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We, Medallion Financial Corp. or the Company, are a closed-end, non-diversified management investment company that has elected to be treated as a business development company (a “BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We are a specialty finance company that originates, acquires and services loans to various types of commercial businesses. A wholly-owned portfolio company of ours, Medallion Bank, originates consumer loans for the purchase of recreational vehicles, boats, motorcycles and trailers. Medallion Bank also originates financing for small-scale home improvements. Our core philosophy has been “In niches there are riches.” We try to identify markets that are profitable and where we can be an industry leader. Our investment objectives are to provide a high level of distributable income, consistent with preservation of capital, as well as long-term growth of net asset value and our stock price. In addition, we have elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended. As a RIC, provided certain conditions are met, we are not subject to corporate taxes on the amounts we pay as distributions to our shareholders.

We are offering $30,000,000 principal amount of our 9.000% notes due 2021. The notes will mature on April 15, 2021. We will pay interest on the notes quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, beginning on July 15, 2016. We do not have the right to redeem the notes prior to April 15, 2020 (twelve months before maturity). We may redeem any or all of the notes at our option on or after April 15, 2020 at the redemption price described under the heading “Description of the Notes — Optional Redemption” in this prospectus supplement. In addition, holders of the notes can require us to repurchase some or all of the notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest to, but not including, the repurchase date upon the occurrence of a “Change of Control Repurchase Event” (as defined herein). The notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

The notes will be our unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes, including our Fixed/Floating Rate Junior Subordinated Notes issued on June 7, 2007; equal in right of payment to any of our outstanding and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

We intend to apply to list the notes on The NASDAQ Global Select Market, and we expect trading to commence thereon within 30 days of the first original issue date of the notes under the symbol “TAXIL.” The notes are expected to trade “flat.” This means that purchasers will not pay, and sellers will not receive, any accrued and unpaid interest on the notes that is not included in the trading price. Currently, there is no public market for the notes.

Investing in the notes involves a high degree of risk. See “Risk Factors” beginning on page S-10 of this prospectus supplement.

We have granted the underwriters the right to purchase, exercisable within a 30-day period, up to an additional $4,500,000 principal amount of notes, solely to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

We expect that delivery of the notes will be made to investors in book-entry form through The Depository Trust Company on or about April 15, 2016.

We have not authorized anyone to provide you with additional information, or information different from that contained in this prospectus supplement and the accompanying base prospectus. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus supplement and the accompanying base prospectus is accurate only as of the date of this prospectus supplement or such base prospectus, respectively. Our business, financial condition, results of operations and prospects may have changed since then.

This document contains two parts. The first part is this prospectus supplement, which describes the terms of the offering and also adds to and updates information contained in the accompanying prospectus. The second part, the accompanying prospectus, provides information about us. Generally, when we refer to this prospectus, we are referring to both parts of this document combined together. To the extent there is a conflict between the information contained in this prospectus supplement on the one hand, and the information contained in the accompanying prospectus, on the other hand, the statements in the prospectus supplement supersedes the earlier statement.

PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights some of the information in this prospectus supplement. It is not complete and may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this prospectus supplement and the accompanying base prospectus before deciding whether to invest in the notes. In this prospectus supplement and the accompanying base prospectus, except where the context suggests otherwise, the terms “we”, “us” and “our” refer to Medallion Financial Corp.

Overview

We are a specialty finance company with a leading position in originating, acquiring and servicing loans that finance various types of commercial businesses. A wholly-owned portfolio company of ours, Medallion Bank, also originates consumer loans for the purchase of recreational vehicles, boats, motorcycles and trailers. Medallion Bank also originates financing for small-scale home improvements. Our investment objectives are to provide a high level of distributable income, consistent with preservation of capital, as well as long-term growth of net asset value and our stock price. These investment objectives may be changed without shareholder approval. Since 1996, the year in which we became a public company, through December 31, 2015, we have increased our taxicab medallion loan portfolio at a compound annual growth rate of 4%, and our commercial loan portfolio at a compound annual growth rate of 4% (9% and 6% on a managed basis when combined with Medallion Bank). Since Medallion Bank acquired a consumer loan portfolio and began originating consumer loans in 2004, it has increased its consumer loan portfolio at a compound annual growth rate of 18%. Total assets under our management and the management of our unconsolidated wholly-owned subsidiaries, which includes our managed net investment portfolio, as well as assets serviced for third party investors, were approximately $1.66 billion as of December 31, 2015 and $1.50 billion as of December 31, 2014, and have grown at a compound rate of 11% from approximately $215.0 million at the end of 1996.

Our managed net investment portfolio was comprised of managed medallion loans of approximately $640,904,000, or 43%, as of December 31, 2015 and approximately $677,155,000, or 52%, as of December 31, 2014 and other managed commercial loans of approximately $125,882,000, or 8%, at December 31, 2015, and approximately $114,404,000, or 9%, as of December 31, 2014. Consumer loans originated by Medallion Bank of approximately $619,887,000 and $472,547,000 comprised 41% and 36% of the managed net investment portfolio as of December 31, 2015 and December 31, 2014, respectively. For more information, see “Our Business—Overview.”

We conduct our business through various wholly-owned investment company subsidiaries including:

•

Medallion Funding LLC, or Medallion Funding or MFC, a Small Business Investment Company, or an SBIC, our primary taxicab medallion lending company;

•

Medallion Capital, Inc., or Medallion Capital or MCI, an SBIC and a Registered Investment Company, or RIC, which conducts a mezzanine financing business; and

•

Freshstart Venture Capital Corp., or Freshstart or FSVC, an SBIC and a RIC, which originates and services taxicab medallion and commercial loans.

We also conduct business through our asset-based lending division, Medallion Business Credit, an originator of loans to small businesses for the purpose of financing inventory and receivables. In addition, we conduct business through a wholly-owned portfolio company, Medallion Bank, a bank regulated by the Federal Deposit Insurance Corporation (“FDIC”) and the Utah Department of Financial Institutions, which originates taxicab medallion, commercial, and consumer loans, raises deposits, and conducts other banking activities.

Management

We have assembled a management team that has extensive experience in our lines of business. Alvin Murstein, our Chairman and Chief Executive Officer, has over 60 years of experience in the ownership, management and financing of taxicab medallions. Andrew M. Murstein, our President, is the third generation in his family to be active in the business and has over 25 years of experience in the ownership, management and financing of taxicab medallions. In addition to our medallion loan experience, our Chief Operating and Credit Officer has over 30 years of commercial finance experience, our Chief Financial Officer has over 30 years of finance company experience, and the head of our commercial lending area has over 35 years of commercial banking experience. For more information, see “Management.”

Strategy

Our core philosophy has been “In niches there are riches.” We try to identify markets that are profitable and where we can be an industry leader. Key elements of our strategy include capitalizing on our relationships with customers and brokers and dealers, employing disciplined underwriting policies and maintaining rigorous portfolio monitoring, leveraging the skills of our experienced management team and performing strategic acquisitions. Investments in our portfolio companies are not rated by any of the public ratings agencies, but if they were, all of them could be rated below “investment grade.” Our portfolio companies may have limited access to capital, higher funding costs, abrupt business cycles, and intense competition. These factors could impair their cash flow or result in other events, such as bankruptcy, that could limit their ability to repay their obligations to us and may materially adversely affect the return on, or the recovery of, our investments in their businesses. For more information, see “Our Business—Our Strategy.”

Structure

We are a closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. For more information on our organizational structure, see “Our Structure” in the accompanying Prospectus and “Our Business—Overview.”

In addition, we have elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code. As a RIC, we will not be subject to U.S. federal income tax on any investment company taxable income (which includes, among other things, dividends and interest reduced by deductible expenses) that we distribute to our shareholders if at least 90% of our investment company taxable income for that taxable year is distributed. We intend to pay quarterly cash distributions to comply with this requirement. Shareholders can elect to reinvest distributions. For more information, see “Material U.S. Federal Income Tax Considerations” in this prospectus supplement and “Dividend Reinvestment Plan” in the accompanying Prospectus.

Principal Risks Factors

Investing in our securities involves a number of significant risks. You should carefully consider the information found in “Risk Factors” including the following risks:

Risk of increased competition

There have been recent changes in the taxicab and for-hire vehicle industries that have resulted in increased competition in all of our taxi medallion markets. Ridesharing applications, or ridesharing apps, utilized by for-hire vehicles were introduced in New York City in 2011 and continue to expand domestically and globally. Many of these for-hire vehicle operators operate outside of the regulatory regime with which we and our borrowers operate, which poses an increased risk of competition because such operators are able to pass the cost savings of not having to comply with certain regulations to its passengers. In addition, the New York State legislature enacted laws to permit cars for-hire to pick-up street hails in boroughs outside of Manhattan.

Increased competition from ridesharing apps and Street Hail Livery licenses has reduced our market share, the overall market for taxicab services, the supply of taxicab drivers, income from operating medallions and the value of taxicab medallions. If these trends continue and intensify, there would be a material increase to our loan to value ratios, loan delinquencies, and loan defaults resulting in a material adverse effect on our business, financial condition, and results of operations.

Risk of decreases in the value of our medallion loan collateral and our Chicago medallions

A significant portion of our loan revenue is derived from loans collateralized by New York City taxicab medallions. A portion of our loan revenue is also derived from loans collateralized by Chicago taxicab medallions. Decreases in the value of our medallion loan collateral has resulted in an increase in the loan-to-value ratios of our medallion loans. Since the September 30, 2014 peak valuation, the value of New York City taxicab medallions decreased by approximately 32% for individual medallions and 40% for corporate medallions at December 31, 2015, and the value of Chicago taxicab medallions has decreased 35% at December 31, 2015 since December 31, 2013. We have also experienced increases in Medallion loans 90 days or more past due from 0.0% at December 31, 2014 to 3.8% at December 31, 2015 and increases of 0.0% of loans at Medallion Bank at December 31, 2014 to 4.4% at December 31, 2015.

Key investment personnel risk

Our future success will depend, to a significant extent, on the continued service and coordination of our senior management team. The departure of any member of our senior management team could have a material adverse effect on our ability to achieve our investment objective.

Regulatory risk

The 1940 Act imposes numerous constraints on the operations of BDCs. Our regulatory requirements may hinder our ability to take advantage of attractive investment opportunities and, as a result, achieve our investment objective. As a BDC, we are not permitted to acquire any assets other than “qualifying assets” unless, at the time of such acquisition, at least 70% of our total assets are qualifying assets. Failure to meet this test could result in us being deemed in violation of the 1940 Act and could preclude us from investing in what we believe are attractive investments. As of December 31, 2015, the percentage of our total assets that were invested in non-qualifying assets were up to 28.6% on an unconsolidated basis and up to 29.1% on a consolidated basis.

Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be restricted from issuing additional debt, may be limited in making distributions on our stock, and may be required to sell a portion of our investments and, depending on the nature of our leverage, to repay a portion of our debt at a time when such sales and/or repayments may be disadvantageous. As of December 31, 2015, our asset coverage was approximately 240%, calculated on a consolidated basis, and 228%, calculated on an unconsolidated basis. After giving effect to the issuance of the Notes (assuming no exercise of the underwriters’ over-allotment option) and the use of proceeds therefrom, our asset coverage is expected to be approximately 221%, calculated on a consolidated basis, and 211%, calculated on an unconsolidated basis.

Interest rate sensitivity risk

We, like other financial institutions, are subject to interest rate risk to the extent that our interest-earning assets (consisting of medallion, commercial, and consumer loans; and investment securities) reprice on a different basis over time in comparison to our interest-bearing liabilities (consisting primarily of credit facilities with banks and other lenders, bank certificates of deposit, and SBA debentures). The majority of our loan portfolio is comprised of fixed-rate loans. 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. The effect of changes in interest rates is mitigated by regular turnover of the portfolio. We seek to manage interest rate risk by originating adjustable-rate loans, by incurring fixed-rate indebtedness, by evaluating appropriate derivatives, pursuing securitization opportunities, and by other options consistent with managing interest rate risk.

Valuation risk

The net asset value per share of our common stock is determined by dividing the total shareholders’ equity by the total number of our shares of common stock outstanding at that date. In calculating the value of our total assets, we value investments for which market quotations are readily available at such market quotations. A significant portion of our debt and equity securities are not publicly traded or their market price is not readily available. These securities are valued at fair value as determined in good faith by our Board of Directors under a valuation policy and a consistently applied valuation process, and involves subjective judgment. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate over short periods of time and may be based on estimates. As a result, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.

Tax risk

To obtain and maintain RIC tax treatment under the Code, we must meet certain annual distribution, income source, and asset diversification requirements. If we fail to qualify for RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

THE OFFERING

The summary below describes the principal terms of the notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The “Description of Our Debt Securities” section of the accompanying prospectus, as supplemented by the “Description of the Notes” section of this prospectus supplement, contains a more detailed description of the terms and conditions of the notes. As used in this section, “we,” “our,” and “us” refer to Medallion Financial Corp. and not to its consolidated subsidiaries.

Issuer

Medallion Financial Corp., a Delaware corporation.

Securities

$30,000,000 principal amount of 9.000% Notes due 2021 (plus up to an additional $4,500,000 principal amount to cover over-allotments).

Option to Purchase Additional Notes

The underwriters may also purchase from us up to an additional $ aggregate principal amount of notes within 30 days of the date of this prospectus supplement.

Initial Public Offering Price

$25.00 per note

Maturity

April 15, 2021, unless earlier repurchased or redeemed.

Type of Note

Fixed-rate note

Listing

We intend to list the notes on NASDAQ within 30 days of the original issue date under the trading symbol “TAXIL.”

Interest Rate

9.000% per year

Day Count Basis

360-day year of twelve 30-day months

Original Issue Date

April 15, 2016

Stated Maturity Date

April 15, 2021

Date Interest Starts Accruing

April 15, 2016

Interest Payment Dates

Interest will be payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, beginning on July 15, 2016. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.

Interest Periods

The initial interest period will be the period from and including April 15, 2016, to, but excluding, the initial interest payment date, and the subsequent interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

Regular Record Dates for Interest

Every January 1, April 1, July 1 and October 1 beginning on July 1, 2016.

Specified Currency

U.S. Dollars

Ranking of Notes

The notes will be our direct unsecured obligations and will rank:

•

senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes, including our Fixed/Floating Rate Junior Subordinated Notes issued on June 7, 2007;

•

equal in right of payment to any of our indebtedness that is not so subordinated;

•

effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and

•

structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

As of December 31, 2015, our total consolidated indebtedness was $405 million, of which an aggregate of $199 million was senior indebtedness and an aggregate of $372 million was secured indebtedness and we had unused commitments of $20.1 million under these facilities. As of December 31, 2015, Medallion Bank and our other unconsolidated subsidiaries had $916 million of indebtedness and other liabilities (including trade payables, but excluding intercompany obligations and liabilities of a type not required to be reflected on a balance sheet of such subsidiaries in accordance with GAAP) to which the notes would have been structurally subordinated and they had no unused commitments; however, they had $25.0 million available under Fed Funds lines with several commercial banks. After giving effect to the issuance of the notes (assuming no exercise of the underwriters’ over-allotment option) and the use of proceeds therefrom, our total consolidated indebtedness combined with the indebtedness and other liabilities of our unconsolidated subsidiaries would have been $1,346 million. For material changes in our indebtedness since December 31, 2015, see “Capitalization.”

The indenture governing the notes does not limit the amount of debt that we or our subsidiaries may incur.

Denominations

We will issue the notes in denominations of $25 and integral multiples of $25 in excess thereof.

Optional Redemption

We do not have the right to redeem the notes prior to April 15, 2020 (twelve months before maturity).

We may redeem any or all of the notes at our option on or after April 15, 2020 (twelve months before maturity), at a redemption price equal to the greater of:

•

100% of the principal amount of the notes being redeemed; or

•

the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption), discounted to their present value as of such date of redemption on a quarterly basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined herein), plus 50 basis points.

We will also pay the accrued and unpaid interest on the notes to, but excluding, the redemption date.

We will give notice of any redemption not less than 30 nor more than 60 days before the redemption date by mail or electronic delivery to the trustee, the paying agent and each holder of the notes. See “Description of the Notes—Optional Redemption.”

Sinking Fund

The notes will not be subject to any sinking fund, which means that we are not required to redeem or retire the notes periodically.

Offer to Repurchase Upon a Change of Control Repurchase Event

If a Change of Control Repurchase Event occurs prior to maturity, holders will have the right, at their option, to require us to repurchase for cash some or all of the notes at a repurchase price equal to 100% of the principal amount of the notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. Before making any such repurchase of notes, we may have to comply with certain requirements under our revolving lines of credit, to the extent such requirements remain in effect at such time, or otherwise obtain consent from the lenders.

Defeasance

The notes are subject to defeasance by us.

Covenant Defeasance

The notes are subject to covenant defeasance by us.

Book-entry Form

The notes will be issued in book-entry form and will be represented by permanent global certificates deposited with, or on behalf of, The Depository Trust Company (“DTC”) and registered in the name of a nominee of DTC. Beneficial interests in any of the notes will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee and any such interest may not be exchanged for certificated securities, except in limited circumstances.

Trustee, Paying Agent, and Security Registrar

Wilmington Trust, National Association.

Certain Covenants

In addition to any covenants described elsewhere in this prospectus supplement, the following covenants shall apply to the notes:

•

We agree that for the period of time during which the notes are outstanding, we will not violate (regardless of whether we are subject to) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as in effect immediately prior to the issuance of the notes, giving effect to any exemptive relief granted to us by the US Securities and Exchange Commission (the “SEC”). These provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings; provided that, if we are (a) no longer subject to the 1940 Act and (b) required to consolidate Medallion Bank in our consolidated financial statements for GAAP purposes, Medallion Bank shall be assumed to be deconsolidated and carried at the book value of Medallion Bank’s securities owned by us for purposes of this covenant.

•

We agree that for the period of time during which the notes are outstanding, pursuant to Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act as in effect immediately prior to the issuance of the notes (regardless of whether we are subject thereto), we will not declare any dividend (except a dividend payable in stock of the issuer), or declare any other distribution, upon a class of our common stock, or purchase any such common stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in the 1940 Act) of at least 200% after deducting the amount of such dividend, distribution or purchase price, as the case may be, and giving effect, in each case, (i) to any exemptive relief granted to us by the SEC and (ii) to any no-action relief granted by the SEC to another BDC (or to us if it determines to seek such similar no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act in order to maintain such BDC’s status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.

•

We agree to use commercially reasonable efforts to obtain and maintain a rating for the notes with Egan-Jones Ratings Company or any other “nationally recognized statistical rating organization,” as such term is defined in Section 3(a)(62) of the Securities Exchange Act of 1934 (the “Exchange Act”).

Events of Default

You will have rights if an Event of Default occurs with respect to the notes and is not cured.

The term “Event of Default” in respect of the notes means any of the following:

•

We do not pay the principal of any note on its due date.

•

We do not pay interest on any note when due, and such default is not cured within 30 days.

•

We remain in breach of any other covenant with respect to the notes for 60 days after we receive a written notice of default stating we are in breach. The notice must be sent by either the Trustee or holders of at least 25.0% of the principal amount of the notes.

•

We or any significant subsidiaries, as defined in Article I, rule 1-02 of Regulation S-X, file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur and, in the case of certain orders or decrees entered against us under any bankruptcy law, such order or decree remains undischarged or unstayed for a period of 60 days.

•

Default by us or any of our subsidiaries with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $20,000,000 (or its foreign currency equivalent) in the aggregate of us and/or any such subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, if such default is not cured or waived, or such acceleration is not rescinded, within 30 days after written notice to us by the trustee or to us and the trustees by holders of a least 25% in aggregate principal amount of notes then outstanding, in accordance with the indenture.

•

A final judgment or judgments for the payment of $20,000,000 (or its foreign currency equivalent) or more (excluding any amounts covered by insurance) in the aggregate rendered against us or any of our subsidiaries, which judgment is not discharged, bonded, paid, waived or stayed within 60 days after (i) the date on which the right to appeal thereof has expired if no such appeal has commenced, or (ii) the date on which all rights to appeal have been extinguished;

•

On the last business day of each of twenty-four consecutive calendar months, the notes have an asset coverage, as defined in the 1940 Act, of less than 100%, after giving effect to any exemptive relief granted to the Company by the SEC.

Use of Proceeds

We estimate that the proceeds from this offering will be approximately $28.28 million (or approximately $32.63 million if the underwriters exercise their over-allotment option in full), after deducting fees and estimated expenses. We intend to use the net proceeds from this offering to make loans to and other investments in portfolio companies and for general corporate purposes, including repaying borrowings under our credit facilities in the ordinary course of business and expanding our operations. See “Use of Proceeds.”

SUMMARY CONDENSED CONSOLIDATED FINANCIAL DATA

The consolidated financial information at and for the fiscal years ended December 31, 2015, 2014, 2013, 2012 and 2011 are derived from our consolidated financial statements, which have been audited by WeiserMazars LLP, our independent registered public accounting firm. This data should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our annual and interim consolidated financial statements and the related notes thereto included in the accompanying base prospectus.


