Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2022

(4) LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table shows the major classification of loans, inclusive of capitalized loan origination costs, as of September 30, 2022 and December 31, 2021.


	September 30, 2022						December 31, 2021
(Dollars in thousands)	Amount			As a Percent of Gross Loans			Amount			As a Percent of Gross Loans
Recreation	$	1,171,819			63	%	$	961,320			65	%
Home improvement		575,210			31			436,772			29
Commercial		93,735			5			76,696			5
Medallion		13,973			1			14,046			1
Strategic partnership		773		*				90		*
Total gross loans		1,855,510			100	%		1,488,924			100	%
Allowance for loan losses		(61,535	)					(50,166	)
Total net loans	$	1,793,975					$	1,438,758

(*) Less than 1%

The following tables show the activity of the gross loans for the three and nine months ended September 30, 2022 and 2021.


Three Months Ended September 30, 2022 (Dollars in thousands)	Recreation			Home Improvement			Commercial			Medallion			Strategic Partnership			Total
Gross loans – June 30, 2022	$	1,096,670		$	526,278		$	96,928		$	14,152		$	593		$	1,734,621
Loan originations		149,151			100,451			4,500			152			19,428			273,682
Principal payments, sales, maturities, and recoveries		(66,338	)		(49,630	)		(4,017	)		(331	)		(19,248	)		(139,564	)
Charge-offs		(7,534	)		(1,780	)		(3,857	)		—			—			(13,171	)
Transfer to loan collateral in process of foreclosure, net		(2,862	)		—			—			—			—			(2,862	)
Amortization of origination costs		(3,008	)		494			—			—			—			(2,514	)
Amortization of loan premium		(60	)		(90	)		—			—			—			(150	)
FASB origination costs, net		5,800			(513	)		—			—			—			5,287
Paid-in-kind interest		—			—			181			—			—			181
Gross loans – September 30, 2022	$	1,171,819		$	575,210		$	93,735		$	13,973		$	773		$	1,855,510

Nine Months Ended September 30, 2022 (Dollars in thousands)	Recreation			Home Improvement			Commercial			Medallion			Strategic Partnership			Total
Gross loans – December 31, 2021	$	961,320		$	436,772		$	76,696		$	14,046		$	90		$	1,488,924
Loan originations		433,764			295,443			28,172			396			34,267			792,042
Principal payments, sales, maturities, and recoveries		(204,568	)		(152,800	)		(6,220	)		(126	)		(33,584	)		(397,298	)
Charge-offs		(17,675	)		(3,948	)		(5,441	)		(75	)		—			(27,139	)
Transfer to loan collateral in process of foreclosure, net		(8,391	)		—			—			(268	)		—			(8,659	)
Amortization of origination costs		(8,378	)		1,194			—			—			—			(7,184	)
Amortization of loan premium		(180	)		(270	)		—			—			—			(450	)
FASB origination costs, net		15,927			(1,181	)		—			—			—			14,746
Paid-in-kind interest		—			—			528			—			—			528
Gross loans – September 30, 2022	$	1,171,819		$	575,210		$	93,735		$	13,973		$	773		$	1,855,510


Three Months Ended September 30, 2021 (Dollars in thousands)	Recreation			Home Improvement			Commercial			Medallion			Strategic Partnership			Total
Gross loans – June 30, 2021	$	886,206		$	368,257		$	69,520		$	16,514		$	70		$	1,340,567
Loan originations		118,407			68,692			5,700			—			2,969			195,768
Principal payments, sales, maturities, and recoveries		(70,350	)		(38,571	)		(3,332	)		(1,449	)		(2,944	)		(116,646	)
Charge-offs		335			239			—			265			—			839
Transfer to loan collateral in process of foreclosure, net		(2,085	)		—			—			(397	)		—			(2,482	)
Amortization of origination costs		(2,532	)		386			—			—			—			(2,146	)
Amortization of loan premium		(60	)		(90	)		—			—			—			(150	)
FASB origination costs, net		3,869			(139	)		12			1			—			3,743
Paid-in-kind interest		—			—			188			—			—			188
Gross loans – September 30, 2021	$	933,790		$	398,774		$	72,088		$	14,934		$	95		$	1,419,681

