchy. The tables below are not intended to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.
The valuation techniques and significant unobservable inputs used in non-recurring level 3 fair value measurements of assets and liabilities as of December 31, 2025 and 2024.
(Dollars in thousands) |
|
Fair Value |
|
|
Valuation Techniques |
|
Unobservable Inputs |
|
Range |
|
Equity investments |
|
$ |
— |
|
|
Investee financial analysis |
|
Financial condition and operating performance of the borrower (1) |
|
N/A |
(Dollars in thousands) |
|
Fair Value |
|
|
Valuation Techniques |
|
Unobservable Inputs |
|
Range |
|
Equity investments |
|
$ |
1,374 |
|
|
Investee financial analysis |
|
Financial condition and operating performance of the borrower (1) |
|
N/A |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 16, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Mar 13, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.