	Year ended December 31,
(Dollars in thousands, except per share data)	2015			2014			2013		2012			2011
Statement of operations
Investment income	$	$42,653		$	41,068		$	34,929	$	32,344		$	37,227
Interest expense		9,422			8,543			8,361		10,858			13,538

Net interest income		33,231			32,525			26,568		21,486			23,689
Noninterest income		319			509			1,282		1,135			1,185
Operating expense		16,724			17,889			15,661		13,856			14,111

Net investment income before income taxes		16,826			15,145			12,189		8,765			10,763
Income tax (provision) benefit		—			—			—		—			—

Net investment income after income taxes		16,826			15,145			12,189		8,765			10,763
Net realized gains (losses) on investments		7,636			(5,607	)		692		(6,731	)		(546	)
Net change in unrealized appreciation on Medallion Bank and other controlled subsidiaries⁽¹⁾		16,830			15,643			5,060		7,896			7,668
Net change in unrealized appreciation (depreciation) on investments⁽¹⁾		(11,916	)		3,511			7,835		14,587			1,278

Net increase in net assets resulting from operations	$	$29,376		$	28,692		$	25,776	$	24,517		$	19,163

Per share data
Net investment income	$	$0.69		$	0.60		$	0.55	$	0.43		$	0.61
Income tax (provision) benefit		—			—			—		—			—
Net realized gains (losses) on investments		0.31			(0.22	)		0.03		(0.33	)		(0.03	)
Net change in unrealized appreciation on investments⁽¹⁾		0.20			0.76			0.58		1.11			0.51

Net increase in net assets resulting from operations	$	$1.20		$	1.14		$	1.16	$	1.21		$	1.09

Distributions declared per share	$	$1.00		$	0.96		$	0.90	$	0.85		$	0.74

Weighted average common shares outstanding
Basic		24,315,427			24,850,496			21,850,415		19,912,883			17,426,097
Diluted		24,391,959			25,073,323			22,225,783		20,180,694			17,659,831

	Year ended December 31,
(Dollars in thousands, except per share data)	2015			2014			2013		2012			2011
Balance sheet data
Net investments	$	$606,959		$	527,601		$	473,157	$	455,010		$	451,835
Total assets		689,050			632,287			595,053		543,465			537,031
Total funds borrowed		404,540			348,795			314,958		322,770			357,779



	Year ended December 31,
		2015			2014			2013			2012			2011
Total liabilities		410,962			357,617			321,558			327,147			365,527
Total shareholders’ equity		278,088			274,670			273,495			216,318			171,504

Managed balance sheet data⁽²⁾
Net investments	$	1,501,555		$	1,310,685		$	1,144,596		$	1,048,635		$	956,626
Total assets		1,631,118			1,469,751			1,305,809			1,174,124			1,080,239
Total funds borrowed		1,313,436			1,156,735			997,295			924,921			872,108
Total liabilities		1,353,030			1,195,081			1,032,314			957,806			908,735

Selected financial ratios and other data
Return on average assets (ROA)^(3)(12)
Net investment income after taxes		2.59	%		2.51	%		2.19	%		1.68	%		2.01	%
Net increase in net assets resulting from operations		4.53			4.75			4.64			4.69			3.57
Return on average equity (ROE)^(4)(12)
Net investment income after taxes		6.08			5.48			5.40			4.44			6.46
Net increase in net assets resulting from operations		10.61			10.39			11.42			12.41			11.49

Weighted average yield		7.74	%		8.25	%		7.60	%		7.37	%		8.01	%
Weighted average cost of funds		1.71			1.71			1.82			2.48			2.91

Net interest margin⁽⁵⁾		6.03			6.54			5.78			4.89			5.10

Noninterest income ratio^(6)(12)		0.06	%		0.10			0.28			0.26			0.26
Total expense ratio^(7)(8)(12)		4.75			5.31			5.23			5.63			5.95
Operating expense ratio^(8)(12)		3.04			3.60			3.41			3.16			3.04


	As of December 31,
	2015			2014			2013			2012			2011
As a percentage of net investment portfolio
Medallion loans		51	%		59	%		63	%		65	%		68	%
Commercial loans		14			14			13			12			12
Investment in Medallion Bank and other controlled subsidiaries		26			26			23			22			19
Equity investments		1			1			1			1			1
Investment securities		8			—			—			—			—

Investments to assets⁽⁹⁾		88	%		83	%		80	%		84	%		84	%
Equity to assets⁽¹⁰⁾		40			43			46			40			32
Debt to equity⁽¹¹⁾		145			127			115			149			209

(1)	Unrealized appreciation (depreciation) on investments represents the increase (decrease) for the year in the fair value of our investments, including the results of operations for Medallion Bank and other controlled subsidiaries, where applicable.

(2)	Includes the balances of wholly-owned, unconsolidated portfolio companies, primarily Medallion Bank.

(3)	ROA represents the net investment income after taxes or net increase in net assets resulting from operations, divided by average total assets.

(4)	ROE represents the net investment income after taxes or net increase in net assets resulting from operations, divided by average shareholders’ equity.

(5)

Net interest margin represents net interest income for the year divided by average interest earning assets, and included interest recoveries and bonuses of $817 in 2015, $4,160 in 2014, $2,326 in 2013, $444 in 2012, and $4,070 in 2011, and also included dividends from Medallion Bank and other controlled subsidiaries of $18,889 in 2015, $15,000 in 2014, $12,000 in 2013, $10,500 in 2012, and $5,500 in 2011. On a managed basis, combined with Medallion Bank, the net interest margin was 6.98%, 7.09%, 6.66%, 6.31%, and 6.68% for 2015, 2014, 2013, 2012 and 2011.

(6)	Noninterest income ratio represents noninterest income divided by average interest earning assets.

(7)	Total expense ratio represents total expenses (interest expense, operating expenses, and income taxes) divided by average interest earning assets.

(8)	Operating expense ratio represents operating expenses divided by average interest earning assets.

(9)	Represents net investments divided by total assets as of the period indicated.

(10)	Represents total shareholders’ equity divided by total assets as of the period indicated.

(11)	Represents total funds borrowed divided by total shareholders’ equity as of the period indicated.

(12)

Medallion Servicing Corporation (“MSC”) has assumed our servicing obligations, and as a result, servicing fee income of $5,658, $5,946, $5,920, $6,066 and $5,492 and operating expenses of $6,044, $6,005, $5,841, $6,359 and $5,659, which formally were ours, were now MSC’s for the years ended December 31, 2015, 2014, 2013, 2012 and 2011. Excluding the impact of the MSC amounts, the 2015 ROA and ROE on net investment income after taxes were 2.53% and 5.94%, and the noninterest income, total expense, and operating expense ratios were 1.09%, 5.84%, and 4.13%; and the comparable amounts for 2014 were 2.50%, 5.46%,1.30%, 6.52%, and 4.80%; and for 2013 were 2.19%, 5.39%, 1.57%, 6.50%, and 4.68%, and for 2012 were 1.62%, 4.29%, 1.64%, 7.08%, and 4.60%; and for 2011 were 1.98%, 6.36%, 1.44%, 7.17%, and 4.21%.


	2015								2014								2013
(In thousands except per share amounts)	Qtr 4		Qtr 3		Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2		Qtr 1
Quarterly Data (unaudited)
Total investment income	$	9,319	$	10,665	$	10,838	$	11,831	$	10,779	$	11,379	$	9,875	$	9,035	$	9,706	$	9,435	$	7,543	$	8,245
Net investment income before income taxes		3,356		4,236		4,330		4,904		2,664		5,228		3,803		3,450		3,569		4,415		1,742		2,463
Net increase in net assets resulting from operations		6,911		7,312		8,086		7,068		8,127		6,694		7,105		6,766		6,658		6,397		6,249		6,472
Diluted earnings per common share		0.29		0.30		0.33		0.29		0.33		0.27		0.28		0.27		0.29		0.29		0.28		0.30
Distributions declared per common share		0.25		0.25		0.25		0.25		0.24		0.24		0.24		0.24		0.23		0.23		0.22		0.22
Net asset value per common share		11.42		11.37		11.26		11.16		11.16		11.05		11.01		10.95		10.95		10.25		10.17		10.08

Some of the statements in this prospectus supplement constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this prospectus supplement involve risks and uncertainties, including statements as to:

We generally use words such as “anticipates,” “believes,” “expects,” “intends,” “plans” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in this prospectus supplement.

We have based the forward-looking statements included in this prospectus supplement on information available to us on the date of this prospectus supplement, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on
Form 8-K.

An investment in the notes involves significant risks. Prior to making a decision about investing in the notes, and in consultation with your own financial and legal advisors, you should carefully consider, among other matters, the following risk factors, and information in this prospectus supplement.

Changes in the taxicab and for-hire vehicle industries have resulted in increased competition and could have a material adverse effect on our business, financial condition and operations.

There have been recent changes in the taxicab and for-hire vehicle industries that have resulted in increased competition in all of our taxi medallion markets. Ridesharing applications, or ridesharing apps, utilized by for-hire vehicles were introduced in New York City in 2011 and continue to expand domestically and globally. Many of these for-hire vehicle operators operate outside of the regulatory regime with which we and our borrowers operate, which poses an increased risk of competition because such operators are able to pass the cost savings of not having to comply with certain regulations to its passengers. According to the Taxi and Limousine Commission, or TLC, between January 2015 and January 2016, approximately 13,000 new for-hire vehicle licenses were issued, increasing the total number of for-hire vehicles to approximately 72,000 as of January 31, 2016, a 22% increase from January 2015.

In addition, the New York State legislature enacted a law on December 21, 2011, which was amended on February 17, 2012, to permit cars for-hire to pickup street hails in boroughs outside of Manhattan. Pursuant to this law the TLC has issued approximately 8,100 Street Hail Livery licenses since June 2013, of which approximately 6,100 are active.

TLC six month data through June 2015 has shown a 5.2% reduction in the average daily New York City taxicab fare totals, including tips, compared to the same period in 2014, and an 8.5% reduction in the average daily number of New York City taxicab trips. Such reductions in fare totals and taxicab trips are likely the result of a combination of ridesharing apps, Street Hail Livery licenses, and other forms of public transportation.

As of December 31, 2015, 4.1% of our managed medallion loan portfolio and 3.0% of our on-balance sheet was 90 days or more past due, compared to 0% at December 31, 2014. As discussed in further detail below, there have also been recent decreases in the values of our medallion loan collateral and our Chicago medallions purchased out of foreclosure. Increased competition from ridesharing apps and Street Hail Livery licenses has reduced our market share, the overall market for taxicab services, the supply of taxicab drivers, income from operating medallions and the value of taxicab medallions. If these trends continue and intensify, there would be a material increase to our loan to value ratios, loan delinquencies, and loan defaults resulting in a material adverse effect on our business, financial condition, and results of operations.

Decreases in the value of our medallion loan collateral and our Chicago medallions purchased out of foreclosure would have a material adverse effect on our business.

A significant portion of our loan revenue is derived from loans collateralized by New York City taxicab medallions. According to TLC data, over the past 20 years New York City taxicab medallions have appreciated in value from under $200,000 to $1,320,000 for corporate medallions and $1,050,000 for individual medallions in 2014. Over approximately the last year, however, taxicab medallions have declined in value. Since the September 30, 2014 peak valuation, the value of New York City taxicab medallions decreased by approximately 32% for individual medallions and 40% for corporate medallions.

We own 159 Chicago taxicab medallions that were purchased out of foreclosure. Additionally, a portion of our loan revenue is derived from loans collateralized by Chicago taxicab medallions. Since we acquired the Chicago medallions in 2003, they had appreciated in value from $50,000 to approximately $370,000 in 2013. Over approximately the past year and a half, however, there has been a decline in the value of Chicago taxicab medallions. Since December 31, 2013, the value of Chicago taxicab medallions decreased 35%.

Decreases in the value of our medallion loan collateral has resulted in an increase in the loan-to-value ratios of our medallion loans. We estimate that the weighted average loan-to-value ratio of all of our medallion loans was approximately 76% as of December 31, 2015 and 60% as of December 31, 2014.

If taxicab medallion values continue to decline, there would be an increase in medallion loan delinquencies, foreclosures and borrower bankruptcies. Our ability to recover on defaulted medallion loans by foreclosing on and selling the medallion collateral would be diminished, which would result in material losses on defaulted medallion loans which would have a material adverse effect on our business. A substantial decrease in the value of our Chicago medallions purchased out of foreclosure would adversely affect our ability to dispose of such medallions at times when it may be advantageous for us to do so. If we are required to liquidate all or a portion of our medallions quickly, we would realize less than the value at which we had previously recorded such medallions.

We borrow money, which magnifies the potential for gain or loss on amounts invested, and may increase the risk of investing in us.

Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested, and therefore increase the risk associated with investing in us. We borrow from and issue senior debt securities to banks and other lenders, and through long-term subordinated SBA debentures. These creditors have fixed dollar claims on our assets that are superior to the claims of our shareholders. If the value of our assets increases, then leveraging would cause the net asset value to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could reduce the amount available for distribution payments.

As of December 31, 2015, we had $404,540,000 of outstanding indebtedness, which had a weighted average borrowing cost of 2.47% at December 31, 2015, and our wholly-owned unconsolidated portfolio companies, primarily Medallion Bank, had $908,896,000 of outstanding indebtedness at a weighted average borrowing cost of 1.04%.

Consumer lending by Medallion Bank carries a higher risk of loss and could be adversely affected by an economic downturn.

By its nature, lending to consumers carries with it a higher risk of loss than commercial lending. Although the net interest margins should be higher to compensate Medallion Bank for this increased risk, an economic downturn could result in higher loss rates and lower returns than expected, and could affect the profitability of Medallion Bank’s consumer loan portfolio.

We depend on the diligence, skill, and network of business contacts of the investment professionals we employ for sourcing, evaluating, negotiating, structuring, and monitoring our investments. Our future success will also depend, to a significant extent, on the continued service and coordination of our senior management team, particularly, Alvin Murstein, our Chairman and Chief Executive Officer, Andrew M. Murstein, our President, and Larry D. Hall, our Chief Financial Officer. The departure of Messrs. Murstein or Hall, or any member of our senior management team, could have a material adverse effect on our ability to achieve our investment objective.

Changes in taxicab industry regulations that result in the issuance of additional medallions or increases in the expenses involved in operating a medallion would lead to a decrease in the value of our medallion loan collateral and our Chicago medallions purchased out of foreclosure.

Every city in which we originate medallion loans, and most other major cities in the United States, limits the supply of taxicab medallions. This regulation results in supply restrictions that support the value of medallions. Actions that loosen these restrictions and result in the issuance of additional medallions into a market could decrease the value of medallions in that market. If this were to occur, the value of the collateral securing our then outstanding medallion loans in that market would be adversely affected. We are unable to forecast with any degree of certainty whether any other potential increases in the supply of medallions will occur.

In New York City, Chicago, Boston, and other markets where we originate medallion loans, taxicab fares are generally set by government agencies. Expenses associated with operating taxicabs are largely unregulated. As a result, the ability of taxicab operators to recoup increases in expenses is limited in the short term. Escalating expenses, such as rising gas prices and increase in interest rates, can render taxicab operations less profitable, could cause borrowers to default on loans from us and would adversely affect the value of our collateral.

We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.

The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70% of their total assets in qualifying assets, primarily securities of “eligible portfolio companies” (as defined under the 1940 Act), cash, cash equivalents, US government securities, and other high quality debt investments that mature in one year or less. Our regulatory requirements may hinder our ability to take advantage of attractive investment opportunities and, as a result, achieve our investment objective. In addition, we rely upon several exemptive orders from the SEC permitting us to consolidate our financial reporting and operate our business as presently conducted. Our failure to satisfy the conditions set forth in those exemptive orders could result in our inability to rely upon such orders or to cause the SEC to revoke the orders which could result in material changes in our financial reporting or the way in which we conduct our business. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could have material adverse consequences to us or our investors, including possible enforcement action by the SEC and the possible loss of our ability to qualify as a RIC that is exempt from corporate-level income tax under the Code. If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would further significantly decrease our operating flexibility.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted in 2010. The Dodd-Frank Act significantly changed federal financial services regulation and affects, among other things, the lending, deposit, investment, trading, and operating activities of financial institutions and their holding companies. In addition to the statutory requirements under the Dodd-Frank Act, the legislation also delegated authority to US banking, securities and derivatives regulators to impose additional restrictions through required rulemaking. The Dodd-Frank Act requires a company that owns an industrial bank to serve as a “source of strength” to the institution. We believe that we have historically served, and will serve in the future, as a source of strength to our industrial bank subsidiary, Medallion Bank. We do not believe that the codification of this requirement under the Dodd-Frank Act materially impacts our obligations. A company that owns an industrial bank is also subject to the Dodd-Frank Act “Volcker Rule.” We do not believe that the “Volcker Rule” materially impacts our operations as presently conducted.

Other changes in the laws or regulations applicable to us more generally, may negatively impact the profitability of our business activities, require us to change certain of our business practices, materially affect our business model, limit the activities in which we may engage, affect retention of key personnel, require us to raise additional regulatory capital, increase the amount of liquid assets that we hold, otherwise affect our funding profile or expose us to additional costs (including increased compliance costs). Any such changes may also require us to invest significant management attention and resources to make any necessary changes and may adversely affect our ability to conduct our business as previously conducted or our results of operations or financial condition.

We are also subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements, and retail financing, debt collection, consumer protection, environmental, health and safety, creditor, wage-hour, anti-discrimination, whistleblower and other employment practices laws and regulations and we expect these costs to increase going forward. The violation of these or future requirements or laws and regulations could result in administrative, civil, or criminal sanctions against us, which may include fines, a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business. As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations.

Changes in laws, regulations, or policies may adversely affect our business.

The post-financial crisis era has been marked by an increase in regulation, regulatory intensity, and enforcement. We are unable to predict all of the ways in which this change in the regulatory environment could impact our business models or objectives. The laws and regulations governing our lending, servicing, and debt collection activities or the regulatory or enforcement environment at the federal level or in any of the states in which we operate may change at any time which may have an adverse effect on our business.

We expect, however, to see an increase over time in regulatory scrutiny and enforcement in the area of consumer financial products regulation, as a result of the establishment of the Consumer Financial Protection Bureau, or the CFPB, by the Dodd-Frank Act. The CFPB is responsible for interpreting and enforcing a broad range of consumer protection laws that govern the provision of deposit accounts and the making of loans, including the regulation of mortgage lending and servicing and automobile finance. While Medallion Bank’s size currently falls below the threshold that would give the CFPB direct authority over it, Medallion Bank’s existing bank supervisors may pursue similar policies and make similar information requests to those of the CFPB with respect to consumer financial products and other matters within the scope of the CFPB’s authority. We believe that the CFPB’s regulatory reforms, together with other provisions of the Dodd-Frank Act, and increased regulatory supervision, may increase our cost of doing business, impose new restrictions on the way in which we conduct our business, or add significant operational constraints that might impair our profitability.

We are unable to predict how these or any other future legislative proposals or programs will be administered or implemented or in what form, or whether any additional or similar changes to statutes or regulations, including the interpretation or implementation thereof, will occur in the future. Any such action could affect us in substantial and unpredictable ways and could have an adverse effect on our results of operations and financial condition.

Our inability to remain in compliance with regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market and on our reputation generally. No assurance can be given that applicable laws or regulations will not be amended or construed differently or that new laws and regulations will not be adopted, either of which could materially adversely affect our business, financial condition, or results of operations.

Federal and state law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders.

Because Medallion 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 Medallion Bank, without, in most cases, prior written approval of the FDIC or the Commissioner of the 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. Under the Utah Financial Institutions Act, control is defined as the power 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. 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. These provisions could delay or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the market price of our common stock. Although Medallion 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 Medallion Financial Corp. is not guaranteed by the FDIC and is subject to loss.

Regulations governing our operation as a BDC may affect our ability to, and the way in which, we raise additional capital.

Our business may periodically require capital. We may acquire additional capital from the following sources:

Senior Securities and Other Indebtedness. We may issue debt securities or preferred stock, and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities, up to the maximum amount permitted by the 1940 Act. If we issue senior securities, including debt or preferred stock, we will be exposed to additional risks, including the following:

Additional Common Stock. We are not generally able to issue and sell our common stock at a price below net asset value (less any distributing commission or discount) per share. We may, however, sell our common stock, warrants, options, or rights to acquire our common stock, at a price below the current net asset value of the common stock if our Board of Directors determines that such sale is in our best interests and that of our shareholders, and our shareholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). We may also make rights offerings to our shareholders at prices per share less than the net asset value per share, subject to applicable requirements of the 1940 Act. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our shareholders at that time would decrease and they may experience dilution. Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all.

If our investments in assets that are not “qualifying assets” are determined to exceed 30% of our total assets, we could be deemed to be in violation of the 1940 Act or could be precluded from investing in what we believe are attractive investments, which could have a material adverse effect on our business.