Nine Months Ended September 30, 2021 (Dollars in thousands)	Recreation			Home Improvement			Commercial			Medallion			Strategic Partnership			Total
Gross loans – December 31, 2020	$	792,686		$	334,033		$	65,327		$	37,768		$	24		$	1,229,838
Loan originations		346,724			179,743			20,916			—			7,339			554,722
Principal payments, sales, maturities, and recoveries		(199,449	)		(115,369	)		(14,861	)		(5,663	)		(7,268	)		(342,610	)
Charge-offs		(1,334	)		(237	)		—			(10,529	)		—			(12,100	)
Transfer to loan collateral in process of foreclosure, net		(8,118	)		—			—			(5,027	)		—			(13,145	)
Amortization of origination costs		(7,171	)		1,293			12			(2	)		—			(5,868	)
Amortization of loan premium		(161	)		(256	)		—			(1,615	)		—			(2,032	)
FASB origination costs, net		10,613			(433	)		12			2			—			10,194
Paid-in-kind interest		—			—			682			—			—			682
Gross loans – September 30, 2021	$	933,790		$	398,774		$	72,088		$	14,934		$	95		$	1,419,681

The following table sets forth the activity in the allowance for loan losses for the three and nine months ended September 30, 2022 and 2021.


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2022			2021			2022			2021
Allowance for loan losses – beginning balance	$	59,152		$	46,946		$	50,166		$	57,548
Charge-offs
Recreation		(7,534	)		(2,313	)		(17,675	)		(10,038	)
Home improvement		(1,780	)		(523	)		(3,948	)		(1,990	)
Commercial		(3,857	)		—			(5,441	)		—
Medallion		—			(1,142	)		(75	)		(15,047	)
Total charge-offs		(13,171	)		(3,978	)		(27,139	)		(27,075	)
Recoveries
Recreation		3,348			2,648			10,473			8,704
Home improvement		713			763			1,857			1,753
Commercial		—			—			47			—
Medallion		1,446			1,406			5,085			4,518
Total recoveries		5,507			4,817			17,462			14,975
Net recoveries (charge-offs) (1)		(7,664	)		839			(9,677	)		(12,100	)
Provision (benefit) for loan losses		10,047			(337	)		21,046			2,000
Allowance for loan losses – ending balance (2)	$	61,535		$	47,448		$	61,535		$	47,448

(1)

As of September 30, 2022, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the medallion loan portfolio were $252.5 million, some of which may represent collection opportunities for the Company.

(2)

As of September 30, 2022 and September 30, 2021, there were no allowance for loan losses and net charge-offs related to the strategic partnership loans.

The following tables set forth the allowance for loan losses by type as of September 30, 2022 and December 31, 2021.


September 30, 2022 (Dollars in thousands)	Amount		Percentage of Allowance			Allowance as a Percent of Loan Category			Allowance as a Percent of Nonaccrual
Recreation	$	40,768		66	%		3.48	%		132.45	%
Home improvement		10,208		17			1.77			33.17
Commercial		963		1			1.03			3.13
Medallion		9,596		16			68.68			31.18
Total	$	61,535		100	%		3.32	%		199.93	%


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

The following table presents total nonaccrual loans and foregone interest. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.


(Dollars in thousands)	September 30, 2022			December 31, 2021
Total nonaccrual loans	$	30,780		$	35,571
Interest foregone quarter to date		504			466
Amount of foregone interest applied to principal in the quarter		101			114
Interest foregone year to date		1,670			1,620
Amount of foregone interest applied to principal for the year		301			432
Interest foregone life-to-date		3,251			3,623
Amount of foregone interest applied to principal life-to-date		1,178			942
Percentage of nonaccrual loans to gross loan portfolio		1.7	%		2.4	%
Percentage of allowance for loan losses to nonaccrual loans		199.9	%		141.0	%

The following tables present the performance status of loans as of September 30, 2022 and December 31, 2021.