As a BDC, we are not permitted to acquire any assets other than “qualifying assets” unless, at the time of such acquisition, at least 70% of our total assets are qualifying assets. Our investment in Medallion Bank and City of Chicago taxicab medallions purchased out of foreclosure, which are carried in investments other than securities on the consolidated balance sheet, are non-qualifying assets. As of December 31, 2015, the percentage of our total assets that were invested in non-qualifying assets were up to 28.6% on an unconsolidated basis and up to 29.1% on a consolidated basis.

At the end of each fiscal quarter, we may take proactive steps to prospectively preserve investment flexibility in the next quarter which is assessed against our total assets at our most recent quarter end. We can accomplish this in many ways including purchasing US Treasury bills or other investment-grade debt securities, and closing out our position on a net cash basis subsequent to quarter end. However, if such proactive measures are ineffective or our primary investments are deemed not to be qualifying assets, or if the fair value of our non-qualifying assets increases or is determined to be higher than previously determined, or if the fair value of our qualifying assets decreases or is determined to be lower than previously determined, we could be deemed in violation of the 1940 Act, or could be precluded from investing in what we believe are attractive investments or from making follow-on investments in existing portfolio companies that are non-qualifying assets, or could be required to dispose of non-qualifying assets at times or on terms that may be disadvantageous to us. Medallion Bank may also not be able to grow as quickly if we are precluded from providing additional funding to Medallion Bank. Any of the foregoing consequences could have a material adverse effect on us. In addition, if we are found to be in violation of the requirements applicable to BDC under the 1940 Act, we could be unable to qualify as a RIC under the Code.

We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code.

To obtain and maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source, and asset diversification requirements.

If we do not qualify as a RIC for more than two consecutive years, and then seek to requalify and elect RIC status, we would be required to recognize gain to the extent of any unrealized appreciation on our assets unless we make a special election to pay corporate-level tax on any such unrealized appreciation recognized during the succeeding 10-year period.

If we fail to qualify for RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. In addition, the asset coverage and distribution requirements impose significant cash flow management restrictions on us and limit our ability to retain earnings to cover periods of loss, provide for future growth, and pay for extraordinary items. Additionally, we could fail to satisfy the requirement that a RIC derive at least 90% of its gross income from qualifying sources, with the result that we would not qualify as a RIC. Qualification as a RIC is made on an annual basis and, although we and some of our subsidiaries have qualified in the past, we cannot assure you that we will qualify for such treatment in the future.

The Code’s diversification requirements may limit our ability to expand our business.

RIC qualification rules require that at the end of each quarter of our taxable year, (i) at least 50% of the market value of our assets must be represented by cash, securities of other RICs, US government securities, and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of our assets and not greater than 10% of the outstanding voting securities of such issuer and (ii) not more than 25% of the value of our assets may be invested in the securities (other than US government securities or securities of other RICs) of any one issuer, any two or more issuers of which 20% or more of the voting stock is held by us and that are determined to be engaged in the same or similar trades or businesses or related trades or businesses or in the securities of one or more qualified publicly traded partnerships. As of December 31, 2015, our largest investment subject to this test was our investment in Medallion Bank, representing 24.97% of our RIC assets. No other investments were more than 5% of our RIC assets. We will continue to monitor the levels of this and any other investment concentrations in conjunction with the diversification tests.

We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

For US federal income tax purposes, we will include in taxable income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the origination of a loan or possibly in other circumstances, or contractual payment-in-kind interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discount or increases in loan balances as a result of payment-in-kind interest will be included in income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we will not receive in cash.

Since, in certain cases, we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the annual distribution requirement necessary to achieve and maintain RIC tax treatment under the Code. Accordingly, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or reduce new investment originations for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

As Medallion Bank grows, a greater portion of our business will be subject to corporate-level tax.

Medallion Bank must pay corporate-level U.S. federal and state income taxes. As Medallion Bank grows its business, a larger percentage of our economic income will be taxed at the corporate level.

Our SBIC subsidiaries may be unable to meet the investment company requirements, which could result in the imposition of an entity-level tax.

Some of our subsidiaries are subject to the Small Business Investment Act (the “SBIA”). Our SBIC subsidiaries that are also RICs may be prohibited by the SBIA from making the distributions necessary to qualify as a RIC. The SBA has agreed that our SBIC subsidiaries can make these distributions, provided we reinvest the distributions in our SBIC subsidiaries. Normally, we would report this reinvested capital as paid-in surplus; however, the SBA has required us to categorize this reinvested capital as undistributed net realized earnings. We cannot assure you that this will continue to be the SBA’s policy or that our subsidiaries will have adequate capital to make the required adjustments. If the relevant subsidiaries are unable to obtain a waiver, compliance with the SBA regulations may result in loss of RIC status and a consequent imposition of an entity-level tax at the subsidiary level, which may also adversely affect our status as a RIC. In the event the relevant subsidiaries are granted a waiver, we will be required to reinvest the relevant distributions into the SBICs as capital. This may result in us recognizing taxable income without receiving any cash from which to pay a corresponding distribution. Any failure to pay required distributions could cause a loss of our RIC status and the imposition of entity level tax.

Our SBIC subsidiaries are licensed by the SBA, and are therefore subject to SBA regulations.

Our SBIC subsidiaries are licensed to act as SBICs and are regulated by the SBA. The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the SBIC subsidiaries to forego attractive investment opportunities that are not permitted under SBA regulations.

Further, SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10% or more of a class of capital stock of a licensed SBIC. If the SBIC subsidiaries fail to comply with applicable SBIC regulations, the SBA could, depending on the severity of the violation, limit or prohibit their use of debentures, declare outstanding debentures immediately due and payable, and/or limit them from making new investments. In addition, the SBA can revoke or suspend a license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the SBIA or any rule or regulation promulgated thereunder. Such actions by the SBA would, in turn, negatively affect us.

We may materially change our corporate structure and the nature of our business.

We are very much affected by the legal, regulatory, tax and accounting regimes under which we operate. We periodically evaluate whether those regimes and our existing corporate structure are the optimum means for the operation and capitalization of our business. As a result of these evaluations, we may decide to proceed with structural and organizational changes (certain of which may require the approval of our shareholders), which could result in material dispositions of various assets, changes in our corporate form, termination of our election to be regulated as a BDC, our conversion from an investment company to an operating company or other fundamental changes. If we were no longer an investment company, our accounting practices would change and, for example, lead to the consolidation of certain majority owned companies with which we do not now consolidate as an investment company. Additionally, if we were no longer an investment company, our shareholders would not benefit from the investor protections provided by the 1940 Act. We may incur certain costs in completing these evaluations and may receive no benefit from these expenditures, particularly if we do not proceed with any changes. No decisions have been made with respect to any such changes and there is no timetable for making any decisions, including any decision not to proceed with any such changes.

We compete for investments with other BDCs and other investment funds as well as traditional financial services companies such as commercial banks and credit unions. Many of our competitors are substantially larger and have considerably greater financial, technical, and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships, and offer better pricing and more flexible structuring than us. We may be unwilling to match our competitors’ pricing, terms, and structure of certain loans and investments opportunities due to potential risks, which may result in us earning less income than our competitors. If we are forced to match our competitors’ pricing, terms, and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC.

We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time.

Changes in interest rates may affect our cost of capital and net investment income.

Because we borrow to fund our investments, a portion of our income is dependent upon the difference between the interest rate at which we borrow funds and the interest rate at which we invest these funds. A portion of our investments, such as taxi medallion loans, will have fixed interest rates, while a portion of our borrowings will likely have floating interest rates. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds could increase, which would reduce our net investment income. We may hedge against interest rate fluctuations by using standard hedging instruments, subject to applicable legal requirements. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition, and results of operations. Also, we will have to rely on our counterparties to perform their obligations under such hedges.

A decrease in prevailing interest rates may lead to more loan prepayments, which could adversely affect our business.

Our borrowers generally have the right to prepay their loans upon payment of a fee ranging from 1% to 2% for standard commodity loans, and for higher amounts, as negotiated, for larger more custom loan arrangements. A borrower is likely to exercise prepayment rights at a time when the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. In a lower interest rate environment, we will have difficulty re-lending prepaid funds at comparable rates, which may reduce the net interest income that we receive. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid, and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if a substantial number of our portfolio companies elect to prepay amounts owed to us and we are not able to reinvest the proceeds for comparable yields in a timely fashion. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock.

An increase in prevailing interest rates could adversely affect our business.

The majority of our loan portfolio is comprised of fixed-rate loans. Abrupt increase in market rates of interest may have an adverse impact on our earnings until we are able to originate new loans at higher prevailing interest rates.

We depend on cash flow from our subsidiaries to make distribution payments to our shareholders.

We are primarily a holding company, and we derive most of our operating income and cash flow from our subsidiaries. As a result, we rely heavily upon distributions from our subsidiaries to generate the funds necessary to make distribution payments to our shareholders. Funds are provided to us by our subsidiaries through dividends and payments on intercompany indebtedness, but we cannot assure you that our subsidiaries will be in a position to continue to make these dividend or debt payments. The Utah Department of Financial Institutions and FDIC have the authority to prohibit or to limit the payment of dividends by Medallion Bank. In addition, as a condition to receipt of FDIC insurance, Medallion Bank entered into a capital maintenance agreement with the FDIC requiring it to maintain a 15% leverage ratio (Tier 1 capital to total assets). Medallion Bank may be restricted from declaring and paying dividends if doing so were to cause it to fall below a 15% leverage ratio.

Medallion Bank’s use of brokered deposit sources for its deposit-gathering activities may not be available when needed.

Medallion Bank relies on the established brokered deposit market to originate deposits to fund its operations. Medallion Bank’s brokered deposits consist of deposits raised through the brokered deposit market rather than through retail branches. While Medallion Bank has developed contractual relationships with a diversified group of investment brokers, and the brokered deposit market is well developed and utilized by many banking institutions, conditions could change that might affect the availability of deposits. If the capital levels at Medallion Bank fall below the “well-capitalized” level as defined by the FDIC or the capital level currently required by the FDIC pursuant to its capital maintenance agreement, or if Medallion Bank experiences a period of sustained operating losses, the cost of attracting deposits from the brokered deposit market could increase significantly, and the ability of Medallion Bank to raise deposits from this source could be impaired. Brokered deposits may also not be as stable as other types of deposits. Medallion Bank’s ability to manage its growth to stay within the “well-capitalized” level, and the capital level currently required by the FDIC pursuant to its capital maintenance agreement, which is also considerably higher than the level required to be classified as “well-capitalized”, is critical to Medallion Bank’s retaining open access to this funding source. See “Description of Other Indebtedness” for additional information regarding this matter.

Our investment portfolio is, and will continue to be, recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is, and will continue to be, uncertainty as to the value of our portfolio investments which could adversely affect our net asset value.

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by our Board of Directors. Unlike other lending institutions, we are not permitted to establish reserves for loan losses. Instead, we are required by the 1940 Act to specifically value each individual investment and record an unrealized gain or loss for any asset we believe has increased or decreased in value. Typically, there is not a public market for most of the investments in which we have invested and will generally continue to invest. As a result, our Board of Directors values our investments on a quarterly basis based on a determination of their fair value made in good faith and in accordance with the written guidelines approved by our Board of Directors. Our Board of Directors regularly reviews the appropriateness and accuracy of the method used in valuing our investments, and makes any necessary adjustments. The types of factors that may be considered in determining the fair value pricing of our investments include the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, market conditions for loans (e.g., values used by other lenders and any active bid/ask market), comparison to publicly traded companies, discounted cash flow, comparable sales and valuations of companies similar to the portfolio company, regulatory factors that may limit the value of the portfolio company, and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate over short periods of time and may be based on estimates. As a result, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed, and may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale or disposition of one or more of our investments. Investors purchasing our securities in connection with an offering based on an overstated net asset value would pay a higher price than the value of our investments might warrant, and investors purchasing our securities in connection with an offering based on an understated net asset value would pay a lower price than the value of our investments might warrant. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities. Considering these factors, we have determined that the fair value of our portfolio is above its cost basis. As of December 31, 2015, our net unrealized appreciation on investments, other than on investments other than securities, was $15,527,000 or 2.63% of our investment portfolio.

Uncertainty relating to the reporting of collateral values for our loans may adversely affect the value of our portfolio.

Medallion loans and the asset-based portion of the commercial loan portfolio are primarily collateral-based lending, whereby the collateral value exceeds the amount of the loan, providing sufficient excess collateral to protect us against losses. Collateral values for medallion loans reflect recent sales prices and are typically obtained from the regulatory agency in a particular local market. Collateral values for asset based loans are confirmed through daily analysis of funds availability based on cash collection and receivables agings, confirmations obtained from a borrower’s underlying customers, and field examinations by us or third parties engaged by us. We rely on the integrity of the collateral value benchmarks obtained by the applicable regulatory agencies and other third parties. If these benchmarks are artificially influenced by market participants we could suffer losses. We have experienced a significant downward movement in medallion collateral values which may continue, and has caused a negative impact on our valuation analysis and could result in a significantly lower fair market value measurement of our portfolio.

We require an objective benchmark in determining the fair value of our portfolio. If the benchmarks that we currently use are deemed to be unreliable, we will need to use other intrinsic factors in determining the collateral values for our loans.

Failure to obtain an extension of our existing credit facilities could have a material adverse effect on our results of operations and financial position.

We utilize secured revolving credit facilities and other facilities to fund our investments. We cannot guarantee that our credit facilities will continue to be available beyond their current maturity dates on reasonable terms or at all or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness. The availability of revolving credit facilities depends, in part, on factors outside of our control, including regulatory capital treatment for unfunded bank lines of credit, the financial strength and strategic objectives of the banks that participate in our credit facilities and the availability of bank liquidity in general. If the credit facilities are not renewed or extended by our lenders by their maturity dates, we will not be able to make further borrowings under the facilities after they mature and the outstanding principal balances under such facilities will be due and payable at maturity. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, our financial condition would be adversely affected and our lenders may foreclose on the property securing such indebtedness. If we are unable to extend or replace these facilities or arrange new credit facilities or other types of interim financing, we may need to curtail or suspend loan origination and funding activities which could have a material adverse effect on our results of operations and financial position.

We are subject to certain financial covenants and other restrictions under our loan and credit arrangements, which could affect our ability to finance future operations or capital needs or to engage in other business activities.

Our loan and credit agreements contain financial covenants and other restrictions relating to borrowing base eligibility, tangible net worth, net income, leverage ratios, shareholders’ equity and collateral values. Our ability to meet these financial covenants and restrictions could be affected by events beyond our control, such as a substantial decline in collateral values or a rise in borrower delinquencies. A breach of these covenants could result in an event of default under the applicable debt instrument. Such a default, if not cured or waived, may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt that is subject to an applicable cross-acceleration or cross-default provision. Certain other events can constitute an event of default. In addition, an event of default under the credit agreements would permit the lenders under our credit facilities to terminate all commitments to extend further credit under the facilities. Furthermore, if we were unable to repay the amounts due and payable under our credit facilities, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or holders of the related notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Based on the foregoing factors, the operating and financial restrictions and covenants in our current credit agreements and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage in other business activities. See “Description of Other Indebtedness” for additional information regarding this matter.

We generally make investments in private companies. Substantially all of these securities are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded our investments. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.

In addition, the illiquidity of our loan portfolio and investments may adversely affect our ability to dispose of loans 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 the investments in the 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 operating income before net realized and unrealized gains. We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with short-term floating-rate debt, and to a lesser extent by term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. 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, and including the impact on Medallion Bank, a hypothetical immediate 1% increase in interest rates would result in an increase to the line item “net increase in net assets resulting from operations” as of December 31, 2015 by approximately $692,000 on an annualized basis, compared to a positive impact of $1,279,000 at December 31, 2014, and the impact of such an immediate increase of 1% over a one year period would have been approximately ($1,855,000) at December 31, 2015, compared to ($1,634,000) at December 31, 2014. 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 increase in net assets resulting 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.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets, and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customers and personally identifiable information of our customers and employees, in our data centers, and on our networks. The secure processing, maintenance, and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and regulatory penalties, disrupt our operations and damage our reputation, which could adversely affect our business.

We experienced a period of capital markets disruption and severe recession beginning in 2008, and the impact of resulting changes on the financial markets may not be fully known for some time.

The global financial crisis that began in 2008 materially and adversely affected the debt and equity capital markets in the United States. The US capital markets experienced extreme volatility and disruption for an extended period of time as evidenced by a lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the repricing of credit risk in the broadly syndicated credit market, and the failure of major financial institutions. These events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of credit and equity capital for the markets as a whole, and financial services firms in particular. In response to the crisis, the US and other governments and the Federal Reserve and certain foreign central banks took steps to support financial markets, including by keeping interest rates at historically low levels. More recently, the Federal Reserve has reduced its market support activities. Further reduction or withdrawal of this support, failure of efforts in response to the crisis, or investor perception that such efforts are not succeeding could negatively affect financial markets generally as well as the value and liquidity of certain securities. While recent market conditions have improved, there have been continuing periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves or worsen in the future. A prolonged period of market volatility or illiquidity could have an adverse effect on our business, financial condition, and results of operations. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. Equity capital may be difficult to raise because, subject to some limited exceptions, we generally are not able to issue and sell our common stock at a price below net asset value per share. In addition, the debt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions.

Terrorist attacks, other acts of violence or war, and natural disasters may affect any market for our securities, impact the businesses in which we invest, and harm our operations and profitability.

Terrorist attacks and natural disasters may harm our results of operations and your investment. We cannot assure you that there will not be further terrorist attacks against the US or US businesses or major natural disasters hitting the United States. Such attacks or natural disasters in the US or elsewhere may impact the businesses in which we invest directly, or indirectly by undermining economic conditions in the United States. In addition, a substantial portion of our business is focused in the New York City metropolitan area, which suffered a terrorist attack in 2001. Another terrorist attack in New York City or elsewhere could severely impact our results of operations. Losses resulting from terrorist attacks are generally uninsurable.

Our financial condition and results of operations will depend on our ability to manage growth effectively.

Our ability to achieve our investment objective will depend on our ability to grow, which will depend, in turn, on our management team’s ability to identify, evaluate, and monitor, and our ability to finance and invest in, companies that meet our investment criteria.

Accomplishing this result on a cost-effective basis will be largely a function of our management team’s handling of the investment process, its ability to provide competent, attentive, and efficient services, and our access to financing on acceptable terms. In addition to monitoring the performance of our existing investments, members of our management team and our investment professionals may also be called upon to provide managerial assistance to our portfolio companies. These demands on their time may distract them or slow the rate of investment. In order to grow, we will need to hire, train, supervise, and manage new employees. However, we cannot assure you that any such employees will contribute to the success of our business. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and results of operations.

Acquisitions may lead to difficulties that could adversely affect our operations.

By their nature, corporate acquisitions entail certain risks, including those relating to undisclosed liabilities, the entry into new markets, operational, and personnel matters. We may have difficulty integrating acquired operations or managing problems due to sudden increases in the size of our loan portfolio. In such instances, we might be required to modify our operating systems and procedures, hire additional staff, obtain and integrate new equipment, and complete other tasks appropriate for the assimilation of new business activities. We cannot assure you that we would be successful, if and when necessary, in minimizing these inherent risks or in establishing systems and procedures which will enable us to effectively achieve our desired results in respect of any future acquisitions.

The 1940 Act restricts our ability to knowingly participate in certain transactions with our affiliates. These restrictions limit our ability to buy or sell any security from or to our affiliates, or engage in “joint” transactions with our affiliates, which could include investments in the same portfolio company (whether at the same or different times). With respect to controlling or certain closely affiliated persons, we will generally be prohibited from engaging in such transactions absent the prior approval of the SEC. With respect to other affiliated persons, we may engage in such transactions only with the prior approval of our independent directors.

The SBA restricts the ability of SBICs to lend money to their officers, directors, and employees, or invest in affiliates thereof.

Medallion Bank is subject to certain federal laws that restrict and control its ability to provide or receive services between affiliates. Sections 23A and 23B of the Federal Reserve Act and applicable regulations also impose restrictions on Medallion Bank. These restrictions limit the transfer of funds by a depository institution to certain of its affiliates, including us, in the form of loans, extensions of credit, investments, or purchases of assets. Sections 23A and 23B also require generally that the depository institution’s transactions with its affiliates be on terms no less favorable to Medallion Bank than comparable transactions with unrelated third parties.

Our Board of Directors may change our operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse.

Our Board of Directors has the authority to modify or waive our current operating policies and strategies without prior notice and without shareholder approval. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results, and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose all or part of your investment.

Lending to small businesses involves a high degree of risk and is highly speculative.

Lending to small businesses involves a high degree of business and financial risk, which can result in substantial losses and should be considered speculative. Our borrower base consists primarily of small business owners that may have limited resources and that are generally unable to obtain financing from traditional sources. There is generally no publicly available information about these small business owners, and we must rely on the diligence of our employees and agents to obtain information in connection with our credit decisions. In addition, these small businesses often do not have audited financial statements. Some smaller businesses have narrower product lines and market shares than their competition. Therefore, they may be more vulnerable to customer preferences, market conditions, or economic downturns, which may adversely affect the return on, or the recovery of, our investment in these businesses.

Our portfolio is and may continue to be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations to us or by a downturn in the particular industry.

Our portfolio is and may continue to be concentrated in a limited number of portfolio companies and industries. In addition, taxicab companies that constitute separate issuers may have related management or guarantors and constitute larger business relationships to us. As of December 31, 2015, investments in New York City taxi medallion loans represented approximately 74% of our managed taxi medallion loans, which in turn represented 43% of our managed net investment portfolio. Beyond the asset diversification requirements associated with our qualification as a RIC, we do not have fixed guidelines for diversification, and while we are not targeting any specific industries, our investments are, and could continue to be, concentrated in relatively few industries. As a result, the aggregate returns we realize may be adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. If our larger borrowers were to significantly reduce their relationships with us and seek financing elsewhere, the size of our loan portfolio and operating results could decrease. In addition, larger business relationships may also impede our ability to immediately foreclose on a particular defaulted portfolio company as we may not want to impair an overall business relationship with either the portfolio company management or any related funding source. Additionally, a downturn in any particular industry in which we are invested could also negatively impact the aggregate returns we realize.

If we are unable to continue to diversify geographically, our business may be adversely affected if the New York City taxicab industry experiences a sustained economic downturn.

A significant portion of our loan revenue is derived from New York City medallion loans collateralized by New York City taxicab medallions. An economic downturn in the New York City taxicab industry could lead to an increase in defaults on our medallion loans. We cannot assure you that we will be able to sufficiently diversify our operations geographically.

An economic downturn could result in certain of our commercial and consumer loan customers experiencing declines in business activities and/or personal resources, which could lead to difficulties in their servicing of their loans with us, and increasing the level of delinquencies, defaults, and loan losses in our commercial and consumer loan portfolios.

Laws and regulations implemented in response to climate change could result in increased operating costs for our portfolio companies.

Congress and other governmental authorities have either considered or implemented various laws and regulations in response to climate change and the reduction of greenhouse gases. Existing environmental regulations could be revised or reinterpreted, new laws and regulations could be adopted, and future changes in environmental laws and regulations could occur, which could impose additional costs on the operation of our portfolio companies. For example, regulations to cut gasoline use and control greenhouse gas emissions from new cars could adversely affect our medallion portfolio companies. Our portfolio companies may have to make significant capital and other expenditures to comply with these laws and regulations. Changes in, or new, environmental restrictions may force our portfolio companies to incur significant expenses or expenses that may exceed their estimates. There can be no assurance that such companies would be able to recover all or any increased environmental costs from their customers or that their business, financial condition or results of operations would not be materially and adversely affected by such expenditures or any changes in environmental laws and regulations, in which case the value of these companies could be adversely affected.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

We invest in our portfolio companies primarily through senior secured loans, junior secured loans, and subordinated debt issued by small- to mid-sized companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of the relevant portfolio company.

A third party finance company sold various participations in asset based loans to Medallion Business Credit and Medallion Bank. In April 2013, the aggregate balance of the participations was approximately $13.8 million, $12.9 million of which were held by Medallion Bank. That amount was divided between seven separate borrowers operating in a variety of industries. In April 2013, the third party finance company became the subject of an involuntary bankruptcy petition filed by its bank lenders. Among other things, the bank lenders alleged that the third party finance company fraudulently misrepresented its borrowing availability under its credit facility with the bank lenders and are seeking the third party finance company’s liquidation. In May 2013, the bankruptcy court presiding over the third party finance company’s case entered an order converting the involuntary chapter 7 case to a chapter 11 case. On May 31, 2013, we commenced an adverse proceeding against the third party finance company and the bank lenders seeking declaratory judgment that our loan participations are true participations and not subject to the bankruptcy estate or to the bank lender’s security interest in the third party finance company’s assets. The third party finance company and bank lenders are contesting our position. In April 2014, we received a decision from the court granting summary judgment in our favor with respect to the issue of whether our loan participations are true participations. In March 2015, we and Medallion Bank received a decision from the court finding that the bank lenders generally held a first lien on our and Medallion Bank’s loan participations subject to, among other things, defenses still pending prosecution by the parties and adjudication by the court. We and Medallion Bank are appealing the decision. The remaining issues are still being litigated. Although we believe the claims raised by the third party finance company and the senior lenders are without merit and will vigorously defend against them, we cannot at this time predict the outcome of this litigation or determine our potential exposure. If we are incorrect in our assessments our results of operations could be materially adversely affected. At December 31, 2015, five of the seven secured borrowers had refinanced their loans in full with third parties, and the related proceeds are held in escrow pending resolution of the bankruptcy proceedings. In September 2015, one loan was sold at a discount to a third party, and the related proceeds are held in escrow pending resolution of the bankruptcy proceedings. One loan was charged off in September 2014. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Portfolio Summary – Delinquency and Loan Loss Experience” for additional information regarding this matter.

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

Even though we may have structured most of our investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance.

We may not control many of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree, and the management of such company may take risks or otherwise act in ways that do not serve our interests as debt investors.

Certain investments that we have made in the past and may make in the future include warrants or other equity securities. In addition, we may from time to time make non-control, equity co-investments in companies in conjunction with private equity sponsors. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization, or public offering, which would allow us to sell the underlying equity interests.

The notes are subordinated to our secured debt and any liabilities of our subsidiaries.

The notes will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes, including our Fixed/Floating Rate Junior Subordinated Notes issued on June 7, 2007; equal in right of payment to any of our liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure debt ranking senior in right of payment to the notes will be available to pay obligations on the notes only after the secured debt has been repaid in full from these assets. There may not be sufficient assets remaining to pay amounts due on any or all of the notes then outstanding. The indenture governing the notes does not prohibit us from incurring additional senior debt or secured debt, nor does it prohibit any of our subsidiaries from incurring additional liabilities.

As of December 31, 2015, our total consolidated indebtedness was $405 million, of which an aggregate of $199 million was senior indebtedness and an aggregate of $372 million was secured indebtedness and we had unused commitments of $20.1 million under these facilities. As of December 31, 2015, Medallion Bank and our other unconsolidated subsidiaries had $916 million of indebtedness and other liabilities (including trade payables, but excluding intercompany obligations and liabilities of a type not required to be reflected on a balance sheet of such subsidiaries in accordance with GAAP) to which the notes would have been structurally subordinated and they had no unused commitments; however, they had $25.0 million available under Fed Fund’s lines with several commercial banks. After giving effect to the issuance of the notes (assuming no exercise of the underwriters’ over-allotment option) and the use of proceeds therefrom, our total consolidated indebtedness combined with the indebtedness and other liabilities of our unconsolidated subsidiaries would have been $1,346 million.

The notes are our obligations exclusively and are not guaranteed by any of our operating subsidiaries.

Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to make payments on the notes or to make any funds available for that purpose. In addition, dividends, loans or other distributions to us from such subsidiaries may be subject to contractual and other restrictions and are subject to other business considerations. Our ability to service our debt, including the notes, may depend on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in the form of dividends, loans or otherwise, to pay amounts due on our obligations, including the notes.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

The indenture under which the notes will be issued contains limited protection for holders of the notes.

The indenture under which the notes will be issued offers limited protection to holders of the notes. The terms of the indenture and the notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in the notes. In particular, the terms of the indenture and the notes will not place any restrictions on our or our subsidiaries’ ability to:

Furthermore, the terms of the indenture and the notes do not protect holders of the notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity other than as described under “Description of the Notes—Events of Default” in this prospectus supplement. Any changes to the financial tests in the 1940 Act could affect the terms of the notes.

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the notes may have important consequences for you as a holder of the notes, including making it more difficult for us to satisfy our obligations with respect to the notes or negatively affecting the trading value of the notes.

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the notes, including additional covenants and events of default. For example, the indenture under which the notes will be issued does not contain the same cross-default provisions that are contained in our credit facilities. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the notes.

An active trading market for the notes may not develop, which could limit the market price of the notes or your ability to sell them.

The notes are a new issue of debt securities for which there currently is no trading market. We intend to list the notes on NASDAQ within 30 days of the original issue date under the symbol “TAXIL.” Although we expect the notes to be listed on NASDAQ, we cannot provide any assurances that an active trading market will develop for the notes or that you will be able to sell your notes. If the notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. The underwriters have advised us that they intend to make a market in the notes, but they are not obligated to do so. The underwriters may discontinue any market-making in the notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop for the notes, that you will be able to sell your notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the notes for an indefinite period of time.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the notes.

Any default under the agreements governing our indebtedness, including a default under the credit facilities or other indebtedness to which we may be a party that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the notes and substantially decrease the market value of the notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the credit facilities or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under our credit facilities or other debt that we may incur in the future to avoid being in default.

If we breach our covenants under our credit agreements and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our credit agreements, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt. As our credit facilities, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness under the notes, the credit facilities or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. See “Description of Other Indebtedness” in this prospectus supplement.

A downgrade, suspension or withdrawal of any credit ratings assigned by a rating agency to us or the notes, if any, or change in the debt markets could cause the liquidity or market value of the notes to decline significantly.

Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of notes of any changes in our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the rating agency if in their judgment future circumstances relating to the basis of the credit ratings, such as adverse changes in our company, so warrant. The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the notes.

Despite our current debt levels, we may still incur substantially more debt or take other actions which would intensify the risks discussed above.

Despite our current consolidated debt levels, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. We will not be restricted under the terms of the indenture governing the notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the notes that could have the effect of diminishing our ability to make payments on the notes when due. Certain of our revolving lines of credit restrict our ability to incur additional indebtedness except in the ordinary course of business.

We may not be able to repurchase the notes upon a Change of Control Repurchase Event.

We may not be able to repurchase the notes upon a Change of Control Repurchase Event because we may not have sufficient funds. Upon a Change of Control Repurchase Event, holders of the notes may require us to repurchase for cash some or all of the notes at a repurchase price equal to 100% of the aggregate principal amount of the notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. The terms of certain of our credit facilities may further provide that certain change of control events will constitute an event of default thereunder entitling the lenders to accelerate any indebtedness outstanding under our credit facilities at that time and to terminate the credit facilities. In addition, the occurrence of a Change of Control Repurchase Event enabling the holders of the notes to require the mandatory purchase of the notes would constitute an event of default under certain of our credit facilities entitling the lenders to accelerate any indebtedness outstanding under our credit facilities at that time and to terminate the credit facilities. Our and our subsidiaries’ future financing facilities may contain similar restrictions and provisions. Our failure to purchase such tendered notes upon the occurrence of such Change of Control Repurchase Event would cause an event of default under the indenture governing the notes and a cross-default under the agreements governing certain of our other indebtedness, which may result in the acceleration of such indebtedness requiring us to repay that indebtedness immediately. If a Change of Control Repurchase Event were to occur, we may not have sufficient funds to repay any such accelerated indebtedness. See “Description of the Notes—Offer to Repurchase Upon a Change of Control Repurchase Event” in this prospectus supplement for more information.

The net proceeds of the offering are estimated to be approximately $28,275,000 (approximately $32,633,250 if the underwriters exercise their over-allotment option in full) after deducting the underwriting discount and commissions and estimated offering expenses of approximately $780,000 payable by us. We intend to use a portion of the proceeds to make loans to and other investments in portfolio companies and for general corporate purposes, including repaying borrowings under our credit facilities in the ordinary course of business and expanding our operations. Pending such use, we plan to invest a portion of the net proceeds from this offering in cash equivalents, U.S. government securities and other high-quality debt instruments that mature in one year or less from the date of investment.

Our common stock is quoted on NASDAQ under the symbol “TAXI.” Our common stock commenced trading on May 23, 1996. As of April 11, 2016, there were 209 holders of record of our common stock.

On April 12, 2016, the last reported sale price of our common stock was $8.77 per share, which represented a discount of approximately 23% to the net asset value per share reported by us as of December 31, 2015.

The following table sets forth, for the periods indicated, the range of high and low closing prices for our common stock on NASDAQ, the net asset value and the discount and premium to net asset value. Since our initial public offering, our common stock has traded at a premium to net asset value per share more frequently than at a discount to net asset value.

We intend to distribute quarterly distributions to our shareholders. Our quarterly distributions, if any, will be determined by our Board of Directors.

We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31st and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years. In addition, although we currently intend to distribute realized net capital gains ( i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In such event, the consequences of our retention of net capital gains are as described under “Material U.S. Federal Income Tax Considerations.” In the event that we do not make the distributions described above, we are subject to a 4% excise tax on any shortfall.

We maintain a dividend reinvestment plan for our common shareholders. As a result, if a shareholder has elected to participate in the plan and we declare a distribution, then such shareholders’ cash distributions will be reinvested in additional shares of our common stock.

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings when applicable to us as a BDC under the 1940 Act and due to provisions in future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a regulated investment company. We cannot assure shareholders that they will receive any distributions or distributions at a particular level.

The following table lists the quarterly distributions we have paid or declared per share since January 1, 2011.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this section should be read in conjunction with the Consolidated Financial Statements and notes thereto for the years ended December 31, 2015, 2014, and 2013. 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 – Risks Relating to Our Business and Structure.” Additionally, more information about our business activities can be found in “Our Business.”

The SEC has issued cautionary advice regarding disclosure about critical accounting policies. The SEC defines critical accounting policies as those that are both most important to the portrayal of a company’s financial condition and results, and that require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain and may change materially in subsequent periods. The preparation of our consolidated financial statements requires estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Significant estimates made by us include valuation of loans, equity investments, and investments in subsidiaries, evaluation of the recoverability of accounts receivable and income tax assets, and the assessment of litigation and other contingencies. The matters that give rise to such provisions are inherently uncertain and may require complex and subjective judgments. Although we believe that estimates and assumptions used in determining the recorded amounts of net assets and liabilities at December 31, 2015 are reasonable, actual results could differ materially from the estimated amounts recorded in our financial statements.

We are a specialty finance company that has a leading position in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. A wholly-owned portfolio company of ours, Medallion Bank, also originates consumer loans for the purchase of recreational vehicles, boats, motorcycles, and trailers, and to finance small-scale home improvements. Since 1996, the year in which we became a public company, we have increased our taxicab medallion loan portfolio at a compound annual growth rate of 4%, and our commercial loan portfolio at a compound annual growth rate of 4% (9% and 6% on a managed basis when combined with Medallion Bank). Since Medallion Bank acquired a consumer loan portfolio and began originating consumer loans in 2004, it has increased its consumer loan portfolio at a compound annual growth rate of 18%. Total assets under our management and the management of our unconsolidated wholly-owned subsidiaries, which includes our managed net investment portfolio, as well as assets serviced for third party investors, were $1,655,000,000 as of December 31, 2015 and $1,497,000,000 as of December 31, 2014, and have grown at a compound annual growth rate of 11% from $215,000,000 at the end of 1996.

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, such as revolving bank facilities, bank certificates of deposit issued to customers, debentures issued to and guaranteed by the SBA, and bank term debt. 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-bearing 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 on a different basis than our interest-bearing liabilities.

We also provide debt, mezzanine, and equity investment capital to companies in a variety of industries, consistent with our investment objectives. These investments may be venture capital style investments which may not be fully collateralized. Medallion Capital’s investments are typically in the form of secured debt instruments with fixed interest rates accompanied by membership interests and/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.

We are a closed-end, management investment company under the 1940 Act. We have elected to be treated as a BDC under the 1940 Act. We have also elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level federal income taxes on any net ordinary income or capital gains that we distribute to our shareholders as distributions if we meet certain source-of-income and asset diversification requirements. Medallion Bank is not a RIC and must pay corporate-level US federal and state income taxes.

Our wholly-owned portfolio company, Medallion Bank, is a bank regulated by the FDIC and the Utah Department of Financial Institutions which originates taxicab medallion, commercial, and consumer loans, raises deposits, and conducts other banking activities. Medallion Bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit issued to its customers. To take advantage of this low cost of funds, we refer a portion of our taxicab medallion and commercial loans to Medallion Bank, which then originates these loans. However, the FDIC restricts the amount of taxicab medallion loans that Medallion Bank may finance to three times Tier 1 capital, or $485,814,000 as of December 31, 2015. We earn referral fees for these activities. All of these servicing activities have been assigned to MSC. As a non-investment company, Medallion Bank is not consolidated with the Company.

Realized gains or losses on investments are recognized when the investments are sold or written off. The realized gains or losses represent the difference between the proceeds received from the disposition of portfolio assets, if any, and the cost of such portfolio assets. In addition, changes in unrealized appreciation or depreciation on investments are recorded and represent the net change in the estimated fair values of the portfolio assets at the end of the period as compared with their estimated fair values at the beginning of the period. Generally, realized gains (losses) on investments and changes in unrealized appreciation (depreciation) on investments are inversely related. When an appreciated asset is sold to realize a gain, a decrease in the previously recorded unrealized appreciation occurs. Conversely, when a loss previously recorded as unrealized depreciation is realized by the sale or other disposition of a depreciated portfolio asset, the reclassification of the loss from unrealized to realized causes a decrease in net unrealized depreciation and an increase in realized loss.

Our investment in Medallion Bank, as a wholly owned portfolio investment, is also subject to quarterly assessments of fair value. We conduct a thorough valuation analysis as described previously, and determine whether any factors give rise to a valuation different than recorded book value, including various regulatory restrictions that were established at Medallion Bank’s inception, by the FDIC and State of Utah, and also by additional marketplace restrictions, such as the ability to transfer industrial bank charters. Because of these restrictions and other factors, our Board of Directors had previously determined that Medallion Bank had little value beyond its recorded book value. As a result of this valuation process, we had previously used Medallion Bank’s actual results of operations as the best estimate of changes in fair value, and recorded the results as a component of unrealized appreciation (depreciation) on investments. In the second quarter of 2015, we became aware of external interest in Medallion Bank and its portfolio assets at values in excess of their book value. We incorporated these new factors in the Medallion Bank fair value analysis, and the Board of Directors determined that Medallion Bank had a fair value in excess of book value. We also engaged a valuation specialist to assist the Board of Directors in its determination of Medallion Bank’s fair value, and this appreciation of $15,500,000 was thereby recorded in 2015 as a component of unrealized appreciation (depreciation) on investments, in addition to Medallion Bank’s actual results of operations for the year ended December 31, 2015.

Our investment income is driven by the principal amount of and yields on our investment portfolio. To identify trends in the balances and yields, the following table illustrates our investments at fair value, grouped by medallion loans, commercial loans, equity investments, and investment securities, and also presents the portfolio information for Medallion Bank, at the dates indicated.

The weighted average yield (which is calculated by dividing the aggregate yield of each investment in the portfolio by the aggregate portfolio balance and does not include expenses and sales load for any offering) of the total portfolio at December 31, 2015 was 7.06% (5.95% for the loan portfolio), an increase of 9 basis points from 6.97% at December 31, 2014, which was an increase of 46 basis points from 6.51% at December 31, 2013. The weighted average yield of the total managed portfolio at December 31, 2015 was 8.53% (9.03% for the loan portfolio), an increase of 26 basis points from 8.27% at December 31, 2014, which was an increase of 42 basis points from 7.85% at December 31, 2013. The increase from 2015 was attributed to increased yields on most of our investment categories.

Our medallion loans comprised 51% of the net portfolio of $606,959,000 at December 31, 2015, compared to 59% of the net portfolio of $527,601,000 at December 31, 2014, and 63% of $473,157,000 at December 31, 2013. Our managed medallion loans of $640,904,000 comprised 43% of the net managed portfolio of $1,501,555,000 at December 31, 2015, compared to 52% the net managed portfolio of $1,310,685,000 at December 31, 2014, and 56% of $1,144,596,000 at December 31, 2013. The medallion loan portfolio decreased by $3,486,000 or 1% in 2015 (and decreased by $36,251,000 or 5% on a managed basis), primarily reflecting increases in valuation reserves reflecting current market conditions. The decrease in the managed portfolio reflected the above and portfolio decreases in the New York and Chicago markets, reflecting management’s decision to cull weaker and less profitable borrowers from the portfolio. Total medallion loans serviced for third parties were $26,959,000, $27,658,000, and $24,875,000 at December 31, 2015, 2014, and 2013.

The weighted average yield of the medallion loan portfolio at December 31, 2015 was 4.09%, an increase of 6 basis points from 4.03% at December 31, 2014, which was an increase of 1 basis point from 4.02% at December 31, 2013. The weighted average yield of the managed medallion loan portfolio at December 31, 2015 was 3.96%, an increase of 3 basis points from 3.93% at December 31, 2014, which was an increase of 4 basis points from 3.89% at December 31, 2013. The slight changes in 2015 reflected our increasing rates as loans refinance. At December 31, 2015, 31% of the medallion loan portfolio represented loans outside New York, compared to 32% at year-end 2014 and 2013. At December 31, 2015, 26% of the managed medallion loan portfolio represented loans outside New York, compared to 26% at year-end 2014 and 2013. We continue to focus our efforts on originating higher yielding medallion loans outside the New York market.