September 30, 2022 (Dollars in thousands)	Performing		Nonperforming		Total		Percentage of Nonperforming to Total
Recreation	$	1,164,526	$	7,293	$	1,171,819		0.62	%
Home improvement		574,722		488		575,210		0.08
Commercial		84,340		9,395		93,735		10.02
Medallion		—		13,973		13,973		100.00
Strategic partnership		773		—		773		—
Total	$	1,824,361	$	31,149	$	1,855,510		1.68	%

December 31, 2021 (Dollars in thousands)	Performing		Nonperforming		Total		Percentage of Nonperforming to Total
Recreation	$	955,763	$	5,557	$	961,320		0.58	%
Home improvement		436,640		132		436,772		0.03
Commercial		60,366		16,330		76,696		21.29
Medallion		—		14,046		14,046		100.00
Strategic partnership		90		—		90		—
Total	$	1,452,859	$	36,065	$	1,488,924		2.42	%

For those loans aged under 90 days past due, there is a possibility that their delinquency status will continue to deteriorate and they will subsequently be placed on nonaccrual status and be reserved for, and as such, deemed nonperforming.

The following tables provide additional information on attributes of the nonperforming loan portfolio as of September 30, 2022 and December 31, 2021, all of which had an allowance recorded against the principal balance.


	September 30, 2022						December 31, 2021
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With an allowance recorded
Recreation	$	7,293	$	7,293	$	251	$	5,557	$	5,557	$	188
Home improvement		488		488		9		132		132		2
Commercial		9,395		9,469		963		16,330		16,360		1,141
Medallion		13,973		15,077		9,596		14,046		14,958		8,837
Total nonperforming loans with an allowance	$	31,149	$	32,327	$	10,819	$	36,065	$	37,007	$	10,168


	Three Months Ended September 30,
	2022				2021
(Dollars in thousands)	Average Investment Recorded		Interest Income Recognized		Average Investment Recorded		Interest Income Recognized
With an allowance recorded
Recreation	$	6,903	$	114	$	4,423	$	148
Home improvement		491		—		161		—
Commercial		13,577		—		16,531		—
Medallion		16,128		—		16,941		—
Total nonperforming loans with an allowance	$	37,099	$	114	$	38,056	$	148

	Nine Months Ended September 30,
	2022				2021
(Dollars in thousands)	Average Investment Recorded		Interest Income Recognized		Average Investment Recorded		Interest Income Recognized
With an allowance recorded
Recreation	$	6,895	$	303	$	4,641	$	425
Home improvement		459		—		151		—
Commercial		13,494		—		16,926		—
Medallion		16,326		—		17,101		—
Total nonperforming loans with an allowance	$	37,174	$	303	$	38,819	$	425

The following tables show the aging of all loans as of September 30, 2022 and December 31, 2021.


September 30, 2022	Days Past Due												Recorded Investment 90 Days and
(Dollars in thousands)	30-59		60-89		90 +		Total		Current		Total (1)		Accruing
Recreation	$	23,901	$	9,306	$	5,090	$	38,297	$	1,096,692	$	1,134,989	$	—
Home improvement		2,149		882		491		3,522		574,104		577,626		—
Commercial		—		—		74		74		93,660		93,734		—
Medallion		654		—		313		967		13,006		13,973		—
Strategic partnership		—		—		—		—		773		773		—
Total	$	26,704	$	10,188	$	5,968	$	42,860	$	1,778,235	$	1,821,095	$	—

(1)

Excludes loan premiums of $0.1 million and $34.3 million of capitalized loan origination costs.


December 31, 2021	Days Past Due												Recorded Investment 90 Days and
(Dollars in thousands)	30-59		60-89		90 +		Total		Current		Total (1)		Accruing
Recreation	$	20,037	$	6,569	$	3,818	$	30,424	$	901,435	$	931,859	$	—
Home improvement		1,517		479		132		2,128		436,803		438,931		—
Commercial		1,795		—		74		1,869		74,827		76,696		—
Medallion		215		7,125		—		7,340		6,706		14,046		—
Strategic partnership		—		—		—		—		90		90		—
Total	$	23,564	$	14,173	$	4,024	$	41,761	$	1,419,861	$	1,461,622	$	—

(1)

Excludes loan premiums of $0.5 million and $26.8 million of capitalized loan origination costs.