Our commercial loans represented 14% of the net investment portfolio as of December 31, 2015, compared to 14% and 13% at December 31, 2014 and 2013, and were 8%, 9%, and 10% on a managed basis. Commercial loans increased by $10,746,000 or 15% during 2015 (increased by $11,478,000 or 10% on a managed basis), primarily reflecting growth in the high-yield mezzanine portfolio, partially offset by a decrease in the other secured commercial loan portfolio, and in the managed portfolio, also by an increase in asset-based loan participations purchased. Net commercial loans serviced by third parties were $3,419,000, $118,000, and $255,000 at December 31, 2015, 2014, and 2013.

The weighted average yield of the commercial loan portfolio at December 31, 2015 was 12.80%, an increase of 89 basis points from 11.91% at December 31, 2014, which was an increase of 131 basis points from 10.60% at December 31, 2013. The weighted average yield of the managed commercial loan portfolio at December 31, 2015 was 10.18%, an increase of 98 basis points from 9.20% at December 31, 2014, which was an increase of 113 basis points from 8.07% at December 31, 2013. The increases primarily represented the greater proportion of higher yielding mezzanine loans in the portfolio. We continue to originate adjustable-rate and floating-rate loans tied to the prime rate to help mitigate our interest rate risk in a rising interest rate environment. At December 31, 2015, variable-rate loans represented 9% of the commercial portfolio, compared to 6% and 12% at December 31, 2014 and 2013, and were 38%, 38%, and 49% on a managed basis. Although this strategy initially produces a lower yield, we believe that this strategy mitigates interest rate risk by better matching our earning assets to their adjustable-rate funding sources.

Our managed consumer loans, all of which are held in the portfolio managed by Medallion Bank, represented 41% of the managed net investment portfolio as of December 31, 2015, compared to 36% and 31% at December 31, 2014 and 2013. Medallion Bank originates adjustable rate consumer loans secured by recreational vehicles, boats, motorcycles, trailers and home improvements located in all 50 states. The portfolio is serviced by a third party subsidiary of a major commercial bank.

The weighted average gross yield of the managed consumer loan portfolio was 14.06% at December 31, 2015, compared to 14.71% and 15.67% at December 31, 2014 and 2013. The decreases primarily reflected the change in portfolio mix to include a higher proportion of lower-yielding home improvement loans. Adjustable rate loans represented 20% of the managed consumer portfolio at December 31, 2015, compared to 37% and 68% at December 31, 2014 and 2013.

We generally follow a practice of discontinuing the accrual of interest income on our loans that are in arrears as to payments for a period of 90 days or more. We deliver a default notice and begin foreclosure and liquidation proceedings when management determines that pursuit of these remedies is the most appropriate course of action under the circumstances. A loan is considered to be delinquent if the borrower fails to make a payment on time; however, during the course of discussion on delinquent status, we may agree to modify the payment terms of the loan with a borrower that cannot make payments in accordance with the original loan agreement. For loan modifications, the loan will only be returned to accrual status if all past due interest and principal payments are brought fully current. For credit that is collateral based, we evaluate the anticipated net residual value we would receive upon foreclosure of such loans, if necessary. There can be no assurance, however, that the collateral securing these loans will be adequate in the event of foreclosure. For credit that is cash flow-based, we assess our collateral position, and evaluate most of these relationships as ongoing businesses, expecting to locate and install a new operator to run the business and reduce the debt.

For the consumer loan portfolio, the process to repossess the collateral is started at 60 days past due. If the collateral is not located and the account reaches 120 days delinquent, the account is charged off to realized losses. If the collateral is repossessed, a realized 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 realized gain. Proceeds collected on charged off accounts are recorded as realized gains. All collection, repossession, and recovery efforts are handled on behalf of Medallion Bank by the servicer.

The following table shows the trend in loans 90 days or more past due as of December 31.

A third party finance company sold various participations in asset based loans to Medallion Business Credit and Medallion Bank. In April 2013, the aggregate balance of the participations was approximately $13.8 million, $12.9 million of which were held by Medallion Bank. That amount was divided between seven separate borrowers operating in a variety of industries. In April 2013, the third party finance company became the subject of an involuntary bankruptcy petition filed by its bank lenders. Among other things, the bank lenders alleged that the third party finance company fraudulently misrepresented its borrowing availability under its credit facility with the bank lenders and are seeking the third party finance company’s liquidation. In May 2013, the bankruptcy court presiding over the third party finance company’s case entered an order converting the involuntary chapter 7 case to a chapter 11 case. We and Medallion Bank have placed these loans on nonaccrual, and reversed interest income. In addition, we have established valuation allowances against the outstanding balances. On May 31, 2013, we commenced an adverse proceeding against the third party finance company and the bank lenders seeking declaratory judgment that our loan participations are true participations and not subject to the bankruptcy estate or to the bank lender’s security interest in the third party finance company’s assets. The third party finance company and bank lenders are contesting our position. In April 2014, we and Medallion Bank received a decision from the court granting summary judgment in our favor with respect to the issue of whether our loan participations are true participations. In March 2015, we and Medallion Bank received a decision from the court finding that the bank lenders generally held a first lien on our and Medallion Bank’s loan participations subject to, among other things, defenses still pending prosecution by the parties and adjudication by the court. We and Medallion Bank are appealing the decision. The remaining issues are still being litigated. Although we believe the claims raised by the third party finance company and the bank lenders are without merit and will vigorously defend against them, we cannot at this time predict the outcome of this litigation or determine our potential exposure. At December 31, 2015, five of the seven secured borrowers had refinanced their loans in full with third parties, and the related proceeds are held in escrow pending resolution of the bankruptcy proceedings. In September 2015, one loan was sold at a discount to a third party, and the related proceeds are held in escrow pending resolution of the bankruptcy proceedings. One loan was charged off in September 2014. The balances related to the paid off loans have been reclassified to other assets on the consolidated balance sheet. The table below summarizes these receivables and their status with the Company and Medallion Bank.

The increase in medallion loan delinquencies reflected our borrowers experiencing declining cash flows with competitive car sharing services and decreases in medallion values stressing certain borrowers, all of whom we continue to work with, and for whom we continue to provide short term solutions. Secured mezzanine delinquencies decreased as a result of a borrower’s bankruptcy settlement. Asset based delinquencies decreased due to loan chargeoffs. Other secured commercial delinquencies increased reflecting several borrowers in the process of selling their businesses, and not having adequate cash flows for monthly payments. Medallion Bank delinquencies increased from a year ago due to a weaker portfolio performance attributed to the increase in medallion loan delinquencies. We are actively working with each delinquent borrower/obligor to bring them current, and believe that any potential loss exposure is reflected in our mark-to-market estimates on each investment. Although there can be no assurances as to changes in the trend rate and further negative changes in the economy, management believes that any loss exposures are properly reflected in reported asset values.

We monitor delinquent loans for possible exposure to loss by analyzing various factors, including the value of the collateral securing the loan and the borrower’s prior payment history. Under the 1940 Act, our loan portfolio must be recorded at fair value or “marked-to-market.” Unlike other lending institutions, we are not permitted to establish reserves for loan losses. Instead, the valuation of our portfolio is adjusted quarterly to reflect our estimate of the current realizable value of our loan portfolio. Since no ready market exists for this portfolio, fair value is subject to the good faith determination of our Board of Directors. Because of the subjectivity of these estimates, there can be no assurance that in the event of a foreclosure or the sale of portfolio loans we would be able to recover the amounts reflected on our balance sheet. For more information, see “Risk Factors—Risks Relating to Our Business and Structure—Our investment portfolio is, and will continue to be, recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is, and will continue to be, uncertainty as to the value of our portfolio investments which could adversely affect our net asset value” in this prospectus supplement.

In determining the value of our portfolio, the Board of Directors may take into consideration various factors such as the financial condition of the borrower and the adequacy of the collateral. For example, in a period of sustained increases in market interest rates, the Board of Directors could decrease its valuation of the portfolio if the portfolio consists primarily of long-term, fixed-rate loans. Our valuation procedures are designed to generate values that approximate that which would have been established by market forces, and are therefore subject to uncertainties and variations from reported results. Based upon these factors, net unrealized appreciation or depreciation on investments is determined, based on the fluctuations of our estimate of the current realizable value of our portfolio from our cost basis.

The following table sets forth the changes in our unrealized appreciation (depreciation) on investments, for the years ended December 31, 2015, 2014, and 2013.

The following table presents credit-related information for the investment portfolios as of December 31.

The following table presents the gain/loss experience on the investment portfolio for the years ended December 31, 2015, 2014, and 2013.

The table below summarizes components of unrealized and realized gains and losses in the investment portfolio for the years ended December 31, 2015, 2014, and 2013.

Investment in Medallion Bank and other controlled subsidiaries were 26%, 26%, and 23% of our total portfolio at December 31, 2015, 2014, and 2013. The portfolio company investments primarily represent the wholly-owned unconsolidated subsidiaries of ours, substantially all of which is represented by our investment in Medallion Bank, a non-pass-through, taxpaying entity. In addition, to facilitate maintenance of Medallion Bank’s capital ratio requirement and to provide the necessary capital for continued growth, we periodically make capital contributions to Medallion Bank, including $8,000,000 and $10,000,000 in 2015 and 2014. Separately, Medallion Bank declared dividends to us of $18,000,000 in 2015, $15,000,000 in 2014, and $12,000,000 in 2013. See Note 3 of the consolidated financial statements for additional information about these investments.

Equity investments were 1% of our total portfolio at December 31, 2015, 2014, and 2013. Equity investments were less than 1%, 1%, and 1% of our total managed portfolio at December 31, 2015, 2014, and 2013. Equity investments are comprised of common stock, warrants, preferred stock, and limited partnership interests.

Investment securities were 8%, 0%, and 0% of our total portfolio at December 31, 2015, 2014, and 2013. Investment securities were 6%, 2%, and 2% of our total managed portfolio at December 31, 2015, 2014, and 2013. The investment securities are primarily U.S. Treasury Department (“U.S. Treasury”) bills and adjustable-rate mortgage-backed securities purchased by Medallion Bank to better utilize required cash liquidity.

Our interest expense is driven by the interest rates payable on our short-term credit facilities with banks, bank certificates of deposit, fixed-rate, long-term debentures issued to the SBA, and other short-term notes payable. We established a medallion lending relationship with DZ Bank in December 2008 that provides for growth in the portfolio at generally lower rates than under prior facilities. In addition, Medallion Bank began raising brokered bank certificates of deposit during 2004, which are at our lowest borrowing costs at December 31, 2015. As a result of Medallion Bank raising funds through certificates of deposit as previously noted, we were able to transfer certain of our medallion loans and related assets to Medallion Bank at the time of the origination of Medallion Bank allowing us and our subsidiaries to use cash generated through these transactions to retire debt with higher interest rates. In addition, Medallion Bank is able to bid on these deposits at a wide variety of maturity levels 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 4 to the consolidated financial statements for details on the terms of all 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 following table shows the average borrowings and related borrowing costs for the years ended December 31, 2015, 2014, and 2013. Our average balances increased during the year reflecting recent portfolio growth and Medallion Bank’s average balances increased, reflecting the strong growth in the consumer loan portfolio. The decrease in our borrowing costs reflected the adjustable rate nature of much of our borrowings, and changes in our funding mix, and Medallion Bank’s borrowing costs increased reflecting the lengthening of the maturity profile of its certificates of deposits.

We will continue to seek SBA funding 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 SBIA and SBA regulations. 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 December 31, 2015, 2014, and 2013, short-term adjustable rate debt constituted 75%, 72%, and 68% of total debt, and was 23%, 22%, and 22% on a fully managed basis including the borrowings of Medallion Bank.

Factors that affect our net assets include net realized gain or loss on investments and change in net unrealized appreciation or depreciation on investments. Net realized gain or loss on investments is the difference between the proceeds derived upon sale or foreclosure of a loan or an equity investment and the cost basis of such loan or equity investment. Change in net unrealized appreciation or depreciation on investments is the amount, if any, by which our estimate of the fair value of our investment portfolio is above or below the previously established fair value or the cost basis of the portfolio. Under the 1940 Act, our loan portfolio and other investments must be recorded at fair value.

Unlike certain lending institutions, we are not permitted to establish reserves for loan losses, but adjust quarterly the valuation of the investment portfolio to reflect our estimate of the current value of the total investment portfolio. Since no ready market exists for our investments, fair value is subject to our Board of Directors’ good faith determination. In determining such fair value, our Board of Directors considers factors such as the financial condition of our borrowers and the adequacy of their collateral. Any change in the fair value of portfolio investments or other investments as determined by our Board of Directors is reflected in net unrealized depreciation or appreciation on investments and affects net increase in net assets resulting from operations, but has no impact on net investment income or distributable income.

Our investment in Medallion Bank, as a wholly-owned portfolio investment, is also subject to quarterly assessments of fair value. We conduct a thorough valuation analysis as described previously, and also receive an opinion regarding the valuation from an independent third party to assist the Board of Directors in its determination of the fair value of Medallion Bank on an annual basis. Our analysis includes factors such as various regulatory restrictions that were established at Medallion Bank’s inception, by the FDIC and State of Utah, and also by additional regulatory restrictions, such as the prior moratorium imposed by the Dodd-Frank Act on the acquisition of control of an industrial bank by a “commercial firm” (a company whose gross revenues are primarily derived from non-financial activities) which expired in July 2013 and the lack of any new charter issuances since the moratorium’s expiration. Because of these restrictions and other factors, our Board of Directors had previously determined that Medallion Bank had little value beyond its recorded book value. As a result of this valuation process, we had previously used Medallion Bank’s actual results of operations as the best estimate of changes in fair value, and recorded the results as a component of unrealized appreciation (depreciation) on investments. In the second quarter of 2015, we became aware of external interest in Medallion Bank and its portfolio’s assets at values in excess of their book value. We incorporated these new factors in the Medallion Bank’s fair value analysis and the Board of Directors determined that Medallion Bank had a fair value in excess of book value. We also engaged a valuation specialist to assist the Board of Directors in their determination of Medallion Bank’s fair value, and this appreciation of $15,500,000 was thereby recorded in 2015 as a component of unrealized appreciation (depreciation) on investments, in addition to Medallion Bank’s actual results of operations for the year ended December 31, 2015. See Note 3 for additional information about Medallion Bank.

Net increase in net assets resulting from operations was $29,376,000 or $1.20 per diluted common share in 2015, up $684,000 or 2% from $28,692,000 or $1.14 per share in 2014, primarily reflecting lower operating expenses and higher net interest income, partially offset by lower net realized/unrealized gains and noninterest income. Net investment income after income taxes was $16,826,000 or $0.69 per share in 2015, up $1,681,000 or 11% from $15,145,000 or $0.60 in 2014.

Investment income was $42,653,000 in 2015, up $1,585,000 or 4% from $41,068,000 a year ago, and included $864,000 from interest recoveries and bonuses on certain investments in 2015, compared to $4,363,000 in 2014. Also included in 2015 and 2014 were $18,889,000 and $15,000,000 in dividends from Medallion Bank and other controlled subsidiaries. Excluding those items, investment income increased $1,195,000 or 6%, primarily reflecting portfolio growth, partially offset by the repricing of the portfolios to lower current market interest rates. Investment income also reflected a $326,000 or 19% reduction in lease revenue received from our owned Chicago medallions, reflecting the tightening of the market and increased competition in Chicago. The yield on the investment portfolio was 7.74% in 2015, down 6% from 8.25% in 2014. Excluding the extra interest and dividends, the 2015 yield was down 5% to 4.16% from 4.36% in 2014, reflecting the general decrease in market interest rates and changes in the portfolio mix. Average investments outstanding were $550,763,000 in 2015, up 11% from $497,536,000 a year ago, primarily reflecting portfolio growth, partially offset by loan payments received.

Medallion loans were $308,408,000 at year end, down $3,486,000 or 1% from $311,894,000 a year ago, representing 51% of the investment portfolio, compared to 59% a year ago, and were yielding 4.09% compared to 4.03% a year ago, up 1%, reflecting our increasing rates as loans refinance. The decrease in outstandings primarily reflected increases in valuation reserves reflecting current market conditions, and relatively stable portfolio markets.

The managed medallion portfolio, which includes loans at Medallion Bank and those serviced for third parties, was $667,863,000 at year end, down $36,950,000 or 5% from $704,813,000 a year ago, reflecting the above and portfolio decreases in the New York and Chicago markets, reflecting management’s decision to cull weaker and less profitable borrowers from the portfolio. The commercial loan portfolio was $81,895,000 at year end, compared to $71,149,000 a year ago, an increase of $10,746,000 or 15%, and represented 14% of the investment portfolio in both years. The increase primarily reflected growth in the high-yield mezzanine portfolio, partially offset by a decrease in the other secured commercial loan portfolio. Commercial loans yielded 12.80% at year end, up 7% from 11.91% a year ago, reflecting the change in portfolio mix and higher yields on the mezzanine portfolio. The net managed commercial loan portfolio, which includes loans at Medallion Bank and those serviced for or by third parties, was $122,463,000 at year end, up $8,177,000 or 7% from $114,286,000 a year ago, primarily reflecting the changes described above, and an increase in asset-based loan participations purchased. Approximately $11,652,000 of managed asset-based loans ($6,991,000 after valuation adjustments) has been reclassified to other assets awaiting the outcome of legal proceedings as described further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus supplement. Investments in Medallion Bank and other controlled subsidiaries were $159,913,000 at year end, up $23,065,000 or 17% from $136,848,000 a year ago, primarily reflecting our equity in the earnings of Medallion Bank other portfolio company investments, capital contributions made, dividends paid, portfolio sales, and net appreciation, and which represented 26% of the investment portfolio in both years, and which yielded 12.74% at year end, compared to 11.44% a year ago, primarily reflecting the dividends from Medallion Bank. See Notes 3 and 10 of the consolidated financial statements for additional information about Medallion Bank and the other controlled subsidiaries. Equity investments were $6,859,000 at year end, down $851,000 or 11% from $7,710,000 a year ago, primarily reflecting increased equity investments offset by portfolio depreciation and the transfer of an investment to investment in controlled subsidiaries, and which represented 1% of the investment portfolio at both year ends, and had a dividend yield of 0.72%, compared to 0.86% a year ago. Investment securities were $49,884,000 at year end, compared to $0 a year ago, representing 8% of the net investment portfolio, and had a yield of 0.35%, reflecting new investment activity. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – General – Trends in Investment Portfolio” in this prospectus supplement for a table that shows balances and yields by type of investment.

Interest expense was $9,422,000 in 2015, up $879,000 or 10% from $8,543,000 in 2014. The increase in interest expense was primarily due to increased borrowing levels. The cost of borrowed funds was 2.60% in 2015, compared to 2.70% a year ago, a decrease of 4%, reflecting the adjustable rate nature of much of our borrowings, and changes in our funding mix. Average debt outstanding was $361,738,000 in 2015, compared to $316,842,000 a year ago, up 14%, primarily reflecting increased borrowings required to fund portfolio growth and investment activity. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Portfolio Summary – Trend in Interest Expense” in this prospectus supplement for a table that shows average balances and cost of funds for our funding sources.

Net interest income was $33,231,000 and the net interest margin was 6.03% in 2015, up $706,000 or 2% from $32,525,000 a year ago, which represented a net interest margin of 6.54%, all reflecting the items discussed above.

Noninterest income, which is comprised of management fees, prepayment fees, servicing fee income, late charges, and other miscellaneous income was $319,000 in 2015, down $190,000 or 37% from $509,000 a year ago, primarily reflecting lower servicing and other fees generated from the portfolio base at Medallion Bank, and lower prepayment fees.

Operating expenses were $16,724,000 in 2015, down $1,165,000 or 7% from $17,889,000 in 2014. Salaries and benefits expense was $11,644,000 in the year, down $1,159,000 or 9% from $12,803,000 in 2014, primarily reflecting lower bonus accruals, partially offset by higher salaries and health insurance costs, and also by lower salary deferrals related to loan originations. Professional fees were $1,486,000 in 2015, up $292,000 or 24% from $1,194,000 a year ago, primarily reflecting higher legal expenses for a variety of corporate and investment-related matters. Occupancy expense was $877,000 in 2015, up $79,000 or 10% from $798,000 in 2014, primarily reflecting rent previously allocated to a sold unconsolidated portfolio company. Other operating expenses of $2,717,000 in 2015 were down $377,000 or 12% from $3,094,000 a year ago, primarily reflecting lower advertising expenses.

Net change in unrealized appreciation on investments was $4,914,000 in 2015, compared to $19,154,000 in 2014, a decrease in appreciation of $14,240,000 or 74%. Net change in unrealized appreciation other than the portion related to Medallion Bank and the other controlled subsidiaries, was depreciation of $11,916,000 in 2015, compared to appreciation of $3,511,000 in 2014, resulting in decreased appreciation of $15,427,000 in 2015. Unrealized appreciation (depreciation) arises when we make valuation adjustments to the investment portfolio. When investments are sold or written off, any resulting realized gain (loss) is grossed up to reflect previously recorded unrealized components. As a result, movement between periods can appear distorted. The 2015 activity resulted from net appreciation on Medallion Bank and other controlled subsidiaries of $16,830,000, reversals of unrealized depreciation associated with fully depreciated loans which were charged off of $1,015,000, net reversals of unrealized depreciation associated with equity investments which were sold of $292,000, and net unrealized appreciation on equity investments of $209,000, partially offset by net depreciation on investments other than securities of $9,621,000, net unrealized depreciation on loans of $3,743,000, and net depreciation on other assets of $68,000. The 2014 activity resulted from net appreciation on Medallion Bank and other controlled subsidiaries of $15,643,000, reversals of unrealized depreciation associated with fully depreciated loans which were charged off of $5,408,000, net appreciation on other assets of $1,141,000, reversals of unrealized depreciation associated with equity investments which were sold of $674,000, and net unrealized appreciation on equity investments of $553,000, partially offset by net depreciation on investments other than securities of $2,900,000 and net unrealized depreciation on loans of $1,365,000. The net appreciation on Medallion Bank and other controlled subsidiaries described above is net of the dividends declared by them to us of $18,889,000 in 2015 and $15,000,000 in 2014.

Our net realized gains on investments were $7,636,000 in 2015, compared to losses of $5,607,000 in 2014, an increase in realized gains of $13,243,000 in 2015. The 2015 activity reflected the reversals described in the unrealized paragraph above, and reversals of $4,809,000 of unrealized appreciation related to sales of other controlled subsidiaries, $3,296,000 of other gains from the other controlled subsidiaries sales, and other gains on equity investments of $913,000, partially offset by net direct chargeoffs of loans and equity investments of $75,000. The 2014 activity reflected the reversals described in the unrealized paragraph above and other gains on loans of $385,000, other gains on equity investments of $49,000, and net direct loan recoveries of $41,000.

Our net realized/unrealized gains on investments were $12,550,000 in 2015, compared to $13,547,000 in 2014, a decrease of $997,000 or 7% of net gains in the year, reflecting the above.

Net increase in net assets resulting from operations was $28,692,000 or $1.14 per diluted common share in 2014, up $2,916,000 or 11% from $25,776,000 or $1.16 per share in 2013, primarily reflecting higher net interest income, partially offset by higher operating expenses and lower noninterest income and net realized/unrealized gains. Net investment income after income taxes was $15,145,000 or $0.60 per share in 2014, up $2,956,000 or 24% from $12,189,000 or $0.55 in 2013.

Investment income was $41,068,000 in 2014, up $6,139,000 or 18% from $34,929,000 a year ago, and included $4,160,000 from interest recoveries and bonuses on certain investments in 2014, compared to $2,326,000 in 2013. Also included in 2014 and 2013 were $15,000,000 and $12,000,000 in dividends from Medallion Bank. Excluding those items, investment income increased $1,305,000 or 6%, primarily reflecting portfolio growth, partially offset by the repricing of the portfolios to lower current market interest rates, and the sourcing of loans to Medallion Bank. The yield on the investment portfolio was 8.25% in 2014, up 9% from 7.60% in 2013. Excluding the extra interest and dividends, the 2014 yield was down 3% to 4.36% from 4.49% in 2013, reflecting the general decrease in market interest rates and changes in the portfolio mix. Average investments outstanding were $497,536,000 in 2014, up 8% from $459,374,000 a year ago, primarily reflecting portfolio growth, partially offset by loan payments received.

Medallion loans were $311,894,000 at year end, up $14,033,000 or 5% from $297,861,000 a year ago, representing 59% of the investment portfolio, compared to 63% a year ago, and were yielding 4.03% compared to 4.02% a year ago, essentially unchanged, reflecting the bottoming of current market interest rates. The increase in outstandings primarily reflected portfolio growth in New York, Boston, and Newark, partially offset by a decline in Chicago and the other markets.

The managed medallion portfolio, which includes loans at Medallion Bank and those serviced for third parties, was $704,813,000 at year end, up $33,968,000 or 5% from $670,845,000 a year ago, reflecting the above and the strong overall portfolio growth at Medallion Bank, and an increase in third party participations sold. The commercial loan portfolio was $71,149,000 at year end, compared to $60,168,000 a year ago, an increase of $10,981,000 or 18%, and represented 14% of the investment portfolio compared to 13% a year ago. The increase primarily reflected growth in the high-yield mezzanine and other secured commercial loan portfolios, partially offset by a decrease in the asset-based loan portfolio. Commercial loans yielded 11.91% at year end, up 12% from 10.60% a year ago, reflecting the change in portfolio mix and higher yields on the mezzanine portfolio. The net managed commercial loan portfolio, which includes loans at Medallion Bank and those serviced for or by third parties, was $114,286,000 at year end, up $2,435,000 or 2% from $111,851,000 a year ago, primarily reflecting the changes described above, and further decreases and reserve increases in the asset-based loan portfolio at Medallion Bank. Approximately $11,202,000 of managed asset-based loans ($7,841,000 after valuation adjustments) has been reclassified to other assets awaiting the outcome of legal proceedings as described further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus supplement. Investments in Medallion Bank and other controlled subsidiaries were $136,848,000 at year end, up $28,225,000 or 26% from $108,623,000 a year ago, primarily reflecting our equity in the earnings of Medallion Bank and other portfolio company investments, capital contributions made, and net appreciation, and which represented 26% of the investment portfolio, compared to 23% a year ago, and which yielded 11.44% at year end, compared to 11.13% a year ago, reflecting the dividends from Medallion Bank. See Notes 3 and 10 of the consolidated financial statements for additional information about Medallion Bank and the other controlled subsidiaries. Equity investments were $7,710,000 at year end, up $1,205,000 or 19% from $6,505,000 a year ago, primarily reflecting portfolio appreciation and acquisitions, partially offset by portfolio dispositions and distributions, and which represented 1% of the investment portfolio and had a dividend yield of 0.86% at both year ends. Investment securities were zero at both year ends. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – General – Trends in Investment Portfolio” in this prospectus supplement for a table that shows balances and yields by type of investment.

Interest expense was $8,543,000 in 2014, up $182,000 or 2% from $8,361,000 in 2013. The increase in interest expense was primarily due to higher cost of funds. The cost of borrowed funds was 2.70% in 2014, compared to 2.64% a year ago, an increase of 2%, reflecting the adjustable rate nature of much of our borrowings, and changes in our funding mix. Average debt outstanding was $316,842,000 in 2014, compared to $316,448,000 a year ago, essentially unchanged, primarily reflecting borrowing stability, as proceeds from the recent equity raises has been utilized to fund portfolio growth. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Portfolio Summary – Trend in Interest Expense” in this prospectus supplement for a table that shows average balances and cost of funds for our funding sources.

Net interest income was $32,525,000 and the net interest margin was 6.54% in 2014, up $5,957,000 or 22% from $26,568,000 a year ago, which represented a net interest margin of 5.78%, all reflecting the items discussed above.

Noninterest income, which is comprised of prepayment fees, servicing fee income, late charges, and other miscellaneous income was $509,000 in 2014, down $773,000 or 60% from $1,282,000 a year ago, primarily reflecting lower prepayment fees, late charges, and servicing and other fees generated from the portfolio base at Medallion Bank.

Operating expenses were $17,889,000 in 2014, up $2,228,000 or 14% from $15,661,000 in 2013. Salaries and benefits expense was $12,803,000 in the year, up $2,016,000 or 19% from $10,787,000 in 2013, primarily reflecting higher bonus accruals and salaries, and also by lower salary deferrals related to loan originations. Professional fees were $1,194,000 in 2014, down $346,000 or 22% from $1,540,000 a year ago, primarily reflecting lower legal fees, partially offset by higher accounting, tax, and consultant costs, all related to the realization of certain portfolio investments, other investment activities and legal matters, portfolio valuations, and assistance with enhancements to the operating and structural environment. Occupancy expense was $798,000 in 2014, up $33,000 or 4% from $765,000 in 2013, primarily reflecting a relatively stable rent environment. Other operating expenses of $3,094,000 in 2014 were up $525,000 or 20% from $2,569,000 a year ago, primarily reflecting higher marketing, computer, franchise taxes, and other operating expenses, partially offset by higher expense reimbursements from Medallion Bank.

Net change in unrealized appreciation on investments was $19,154,000 in 2014, compared to $12,895,000 in 2013, an increase in appreciation of $6,259,000 or 49%. Net change in unrealized appreciation other than the portion related to Medallion Bank and the other controlled subsidiaries, was appreciation of $3,511,000 in 2014, compared to $7,835,000 in 2013, resulting in decreased appreciation of $4,324,000 or 55% in 2014. Unrealized appreciation (depreciation) arises when we make valuation adjustments to the investment portfolio. When investments are sold or written off, any resulting realized gain (loss) is grossed up to reflect previously recorded unrealized components. As a result, movement between periods can appear distorted. The 2014 activity resulted from net appreciation on Medallion Bank and other controlled subsidiaries of $15,643,000, reversals of unrealized depreciation associated with fully depreciated loans which were charged off of $5,408,000, net appreciation on other assets of $1,141,000, reversals of unrealized depreciation associated with equity investments which were sold of $674,000, and net unrealized appreciation on equity investments of $553,000, partially offset by net depreciation on investments other than securities of $2,900,000 and net unrealized depreciation on loans of $1,365,000. The 2013 activity resulted from net appreciation on investments other than securities and other assets of $6,759,000, net appreciation on Medallion Bank and other controlled subsidiaries of $5,060,000, net unrealized appreciation on equity investments of $443,000, reversals of unrealized depreciation associated with fully depreciated loans which were charged off of $397,000, and reversals of unrealized depreciation associated with equity investments which were charged off of $365,000, partially offset by net unrealized depreciation on loans of $129,000. The net appreciation on Medallion Bank and other controlled subsidiaries described above is net of the dividends declared by them to us of $15,000,000 in 2014 and $12,000,000 in 2013.

Our net realized losses on investments were $5,607,000 in 2014, compared to gains of $692,000 in 2013, a decrease in realized gains of $6,299,000 in 2014. The 2014 activity reflected the reversals described in the unrealized paragraph above and other gains on loans of $385,000, other gains on equity investments of $49,000, and net direct loan recoveries of $41,000. The 2013 activity reflected the reversals described in the unrealized paragraph above and gains on the sale of equity investments of $1,368,000 and net direct recoveries of $86,000.

Our net realized/unrealized gains on investments were $13,547,000 in 2014, compared to $13,587,000 in 2013, a decrease of $40,000 of net gains in the year, reflecting the above.

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. Based on past experience, we anticipate that approximately 40% of the taxicab medallion portfolio will mature or be prepaid each year. 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, particularly in the medallion loan portfolio.

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 or the maturities of tranches drawn under the revolving lines of credit or issued as certificates of deposit, for terms of up to five years. We had outstanding SBA debentures of $74,485,000 with a weighted average interest rate of 3.52%, constituting 18% of our total indebtedness as of December 31, 2015. Also, as of December 31, 2015, portions of the adjustable rate debt with banks repriced at intervals of as long as 2 months, and certain of the certificates of deposit were for terms of up to 59 months, further mitigating the immediate impact of changes in market interest rates.

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.

The following table presents our interest rate sensitivity gap at December 31, 2015, compared to the respective positions at the end of 2014 and 2013. 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.

Our interest rate sensitive assets were $476,468,000 and interest rate sensitive liabilities were $404,540,000 at December 31, 2015. The one-year cumulative interest rate gap was a negative $114,848,000 or 24% of interest rate sensitive assets, compared to a negative $160,108,000 or 37% at December 31, 2014 and $143,126,000 or 34% at December 31, 2013. However, using our estimated 40% prepayment/refinancing rate for medallion loans to adjust the interest rate gap resulted in a negative gap of $43,838,000 or 9% at December 31, 2015. We seek to manage interest rate risk by originating adjustable-rate loans, by incurring fixed-rate indebtedness, by evaluating appropriate derivatives, pursuing securitization opportunities, and by other options consistent with managing interest rate risk.

On a combined basis with Medallion Bank, our interest rate sensitive assets were $1,544,326,000 and interest rate sensitive liabilities were $1,313,436,000 at December 31, 2015. The one-year cumulative interest rate gap was a negative $220,686,000 or 14% of interest rate sensitive assets, compared to a negative $257,578,000 or 19% and $341,843,000 or 28% at December 31, 2014 and 2013. Using our estimated 40% prepayment/refinancing rate for medallion loans to adjust the interest rate gap resulted in a negative gap of $77,488,000 or 5% at December 31, 2015.

We manage our exposure to increases in market rates of interest by periodically purchasing interest rate caps to lock in the cost of funds of our variable-rate debt in the event of a rapid run up in interest rates. We entered into contracts to purchase interest rate caps on $170,000,000 of notional value of principal from various multinational banks, with termination dates ranging to September 2018. The caps provide for payments to us if various LIBOR thresholds are exceeded during the cap terms. Total cap purchases were generally fully expensed when paid, including $81,000, $75,000, and $41,000, in 2015, 2014, and 2013, and all are carried at $0 on the balance sheet at December 31, 2015.

Our sources of liquidity are the revolving lines of credit with DZ Bank and with a variety of local and regional banking institutions, unfunded commitments to sell debentures to the SBA, loan amortization and prepayments, private issuances of debt securities, and participations or sales of loans to third parties. As a RIC, we are required to distribute at least 90% of our investment company taxable income; consequently, we have primarily relied upon external sources of funds to finance growth. Taxi Medallion Loan Trust III’s (“Trust III”) $135,000,000 secured revolving line of credit with DZ Bank had $5,482,000 of availability, $11,568,000 was available under revolving credit agreements with commercial banks, and there were $3,000,000 unfunded commitments from SBA.

Additionally, Medallion Bank, our wholly-owned, unconsolidated portfolio company has access to independent sources of funds for our business originated there, primarily through brokered certificates of deposit. At the current required capital levels, it is expected, although there can be no guarantee, that deposits of approximately $7,500,000 could be raised by Medallion Bank to fund future loan origination activities, and Medallion Bank also has $25,000,000 available under Fed Funds lines with several commercial banks. In addition, Medallion Bank, as a non-RIC subsidiary of ours, is allowed to retain all earnings in the business to fund future growth.

The components of our debt were as follows at December 31, 2015. See Note 4 to the consolidated financial statements on page S-118 for details of the contractual terms of our borrowings.

Our contractual obligations expire on or mature at various dates through September 2037. The following table shows all contractual obligations at December 31, 2015.

We value our portfolio at fair value as determined in good faith by the Board of Directors in accordance with our valuation policy. Unlike certain lending institutions, we are not permitted to establish reserves for loan losses. Instead, we must value each individual investment and portfolio loan on a quarterly basis. We record unrealized depreciation on investments and loans when we believe that an asset has been impaired and full collection is unlikely. We record unrealized appreciation on equities if we have a clear indication that the underlying portfolio company has appreciated in value and, therefore, our equity investment has also appreciated in value. Without a readily ascertainable market value, the estimated value of our portfolio of investments and loans may differ significantly from the values that would be placed on the portfolio if there existed a ready market for the investments. We adjust the valuation of the portfolio quarterly to reflect our Board of Directors’ estimate of the current fair value of each investment in the portfolio. Any changes in estimated fair value are recorded in our statement of operations as net unrealized appreciation (depreciation) on investments. Our investment in Medallion Bank, as a wholly-owned portfolio investment, is also subject to quarterly assessments of its fair value. We conduct a thorough valuation analysis, and also receive an opinion regarding the valuation from an independent third party to assist the Board of Directors in its determination of the fair value of Medallion Bank. We determine whether any factors give rise to valuation different than recorded book value. As a result of this valuation process, we had previously used Medallion Bank’s actual results of operations as the best estimate of changes in fair value, and recorded the results as a component of unrealized appreciation (depreciation) on investments. In the second quarter of 2015, we became aware of external interest in Medallion Bank and its portfolio’s assets at values in excess of their book value. We incorporated these new factors in the Medallion Bank’s fair value analysis and the Board of Directors determined that Medallion Bank had a fair value in excess of book value. We also engaged a valuation specialist to assist the Board of Directors in their determination of Medallion Bank’s fair value, and this appreciation of $15,500,000 was thereby recorded in 2015 as a component of unrealized appreciation (depreciation) on investments, in addition to Medallion Bank’s actual results of operations for the year ended December 31, 2015. For more information, see “Risk Factors – Risks Relating to Our Business and Structure – Our investment portfolio is, and will continue to be, recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is, and will continue to be, uncertainty as to the value of our portfolio investments which could adversely affect our net asset value” in this prospectus supplement.

We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with short-term floating-rate debt, and to a lesser extent by term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. 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, and including the impact on Medallion Bank, a hypothetical immediate 1% increase in interest rates would result in an increase to the line item “net increase in net assets resulting from operations” as of December 31, 2015 by $692,000 on an annualized basis, compared to a positive impact of $1,279,000 at December 31, 2014, and the impact of such an immediate increase of 1% over a one year period would have been ($1,855,000) at December 31, 2015, compared to ($1,634,000) at December 31, 2014. 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 increase in net assets resulting 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.

We continue to work with investment banking firms and other financial intermediaries to investigate the viability of a number of other financing options which include, among others, the sale or spin off 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 December 31, 2015. See Note 4 to the consolidated financial statements for additional information about each credit facility.

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 have available liquidity of $5,482,000 under our revolving credit agreement with DZ Bank as of December 31, 2015. We also generate liquidity through deposits generated at Medallion 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 are actively seeking additional sources of liquidity, however, given current market conditions, we cannot assure you that we will be able to secure additional liquidity on terms favorable to us or at all. If that occurs, we may be unable to cure borrowing base deficiencies, 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. Also, Medallion Bank is not a RIC, and therefore is able to retain earnings to finance growth.

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”. ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for leases classified as operating under current GAAP. ASU 2016-02 applies to all entities and is effective for fiscal years beginning after December 15, 2018 for public entities, with early adoption permitted. We are assessing the impact the update will have on our financial condition and results of operations.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The main objective of this Update is to enhance the reporting model for financial instruments and provide users of financial statements with more decision-useful information. ASU 2016-01 requires equity investments to be measured at fair value, simplifies the impairment assessment of equity investment without readily determinable fair value, eliminates the requirements to disclose the fair value of financial instruments measured at amortized cost, and requires public business entities to use the exit price notion when measuring the fair value of financial instruments. The update, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We do not believe this update will have a material impact on our financial condition.

In August 2015, the FASB issued ASU 2015-15, “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting.” ASU 2015-15 adds SEC paragraphs whereby the SEC staff addresses the absence of guidance under ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30),” for costs related to line-of-credit arrangements. The SEC staff will not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The update, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not believe this update will have a material impact on our financial condition.

In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820) – Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Additionally, the amendment removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient, limiting those disclosures to investments for which the entity has elected to measure the fair value using that practical expedient. The update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not believe this update will have a material impact on our disclosures.

In August 2014, the FASB issued ASU 2014-13, “Consolidation – (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing.” ASU 2014-13 provides an alternative to Topic 820 for measuring the financial assets and the financial liabilities of a consolidated collateralized financing entity to eliminate any differences between their respective fair values. In the event a reporting entity does not elect to utilize the measurement alternative, the update clarifies that the fair value of the financial assets and liabilities of the consolidated collateralized financing entity should be measured using the requirements of Topic 820 and any differences should be reflected in earnings and attributed to the reporting entity in the consolidated statement of income (loss). This update is effective for periods beginning after December 15, 2015. We do not believe this update will have an impact on our financial condition or results of operations.

Our business activities contain elements of risk. We consider the principal types of risk to be fluctuations in interest rates and portfolio valuations. We consider the management of risk essential to conducting our businesses. Accordingly, our risk management systems and procedures are designed to identify and analyze our risks, to set appropriate policies and limits, and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.

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 increase in net assets resulting 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.

We, Medallion Financial Corp. or the Company, are a specialty finance company that has a leading position in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. A wholly-owned portfolio company of ours, Medallion Bank, also originates consumer loans for the purchase of recreational vehicles, boats, motorcycles, trailers, and to finance small scale home improvements. Our core philosophy has been “In niches there are riches.” We try to identify markets that are profitable and where we can become an industry leader. Our investment objectives are to provide high level of distributable income, consistent with the preservation of capital, as well as long-term growth of net asset value and our stock price. These investment objectives may be changed without shareholder approval. We also provide other debt, mezzanine, and equity investment capital to companies in a variety of industries, consistent with our investment objectives. For additional information about our business and operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus supplement.

Since 1996, the year in which we became a public company, we have increased our taxicab medallion loan portfolio at a compound annual growth rate of 4%, and our commercial loan portfolio at a compound annual growth rate of 4% (9% and 6% on a managed basis when combined with Medallion Bank). Since Medallion Bank acquired a consumer loan portfolio and began originating consumer loans in 2004, it has increased its consumer loan portfolio at a compound annual growth rate of 18%. Total assets under our management and the management of our unconsolidated wholly-owned subsidiaries, which includes our managed net investment portfolio, as well as assets serviced for third party investors, were $1,655,000,000 as of December 31, 2015 and $1,497,000,000 as of December 31, 2014, and have grown at a compound annual growth rate of 11% from $215,000,000 at the end of 1996. Since our initial public offering in 1996, we have paid/declared distributions in excess of $254,000,000 or $14.31 per share.