The Company estimates that the weighted average loan-to-value ratio of the medallion loans was approximately 330% and 295% as of September 30, 2022 and December 31, 2021.

The following table shows the TDRs which the Company entered into during the three and nine months ended September 30, 2022.


(Dollars in thousands)	Number of Loans		Pre- Modification Investment		Post- Modification Investment
Three months ended September 30, 2022
Recreation loans		34	$	549	$	549
Medallion loans		—		—		—
Nine months ended September 30, 2022
Recreation loans		56	$	825	$	825
Medallion loans		2		252		252

As of September 30, 2022, no medallion or commercial loans modified as TDRs in the previous 12 months were in default. As of September 30, 2022, 37 recreation loans modified as TDRs were in default and had an investment value of $0.5 million.

The following table shows the TDRs which the Company entered into during the three and nine months ended September 30, 2021.


(Dollars in thousands)	Number of Loans		Pre- Modification Investment		Post- Modification Investment
Three months ended September 30, 2021
Recreation loans		8	$	94	$	55
Medallion loans		1		77		77
Nine months ended September 30, 2021
Recreation loans		47	$	568	$	525
Medallion loans		11		3,071		3,071

As of September 30, 2021, 37 medallion loans modified as TDRs in the previous 12 months were in default and had an investment value of $0.5 million. As of September 30, 2021, 37 recreation loans modified as TDRs in the previous 12 months were in default and had an investment value of $0.4 million.

The following tables show the activity of loan collateral in process of foreclosure, which relate only to the recreation and medallion loans, for the three and nine months ended September 30, 2022 and 2021.


Three Months Ended September 30, 2022 (Dollars in thousands)	Recreation			Medallion			Total
Loan collateral in process of foreclosure – June 30, 2022	$	878		$	26,096		$	26,974
Transfer from loans, net		2,862			—			2,862
Sales		(1,399	)		(544	)		(1,943	)
Cash payments received		—			(2,243	)		(2,243	)
Collateral valuation adjustments		(1,225	)		(94	)		(1,319	)
Loan collateral in process of foreclosure – September 30, 2022	$	1,116		$	23,215		$	24,331

Nine Months Ended September 30, 2022 (Dollars in thousands)	Recreation			Medallion			Total
Loan collateral in process of foreclosure – December 31, 2021	$	1,720		$	35,710		$	37,430
Transfer from loans, net		8,391			268			8,659
Sales		(5,797	)		(2,659	)		(8,456	)
Cash payments received		—			(9,496	)		(9,496	)
Collateral valuation adjustments		(3,198	)		(608	)		(3,806	)
Loan collateral in process of foreclosure – September 30, 2022	$	1,116		$	23,215		$	24,331


Three Months Ended September 30, 2021 (Dollars in thousands)	Recreation			Medallion			Total
Loan collateral in process of foreclosure – June 30, 2021	$	882		$	48,157		$	49,039
Transfer from loans, net		2,085			397			2,482
Sales		(1,554	)		(1,640	)		(3,194	)
Cash payments received		—			(4,525	)		(4,525	)
Collateral valuation adjustments		(640	)		(618	)		(1,258	)
Loan collateral in process of foreclosure – September 30, 2021	$	773		$	41,771		$	42,544

Nine Months Ended September 30, 2021 (Dollars in thousands)	Recreation			Medallion			Total
Loan collateral in process of foreclosure – December 31, 2020	$	1,432		$	53,128		$	54,560
Transfer from loans, net		8,118			5,027			13,145
Sales		(5,842	)		(1,871	)		(7,713	)
Cash payments received		—			(8,948	)		(8,948	)
Collateral valuation adjustments		(2,935	)		(5,565	)		(8,500	)
Loan collateral in process of foreclosure – September 30, 2021	$	773		$	41,771		$	42,544

As of September 30, 2022, medallion loans in the process of foreclosure included 459 medallions in the New York City market, 335 medallions in the Chicago market, 57 medallions in the Newark market, and 40 medallions in other markets.