We conduct our business through various wholly-owned investment company subsidiaries including:

We formed a wholly-owned portfolio company, Medallion Servicing Corporation, or MSC, to provide loan services to Medallion Bank, also a portfolio company wholly-owned by us. We have assigned all of our loan servicing rights for Medallion Bank, which consists of servicing taxi medallion and commercial loans originated by Medallion Bank, to MSC, which bills and collects the related service fee income from Medallion Bank, and is allocated and charged by us for MSC’s share of these servicing costs.

We also conduct business through our asset-based lending division, Medallion Business Credit, an originator of loans to small businesses for the purpose of financing inventory and receivables.

In addition, we conduct business through a wholly-owned portfolio company, Medallion Bank, a bank regulated by the FDIC and the Utah Department of Financial Institutions which originates taxicab medallion, commercial, and consumer loans, raises deposits, and conducts other banking activities. Medallion Bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit issued to its customers. To take advantage of this low cost of funds, we refer a portion of our taxicab medallion and commercial loans to Medallion Bank, which then originates these loans, which are then serviced by MSC. However, the FDIC restricts the amount of taxicab medallion loans that Medallion Bank may finance to three times Tier 1 capital, or $485,814,000 as of December 31, 2015. MSC earns referral and servicing fees for these activities. As a non-investment company, Medallion Bank is not consolidated with the Company, which is an investment company under the 1940 Act.

We are a closed-end, non-diversified management investment company, organized as a Delaware corporation, under the 1940 Act. We have elected to be treated as a BDC under the 1940 Act. We have also elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level federal income taxes on any net ordinary income or capital gains that we distribute to our shareholders as dividends, if we meet certain source-of-income and asset diversification requirements. Medallion Bank is not a RIC and must pay corporate-level US federal and state income taxes.

We are managed by our executive officers under the supervision of our Board of Directors. As a result, we do not pay investment advisory fees, but instead we incur the operating costs associated with employing investment and portfolio management professionals. Alvin Murstein, our chairman and chief executive officer, has over 50 years of experience in the ownership, management, and financing of taxicab medallions and other commercial businesses. Andrew M. Murstein, our president, has over 25 years of experience and is the third generation in his family to participate in the business.

Below is our organizational structure reflecting our consolidated and unconsolidated subsidiaries.

We provide loans to individuals and small to mid-size businesses, both directly through our investment company subsidiaries and also through Medallion Bank, in three primary markets:

The following chart shows the components of our $1,501,555,000 managed net investment portfolio as of December 31, 2015.

Taxi medallion loans of $308,408,000 comprised 51% of our $606,959,000 net investment portfolio as of December 31, 2015, compared to $311,894,000 or 59% of our $527,601,000 net investment portfolio as of December 31, 2014. Managed taxi medallion loans of $640,904,000 comprised 43% of our $1,501,555,000 managed net investment portfolio as of December 31, 2015, compared to $677,155,000 or 52% of our $1,310,685,000 managed net investment portfolio as of December 31, 2014. Including loans to unaffiliated investors, the total amount of medallion loans under our management was $667,863,000 as of December 31, 2015, compared to $704,813,000 as of December 31, 2014. Since 1979, we and Medallion Bank have originated, on a combined basis, approximately $3,539,000,000 in medallion loans in New York City, Chicago, Boston, Newark, Cambridge, and other cities within the United States. In addition, our management has a long history of owning, managing, and financing taxicab fleets, taxicab medallions, and corporate car services, dating back to 1956.

Medallion loans collateralized by New York City taxicab medallions and related assets comprised 69% and 68% of the value of the medallion loan portfolio as of December 31, 2015 and 2014, and were 74% on a managed basis. Based on taxi medallion values published by the New York City TLC, we estimate that the total value of all of New York City taxicab medallions and related assets such as the vehicle, taximeter, and roof lights exceeded $10.7 billion as of December 31, 2015. We estimate that the total value of all taxicab medallions and related assets in our major US markets exceeded $13.5 billion as of December 31, 2015.

Although some of the medallion loans have from time to time been in arrears or in default, our loss experience on medallion loans has been negligible to date. We believe that our medallion loan portfolio is of good credit quality as all of our medallion loans are secured by the medallion and enhanced with personal guarantees of the shareholders and owners. When a borrower defaults on a loan, we can repossess the medallion collateralizing that loan. If the loan is not brought current, the medallion is sold in the traditionally active market and personal guarantees are pursued.

The following table displays information on managed medallion loans outstanding (other than those managed for third party investors) in each of our major markets at December 31, 2015. For a presentation of only the consolidated on-balance sheet medallion loans, see the Consolidated Summary Schedule of Investments in the consolidated financial statements on page S-136.

The New York City Market. A New York City taxicab medallion is the only permitted license to operate a taxicab and accept street hails in New York City, except as discussed below. As reported by the TLC, individual (owner-driver) medallions sold for approximately $715,000 and corporate medallions sold for approximately $793,000 as of December 31, 2015. Individual medallions are issued to an owner-driver who must drive the taxicab for a minimum number of hours in each calendar year whereas corporate medallions are medallions that can be aggregated by businesses, leased to drivers, and operated for more than one shift. The number of taxicab medallions is limited by law, and as a result of the limited supply of medallions, an active market for medallions has developed. The law limiting the number of medallions also stipulates that the ownership for the 13,630 medallions outstanding as of December 31, 2015 shall remain divided into 5,733 individual medallions and 7,897 fleet or corporate medallions. Corporate medallions are more valuable because they can be aggregated by businesses, leased to drivers, and operated for more than one shift. New York City auctioned 600 additional medallions during 2004, 308 during 2006, 89 during 2008, 200 in 2013, and 206 in 2014. The medallions auctioned in 2006 were restricted to hybrid fuel vehicles and wheelchair accessible vehicles. In addition, New York City auctioned an additional 63 medallions for wheelchair accessible vehicles in 2007. There was a 25% fare increase which took effect in May 2004 and a 17% fare increase that took effect in September 2012. The New York State legislature enacted a law on December 21, 2011 which was amended on February 17, 2012 to permit cars for hire to pick up street hails in the boroughs outside Manhattan. Pursuant to the law, the TLC began issuing Street Hail Livery licenses in June 2013.

A prospective medallion owner must qualify under the medallion ownership standards set and enforced by the TLC. These standards prohibit individuals with criminal records from owning medallions, require that the funds used to purchase medallions be derived from legitimate sources, and mandate that taxicab vehicles and meters meet TLC specifications. In addition, before the TLC will approve a medallion transfer, the TLC requires a letter from the seller’s insurer stating that there are no outstanding claims for personal injuries in excess of insurance coverage. After the transfer is approved, the owner’s taxicab is subject to quarterly TLC inspections.

Most New York City medallion transfers are handled through approximately 24 medallion brokers licensed by the TLC. In addition to brokering medallions, these brokers also arrange for TLC documentation insurance, vehicles, meters, and financing. We have excellent relations with many of the most active brokers, and regularly receive referrals from them. Brokers generated 24% of the loans originated during 2015, and 28% for 2014. However, we receive most of our referrals from a small number of brokers.

The Chicago Market. We estimate that Chicago medallions sold for approximately $239,000 as of December 31, 2015. Pursuant to a municipal ordinance, the number of outstanding medallions is capped at 6,995 as of December 31, 2015. We estimate that the total value of all Chicago medallions and related assets is over $1,741,755,000 as of December 31, 2015.

The Boston Market. We estimate that Boston medallions sold for approximately $389,000 as of December 31, 2015. The number of Boston medallions is capped at 1,825 as of December 31, 2015. We estimate that the total value of all Boston medallions and related assets is over $732,409,000 as of December 31, 2015.

The Newark Market. We estimate that Newark medallions sold for approximately $321,000 as of December 31, 2015. The number of Newark medallions has been limited to 600 since 1950 by local law. We estimate that the total value of all Newark medallions and related assets is over $196,350,000 as of December 31, 2015.

The Cambridge Market. We estimate that Cambridge medallions sold for approximately $301,000 as of December 31, 2015. The number of Cambridge medallions is 257 as of December 31, 2015. We estimate that the total value of all Cambridge medallions and related assets is over $80,055,000 as of December 31, 2015.

Commercial loans finance either the purchase of the equipment and related assets necessary to open a new business or the purchase or improvement of an existing business. From the inception of the commercial loan business in 1987 through December 31, 2015, we and Medallion Bank have originated more than $908,067,000 of commercial loans. Commercial loans of $81,895,000 comprised 14% of our $606,959,000 net investment portfolio as of December 31, 2015, compared to $71,149,000 or 14% of our $527,601,000 net investment portfolio as of December 31, 2014. Managed commercial loans of $125,882,000 comprised 8% of our $1,501,555,000 net investment portfolio as of December 31, 2015, compared to $114,404,000 or 9% of our $1,310,685,000 managed net investment portfolio as of December 31, 2014. We have worked to increase our commercial loan activity in recent years, primarily because of the attractive higher yielding, floating rate nature of most of this business. The outstanding balances of managed commercial loans have grown at a compound annual rate of 6% since 1996. The increase since 1996 has been primarily driven by internal growth through the origination of additional commercial loans. We focus our marketing efforts on the manufacturing, retail trade, professional, scientific, and technical services and other services. The majority of our commercial borrowers are located in the New York metropolitan area and the Midwest. We plan to continue expanding our commercial loan activities by developing a more diverse borrower base, a wider geographic area of coverage, and by expanding targeted industries.

Commercial loans are generally secured by equipment, accounts receivable, real estate, or other assets, and have interest rates averaging 668 basis points over the prevailing prime rate at year end, up from 595 basis points over prime at the end of 2014. As with medallion loans, the vast majority of the principals of borrowers personally guarantee commercial loans. The aggregate realized loss of principal on managed commercial loans has averaged 2.5% per annum for the last five years.

The following table displays information on managed commercial loans outstanding (other than those managed for third party investors) in each of our major markets at December 31, 2015. For a presentation of only the consolidated on-balance sheet commercial loans, see the Consolidated Summary Schedule of Investments in the consolidated financial statements on S-136.

Secured Mezzanine Loans. Through our subsidiary Medallion Capital, we originate both senior and subordinated loans nationwide to businesses in a variety of industries, including manufacturing and various service providers, more than 70% of which are located in the Midwest and Northeast regions, 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 $1,000,000 to $5,000,000, and represent approximately 53% of our managed commercial loan portfolio as of December 31, 2015, and were 47% as of December 31, 2014. Frequently, we also receive warrants to purchase an equity interest in the borrowers of secured mezzanine loans.

Asset Based Loans. Through our Medallion Business Credit division, we source, originate, manage, and service asset-based loans to small businesses which require working capital credit facilities ranging from $500,000 to $9,300,000. Medallion Business Credit refers most of its potential commercial loans to Medallion Bank to originate, so that we can benefit from Medallion Bank’s lower cost of funds. Additionally, from time to time, Medallion Business Credit also sells and purchases loan participations to and from independent third party lenders. Together, these loans represent approximately 34% of the managed commercial loan portfolio as of December 31, 2015, and were 37% as of December 31, 2014. These commercial loans are generally secured principally by the borrower’s accounts receivable, but may also be secured by inventory, machinery, equipment, and/or real estate, and are generally personally guaranteed by the principals. Currently, our clients are mostly located in the New York metropolitan area, and include wholesale and retail trade, transportation and warehousing, professional, scientific, and technical services, and other industrial and services businesses. We had successfully originated 49 commercial loans as of December 31, 2015.

Other Secured Commercial Loans. We originate, primarily through our subsidiary Freshstart, other commercial loans that are focused on retail trade businesses, which are typically located within 200 miles of New York City. These commercial loans are generally secured by all of the assets of the businesses and are generally personally guaranteed by the principals. Frequently, we receive assignments of lease from our borrowers. The loans generally range in size from under $100,000 to approximately $8,300,000. These loans represented approximately 13% of the managed commercial loan portfolio as of December 31, 2015, and were 16% as of December 31, 2014. Historically, most of the portfolio has consisted of fixed-rate loans.

Consumer Loans. Consumer loans are originated by Medallion Bank, a wholly-owned, unconsolidated portfolio company. Consumer loans of $619,887,000 comprised 41% of our $1,501,555,000 managed net investment portfolio as of December 31, 2015, compared to $472,547,000 or 36% of our $1,310,685,000 managed net investment portfolio as of December 31, 2014. The loans are collateralized by recreational vehicles, boats, motorcycles, trailers, and home improvements, located in all 50 states. The portfolio is serviced by a large third party servicer. We believe that Medallion Bank’s consumer loan portfolio is of acceptable credit quality given the high interest rates earned on the loans, which compensate for the higher degree of credit risk in the portfolio.

Other. As a BDC, we also provide debt, mezzanine, and equity investment capital to companies in a variety of industries. These investments may be venture capital style investments which may not be fully collateralized. This is a small, but growing portion of our business.

Our core philosophy has been “In niches there are riches.” We try to identify markets that are profitable and where we can be an industry leader. Key elements of our strategy include:

Capitalize on our relationships with brokers and dealers. We are committed to establishing, building, and maintaining our relationships with our brokers and dealers. Our marketing efforts are focused on building relationships with brokers in the medallion market and dealers in the consumer market. We believe that our relationships with brokers and dealers provide us with, in addition to potential investment opportunities, other significant benefits, including an additional layer of due diligence and additional monitoring capabilities. We have assembled a management team that has developed an extensive network of broker and dealer relationships in our target markets over the last 50 years. We believe that our management team’s relationships with these brokers and dealers have and will continue to provide us with significant investment opportunities. In 2015, 20% of our managed originated medallion and commercial loans and 100% of our consumer loans were generated by brokers and dealers.

Employ disciplined underwriting policies and maintain rigorous portfolio monitoring. We have an extensive investment underwriting and monitoring process. We conduct a thorough analysis of each potential investment and its prospects, competitive position, financial performance, and industry dynamics. We stress the importance of credit and risk analysis in our underwriting process. We believe that our continued adherence to this disciplined process will permit us to continue to generate a stable, diversified and increasing revenue stream of current income from our debt investments to enable us to make distributions to our shareholders.

Leverage the skills of our experienced management team. Our management team is led by our Chief Executive Officer, Mr. Alvin Murstein, and our President, Mr. Andrew M. Murstein. Alvin Murstein has over 60 years of experience in the ownership, management, and financing of taxicab medallions and other commercial businesses, and Andrew M. Murstein is the third generation in his family to participate in the business and has over 25 years of experience in the ownership, management, and financing of taxicab medallions and other commercial businesses. The other members of our management team have broad investment backgrounds, with prior experience at specialty finance companies, middle market commercial banks, and other financial services companies. We believe that the experience and contacts of our management team will continue to allow us to effectively implement the key aspects of our business strategy.

Perform Strategic Acquisitions. In addition to increasing market share in existing lending markets and identifying new niches, we seek to acquire medallion financing businesses and related portfolios and specialty finance companies that make secured loans to small businesses which have experienced historically low loan losses similar to our own. Since our initial public offering in May 1996, eight specialty finance companies, five loan portfolios, and three taxicab rooftop advertising companies have been acquired.

The following table sets forth the components of investment activity in the managed investment portfolio for the years indicated.

Medallion Loans. Our medallion loan portfolio consists of mostly fixed-rate loans, collateralized by first security interests in taxicab medallions and related assets (vehicles, meters, and the like). We estimate that the weighted average loan-to-value ratio of all of the medallion loans was 76% as of December 31, 2015. In addition, we have recourse against a vast majority of the owners of the taxicab medallions and related assets through personal guarantees.

Medallion loans generally require equal monthly payments covering accrued interest and amortization of principal over a five to twenty-five year schedule, subject to a balloon payment of all outstanding principal at maturity. Historically, we have originated loans with one-to-five year maturities where interest rates are adjusted and a new maturity period set. In most cases, borrowers may prepay medallion loans upon payment of a fee of approximately 1% to 2%.

We generally retain the medallion loans we originate; however, from time to time, we participate or sell shares of some loans or portfolios to interested third party financial institutions. In these cases, we retain the borrower relationships and service the sold loans.

Commercial Loans. We have typically originated commercial loans in principal amounts generally ranging from under $100,000 to $9,300,000, and occasionally, have originated loans in excess of that amount. These loans are generally retained and typically have maturities ranging from three to ten years and require monthly payments ranging from full amortization over the loan term to fully deferred interest and principal at maturity, with multiple payment options in between. Substantially all loans may be prepaid with a fee ranging from 30 to 120 days’ interest. The term of, and interest rate charged on, certain of our outstanding loans are subject to SBA regulations. Under SBA regulations, the maximum rate of interest permitted on loans originated by us is 19%. Unlike medallion loans, for which competition precludes us from charging the maximum rate of interest permitted under SBA regulations, we are able to charge the maximum rate on certain commercial loans. We believe that the increased yield on commercial loans compensates for their higher risk relative to medallion loans and further illustrates the benefits of diversification.

Commercial loans are generally originated at an average loan-to-value ratio of 60% to 75%. Substantially all of the commercial loans are collateralized by security interests in the assets being financed by the borrower. In addition, we have recourse against the vast majority of the principals of borrowers who personally guarantee the loans. Although personal guarantees increase the commitment of borrowers to repay their loans, we cannot assure you that the assets available under personal guarantees would, if required, be sufficient to satisfy the obligations secured by such guarantees.

Consumer Loans. Consumer loans generally require equal monthly payments covering accrued interest and amortization of principal over a negotiated term, generally around ten years. Interest rates offered are fixed. Borrowers may prepay consumer loans without any prepayment penalty. In general, Medallion Bank has established relationships with dealers in the industry, who are the sources for most of the customers of Medallion Bank.

We employ 36 loan originators to originate medallion, commercial, and consumer loans. Each loan application is individually reviewed through analysis of a number of factors, including loan-to-value ratios, a review of the borrower’s credit history, public records, personal interviews, trade references, personal inspection of the premises, and approval from the TLC, SBA, or other regulatory body, if applicable. Each medallion and commercial loan applicant is required to provide personal or corporate tax returns, premises leases, and/or property deeds. Senior management establishes loan origination criteria. Loans that conform to such criteria may be processed by a loan officer with the proper credit authority, and non-conforming loans must be approved by the chief executive officer and/or the chief credit officer. Both medallion and commercial loans are sourced from brokers with extensive networks of applicants, and commercial loans are also referred by contacts with banks, attorneys, and accounting firms. Consumer loans are primarily sourced through relationships which have been established with recreational vehicle and boat dealers, and home improvement contractors throughout our market area.

We have historically funded our lending operations primarily through credit facilities with bank syndicates and, to a lesser degree, through equity or debt offerings or private placements, and fixed-rate, senior secured notes and long-term subordinated debentures issued to or guaranteed by the SBA.

Since the inception of Medallion Bank, substantially all of Medallion Bank’s funding has been provided by FDIC insured brokered certificates of deposit. The determination of funding sources is established by our management, based upon an analysis of the respective financial and other costs and burdens associated with funding sources. Our funding strategy and interest rate risk management strategy is to have the proper structuring of debt to minimize both rate and maturity risk, while maximizing returns with the lowest cost of funding over an intermediate period of time.

The table below summarizes our sources of available funds and amounts outstanding under credit facilities and their respective end of period weighted average interest rates at December 31, 2015. See Note 4 to the consolidated financial statements for additional information about each credit facility.

We fund our fixed-rate loans with variable-rate credit lines and bank debt, and with fixed-rate SBA debentures. The mismatch between maturities and interest-rate sensitivities of these balance sheet items results in interest rate risk. We seek to manage our exposure to increases in market rates of interest to an acceptable level by:

Nevertheless, we accept varying degrees of interest rate risk depending on market conditions. For additional discussion of our funding sources and asset liability management strategy, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/Liability Management” in this prospectus supplement.

Information about our senior securities is shown in the following table as of December 31 for the years indicated in the table, unless otherwise noted. The information contained in the table for the years 2006 through 2014 has been derived from our audited financial statements. WeiserMazars LLP reported on the senior securities table as of December 31, 2014, 2013, 2012, 2011 and 2010.

Banks, credit unions, and finance companies, some of which are SBICs, compete with us in originating medallion, commercial, and consumer loans. In addition, finance subsidiaries of equipment manufacturers also compete with us in originating commercial loans. Many of these competitors have greater resources than we do and certain competitors are subject to less restrictive regulations than us. As a result, we cannot assure you that we will be able to identify and complete the financing transactions that will permit us to compete successfully.

As of December 31, 2015 we employed 143 persons, including 58 at our Medallion Bank subsidiary. We believe that relations with all of our employees are good.

We are a closed-end, management investment company that has elected to be treated as a BDC under the 1940 Act. We conduct our business through various wholly-owned investment company subsidiaries including Medallion Funding, Medallion Capital, and Freshstart. Pursuant to various exemptive orders, we operate and are regulated as a single BDC. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters, and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities voting as a class.

We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act of 1933. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, we generally cannot acquire more than 3% of the voting stock of any registered investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of more than one investment company. Certain of these limits are not applicable to our investments in our wholly-owned SBIC subsidiaries. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses. None of our policies are fundamental, and each may be changed without stockholder approval.

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are the following:

In addition, a BDC must have been organized and have its principal place of business in the US and must be operated for the purpose of making investments in the types of securities described in (1), (2), or (3) above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers, or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company.

Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash equivalents, US government securities, or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in US Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the US government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements.

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary purposes without regard to full asset coverage requirements. In addition to the 1940 Act, we are subject to two exemptive orders which govern how we calculate our senior securities and under which we have agreed that we will meet the applicable asset coverage ratios both individually and on a consolidated basis. For a discussion of the risks associated with leverage, see “Risk Factors—Risks Relating to Our Business and Structure—Regulations governing our operation as a BDC will affect our ability to, and the way in which we raise additional capital.”

Medallion Funding, Medallion Capital, and Freshstart each operate as SBICs. The SBIA authorizes the organization of SBICs as vehicles for providing equity capital, long term financing, and management assistance to small business concerns. The SBIA and the SBA regulations define a “small business concern” as a business that is independently owned and operated, which does not dominate its field of operation, and which (i) has a net worth, together with any affiliates, of $18.0 million or less and average annual net income after US federal income taxes for the preceding two years of $6.0 million or less (average annual net income is computed without the benefit of any carryover loss), or (ii) satisfies alternative criteria under SBA regulations that focus on the industry in which the business is engaged and the number of persons employed by the business or its gross revenues. In addition, at the end of each year, at least 25% of the total amount of loans made after April 25, 1994 must be made in “smaller businesses” which have a net worth of $6.0 million or less, and average net income after federal income taxes for the preceding two years of $2.0 million or less. SBA regulations also prohibit an SBIC from providing funds to a small business concern for certain purposes, such as relending and reinvestment.

Medallion Funding is authorized to make loans to borrowers other than disadvantaged businesses (that is, businesses that are at least 50% owned, and controlled, and managed, on a day to day basis, by a person or persons whose participation in the free enterprise system is hampered because of social or economic disadvantage) if, at the time of the loan, Medallion Funding has in its portfolio outstanding loans to disadvantaged businesses with an aggregate cost basis equal to or exceeding the value of the unamortized repurchase discount under the preferred stock repurchase agreement between Medallion Funding and the SBA, which is currently zero.

Under current SBA Regulations, the maximum rate of interest that Medallion Funding may charge may not exceed the higher of (i) 19% or (ii) the sum of (a) the higher of (i) that compan


	Per Note		Total
Public offering price	$	25.0000	$	30,000,000
Underwriting discounts and commissions	$	0.7875	$	945,000
Proceeds, before expenses, to us(1)	$	24.2125	$	29,055,000


	*Joint Book-Running Managers*
Keefe, Bruyette & Woods, Inc. *A Stifel Company*		Sandler O’Neill + Partners, L.P.

	*Lead Manager* Janney Montgomery Scott LLC

	*Co-Manager* Ladenburg Thalmann


PROSPECTUS SUPPLEMENT SUMMARY			S-i

SUMMARY CONDENSED CONSOLIDATED FINANCIAL DATA			S-6

FORWARD-LOOKING STATEMENTS			S-9

RISK FACTORS			S-10

USE OF PROCEEDS			S-29

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS			S-30

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			S-32

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			S-55

OUR BUSINESS			S-57

GOVERNMENT REGULATION			S-67

PROPERTIES			S-73

CAPITALIZATION			S-74

DESCRIPTION OF THE NOTES			S-75

DESCRIPTION OF OTHER INDEBTEDNESS			S-86

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS			S-90

UNDERWRITING			S-95

LEGAL MATTERS			S-98

EXPERTS			S-98

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			S-99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			S-105


PROSPECTUS SUMMARY			1

AVAILABLE INFORMATION			6

FEES AND EXPENSES			7

SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA			9

USE OF PROCEEDS			12

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS			13

RISK FACTORS			15

FORWARD-LOOKING STATEMENTS			37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			38

SENIOR SECURITIES			70

BUSINESS			71

PORTFOLIO COMPANIES			82

DETERMINATION OF NET ASSET VALUE			86

MANAGEMENT			87

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS			111

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			114

DIVIDEND REINVESTMENT PLAN			115

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS			117

GOVERNMENT REGULATION			124

DESCRIPTION OF OUR CAPITAL STOCK			131

DESCRIPTION OF OUR PREFERRED STOCK			135

DESCRIPTION OF OUR DEBT SECURITIES			136

DESCRIPTION OF OUR SUBSCRIPTION RIGHTS			149

DESCRIPTION OF OUR WARRANTS			151

PLAN OF DISTRIBUTION			153

LEGAL MATTERS			154

EXPERTS			154

CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND REGISTRAR			154

BROKERAGE ALLOCATION AND OTHER PRACTICES			154

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			F-2

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			F-8

MEDALLION BANK FINANCIAL STATEMENTS			F-58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			F-59

NOTES TO FINANCIAL STATEMENTS			F-64

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS			F-80

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS			F-86


							Premium			(Discount)
	High		Low		Net Asset Value		High Price to Net Asset Value			Low Price to Net Asset Value
2016
First Quarter through April 12	$	9.90	$	6.11		*		*			*
2015
Fourth Quarter	$	8.76	$	6.36	$	11.42		(23	)%		(44	)%
Third Quarter		9.23		6.17		11.37		(19	)		(46	)
Second Quarter		11.01		8.35		11.26		(2	)		(26	)
First Quarter		10.80		9.06		11.16		(3	)		(19	)
2014
Fourth Quarter	$	11.84	$	9.70	$	11.16		6	%		(13	)%
Third Quarter		12.73		11.14		11.05		15			1
Second Quarter		14.23		11.58		11.01		29			5
First Quarter		14.56		13.08		10.95		33			19


	December 31, 2015						December 31, 2014						December 31, 2013
	Interest			Investment			Interest			Investment			Interest			Investment
(Dollars in thousands)	Rate ⁽¹⁾			Balances			Rate ⁽¹⁾			Balances			Rate ⁽¹⁾			Balances
Medallion loans
New York		3.72	%	$	213,356			3.60	%	$	213,099			3.52	%	$	202,954
Chicago		4.87			39,406			4.97			39,280			4.94			42,175
Boston		4.63			26,436			4.69			27,277			4.91			23,622
Newark		5.26			24,585			5.28			25,043			5.58			21,681
Cambridge		4.64			6,607			4.80			6,006			5.06			6,008
Other		7.27			1,043			6.59			814			6.52			1,178

Total medallion loans		4.09			311,433			4.03			311,519			4.02			297,618

Deferred loan acquisition costs					413						375						243
Unrealized depreciation on loans					(3,438	)					—						—

Net medallion loans				$	308,408					$	311,894					$	297,861

Commercial loans
Secured mezzanine		13.59	%	$	67,849			12.88	%	$	55,059			11.69	%	$	46,100
Asset based		5.82			3,750			5.82			3,633			5.32			7,803
Other secured commercial		10.68			12,622			9.91			15,506			9.89			13,336

Total commercial loans		12.80			84,221			11.91			74,198			10.60			67,239

Deferred loan acquisition income					(87	)					(100	)					(79	)
Unrealized depreciation on loans					(2,239	)					(2,949	)					(6,992	)

Net commercial loans				$	81,895					$	71,149					$	60,168

Investment in Medallion Bank and other controlled subsidiaries, net		12.74	%	$	141,273			11.44	%	$	131,150			11.13	%	$	107,809

Unrealized appreciation on subsidiary investments					18,640						5,698						814

Investment in Medallion Bank and other controlled subsidiaries				$	159,913					$	136,848					$	108,623

Equity investments		0.72	%	$	4,277			0.86	%	$	6,102			0.86	%	$	6,124

Unrealized appreciation on equities					2,582						1,608						381

Net equity investments				$	6,859					$	7,710					$	6,505

Investment securities		0.35	%	$	49,902			—	%	$	—			—	%	$	—

Unrealized depreciation on investment securities					(18	)					—						—

Net investment securities				$	49,884					$	—					$	—

Investments at cost ⁽²⁾		7.06	%	$	591,106			6.97	%	$	522,969			6.51	%	$	478,790

Deferred loan acquisition costs					326						275						164
Unrealized appreciation on controlled subsidiaries, equity investments, and investment securities					21,204						7,306						1,195
Unrealized depreciation on loans					(5,677	)					(2,949	)					(6,992	)

Net investments				$	606,959					$	527,601					$	473,157

Medallion Bank investments
Consumer loans		14.06	%	$	626,132			14.71	%	$	478,027			15.67	%	$	353,355
Medallion loans		3.84			338,285			3.84			366,397			3.77			349,015
Commercial loans		5.23			44,634			4.68			44,499			4.91			53,786
Investment securities		2.30			35,713			2.53			27,376			2.47			24,925


(Dollars in thousands)	The Company			Medallion Bank			Total
Loans outstanding	$	258		$	1,953		$	2,211
Loans charged off ⁽¹⁾		(258	)		(1,953	)		(2,211	)
Valuation allowance		—			—			—

Net loans outstanding		—			—			—

Other receivables		590			11,062			11,652
Valuation allowance		(236	)		(4,425	)		(4,661	)


(Dollars in thousands)	Medallion Loans			Commercial Loans			Investment in Subsidiaries			Equity Investments			Investment Securities			Investments Other Than Securities			Total
Balance December 31, 2012	$	—		($	7,844	)	$	—		$	44		$	—		$	33,757		$	25,957
Net change in unrealized
Appreciation on investments		—			—			814			820			—			6,815			8,449
Depreciation on investments		—			(129	)		—			(376	)		—			(56	)		(561	)
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments		—			—			—			—			—			—			—
Losses on investments		—			397			—			365			—			—			762
Other		—			584			—			(472	)		—			(112	)		—

Balance December 31, 2013		—			(6,992	)		814			381			—			40,404			34,607
Net change in unrealized
Appreciation on investments		—			—			4,884			195			—			(2,900	)		2,179
Depreciation on investments		—			(1,365	)		—			358			—			1,141			134
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments		—			—			—			—			—			—			—
Losses on investments		—			5,408			—			674			—			—			6,082

Balance December 31, 2014		—			(2,949	)		5,698			1,608			—			38,645			43,002
Net change in unrealized
Appreciation on investments		—			—			18,132			1,141			—			(9,621	)		9,652
Depreciation on investments		(3,568	)		(176	)		586			(1,426	)		(18	)		(68	)		(4,670	)
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments		—			—			(4,809	)		(9	)		—			—			(4,818	)
Losses on investments		130			886			—			301						—			1,317
Other⁽¹⁾		—			—			(967	)		967			—			—			—

Balance December 31, 2015	($	3,438	)	($	2,239	)	$	18,640		$	2,582		($	18	)	$	28,956		$	44,483


(Dollars in thousands)	Interest Expense		Average Balance		Average Borrowing Costs
December 31, 2015
Revolving lines of credit	$	2,413	$	122,482		1.97	%
Notes payable to banks		3,247		124,666		2.60
SBA debentures		2,776		68,018		4.08
Preferred securities		812		33,000		2.46
Margin loans		174		13,572		1.28

Total	$	9,422	$	361,738		2.60

Medallion Bank borrowings		9,205		851,474		1.08

Total managed borrowings	$	18,627	$	1,213,212		1.54

December 31, 2014
Revolving lines of credit	$	2,459	$	127,115		1.93	%
Notes payable to banks		2,663		97,012		2.75
SBA debentures		2,628		59,715		4.40
Preferred securities		793		33,000		2.40

Total	$	8,543	$	316,842		2.70

Medallion Bank borrowings		7,008		755,163		0.93

Total managed borrowings	$	15,551	$	1,072,005		1.45

December 31, 2013
Revolving lines of credit	$	2,489	$	152,686		1.63	%
Notes payable to banks		2,255		70,960		3.18
SBA debentures		2,810		59,802		4.70
Preferred securities		807		33,000		2.44

Total	$	8,361	$	316,448		2.64

Medallion Bank borrowings		5,271		639,016		0.83

Total managed borrowings	$	13,632	$	955,464		1.43


	December 31, 2015 Cumulative Rate Gap⁽¹⁾
(Dollars in thousands)	Less Than 1 Year			More Than 1 and Less Than 2 Years			More Than 2 and Less Than 3 Years		More Than 3 and Less Than 4 Years		More Than 4 and Less Than 5 Years		More Than 5 and Less Than 6 Years			Thereafter			Total
Earning assets
Floating-rate	$	3,750		$	—		$	—	$	—	$	—	$	—		$	—		$	3,750
Adjustable rate		5,439			—			3,518		—		—		—			—			8,957
Fixed-rate		183,344			134,862			62,963		19,453		23,249		4,189			4,789			432,849
Cash		30,912			—			—		—		—		—			—			30,912

Total earning assets	$	223,445		$	134,862		$	66,481	$	19,453	$	23,249	$	4,189		$	4,789		$	476,468

Interest bearing liabilities
Revolving lines of credit	$	129,518		$	—		$	—	$	—	$	—	$	—		$	—		$	129,518
Notes payable to banks		122,167			180			42		—		40		—			—			122,429
SBA debentures		8,500			—			—		3,000		—		15,985			47,000			74,485
Preferred securities		33,000			—			—		—		—		—			—			33,000
Margin loan		45,108			—			—		—		—		—			—			45,108

Total liabilities	$	338,293		$	180		$	42	$	3,000	$	40	$	15,985		$	47,000		$	404,540

Interest rate gap	($	114,848	)	$	134,682		$	66,439	$	16,453	$	23,209	($	11,796	)	($	42,211	)	$	71,928

Cumulative interest rate gap ⁽²⁾	($	114,848	)	$	19,834		$	86,273	$	102,726	$	125,935	$	114,139		$	71,928			—

December 31, 2014 ⁽²⁾	($	160,108	)	($	47,283	)	$	73,765	$	108,360	$	124,790	$	131,736		$	84,006
December 31, 2013 ⁽²⁾	($	143,126	)	($	72,980	)	$	78,325	$	122,575	$	146,584	$	143,584		$	102,071


(Dollars in thousands)	Balance		Percentage			Rate ⁽¹⁾
Revolving lines of credit	$	129,518		32	%		2.05	%
Notes payable to banks		122,429		31			2.60
SBA debentures		74,485		18			3.52
Margin loans		45,108		11			1.48
Preferred securities		33,000		8			2.58

Total outstanding debt	$	404,540		100	%		2.47

Deposits and other borrowings at Medallion Bank		908,896		—			1.04	%

Total outstanding debt, including Medallion Bank	$	1,313,436		—			1.48


	Payments due by period
(Dollars in thousands)	Less than 1 year		1 – 2 years		2 – 3 years		3 – 4 years		4 – 5 years		More than 5 years		Total
Revolving lines of credit	$	129,518	$	—	$	—	$	—	$	—	$	—	$	129,518
Notes payable to banks		122,167		180		42		—		40		—		122,429
SBA debentures		—		—		—		3,000		—		71,485		74,485
Margin loans		45,108		—		—		—		—		—		45,108
Preferred securities		—		—		—		—		—		33,000		33,000

Total	$	296,793	$	180	$	42	$	3,000	$	40	$	104,485	$	404,540

Deposits and other borrowings at Medallion Bank		393,359		265,336		164,721		72,393		13,087		—		908,896

Total, including Medallion Bank	$	690,152	$	265,516	$	164,763	$	75,393	$	13,127	$	104,485	$	1,313,436


(Dollars in thousands)	The Company			MFC			MCI		MBC		FSVC			MB		12/31/2015 Total			12/31/2014
Cash	$	10,850		$	10,009		$	6,401	$	1,825	$	1,827			$—	$	30,912		$	47,083
Bank loans		102,103			31,644			—		—		250			—		133,997		$	179,016
Amounts undisbursed		4,625	⁽¹⁾		6,943			—		—		—			—		11,568			54,500
Amounts outstanding		97,478			24,701			—		—		250			—		122,429			124,516
Average interest rate		2.44	%		3.19	%		—		—		6.53	%		—		2.60	%		2.51	%
Maturity		3/16-11/16			2/16-12/20			—		—		3/16-11/18			—		2/16-12/20			1/15-4/17
Preferred securities		33,000			—			—		—		—			—		33,000		$	33,000
Average interest rate		2.58	%		—			—		—		—			—		2.58	%		2.36	%
Maturity		9/37			—			—		—		—			—		9/37			9/37
Lines of credit		—			135,000			—		—		—			—		135,000		$	150,000
Amounts undisbursed		—			5,482			—		—		—			—		5,482			27,206
Amounts outstanding		—			129,518			—		—		—			—		129,518			122,794
Average interest rate		—			2.05	%		—		—		—			—		2.05	%		1.84	%
Maturity		—			12/16			—		—		—			—		12/16			12/16
Margin loan		45,108			—			—		—		—			—		45,108			—
Average interest rate		1.48	%		—			—		—		—			—		1.48	%		—
Maturity		N/A			—			—		—		—			—		N/A			—
SBA debentures		—			—			44,000		—		33,485			—		77,485		$	68,485
Amounts undisbursed		—			—			3,000		—		—			—		3,000			—
Amounts outstanding		—			—			41,000		—		33,485			—		74,485			68,485


(Dollars in thousands)	On-Balance Sheet		Off-Balance Sheet⁽¹⁾			Total Managed Investments
Medallion loans	$	308,408	$	332,496		$	640,904
Commercial loans		81,895		43,987			125,882
Consumer loans		—		619,887			619,887
Investments in Medallion Bank and other controlled subsidiaries		159,913		(137,298	)		22,615
Investment securities		49,884		35,524			85,408
Equity investments		6,859		—			6,859

Net investment portfolio	$	606,959	$	894,596		$	1,501,555


(Dollars in thousands)	# of Loans		% of Medallion Loan Portfolio ⁽¹⁾			Average Interest Rate ⁽²⁾			Principal Balance
Managed medallion loans
New York		774		74	%		3.61	%	$	479,588
Chicago		266		14			4.92			92,704
Newark		146		5			5.23			31,659
Boston		66		4			4.58			29,660
Cambridge		22		2			4.40			12,302
Other		44		1			7.80			3,805

Total managed medallion loans		1,318		100	%		3.96			649,718

Deferred loan acquisition costs										760
Unrealized depreciation on loans										(9,574	)

Net managed medallion loans									$	640,904


(Dollars in thousands)	# of Loans		% of Commercial Loan Portfolio ⁽¹⁾			Average Interest Rate ⁽²⁾			Principal Balance
Managed commercial loans
Secured mezzanine		33		53	%		13.59	%	$	67,849
Asset-based		49		34			5.31			44,620
Other secured commercial		89		13			9.34			16,386

Total managed commercial loans		171		100	%		10.18			128,855

Deferred loan acquisition income										(116	)
Unrealized depreciation on loans										(2,857	)

Net managed commercial loans									$	125,882


Consolidated sources of funds (Dollars in thousands)	Total
Cash	$	30,912
Bank loans	$	133,997
Amounts undisbursed		11,568
Amounts outstanding		122,429
Average interest rate		2.60	%
Maturity		2/16-12/20
Preferred securities	$	33,000
Average interest rate		2.58	%
Maturity		9/37
Lines of credit	$	135,000
Amounts undisbursed		5,482
Amounts outstanding		129,518
Average interest rate		2.05	%
Maturity		12/16
Margin loans	$	45,108
Average interest rate		1.48	%
Maturity		N/A
SBA debentures	$	77,485
Amounts undisbursed		3,000
Amounts outstanding		74,485
Average interest rate		3.52	%
Maturity		3/19-3/26

Total cash and amounts remaining undisbursed under credit facilities	$	50,962

Total debt outstanding	$	404,540

Medallion Bank sources of funds
Cash	$	23,094
Deposits and other borrowings		908,896
Average interest rate		1.04	%
Maturity		1/16-12/20

Total cash and amounts remaining undisbursed under credit facilities, including Medallion Bank	$	74,056

Total debt outstanding, including Medallion Bank	$	1,313,436


Year	Total Amount Outstanding Exclusive of Treasury Securities⁽¹⁾			Asset Coverage Per Unit⁽²⁾		Involuntary Liquidating Preference Per Unit⁽³⁾		Average Market Value Per Unit (Exclude Bank Loans)⁽⁴⁾
2006		8,462,000			21.05		—		N/A
2007		50,848,000			4.39		—		N/A
2008		55,224,000			4.17		—		N/A
2009		80,306,000			3.03		—		N/A
2010		82,815,000			2.96		—		N/A
2011		92,557,000			2.85		—		N/A
2012		87,922,000			3.46		—		N/A
2013		108,654,000	⁽⁵⁾		3.52		—		N/A
2014		147,823,000	⁽⁵⁾		2.86		—		N/A
2015⁽⁶⁾		198,962,000	⁽⁵⁾		2.40		—		N/A