Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2022

(4) LOANS AND ALLOWANCE FOR LOAN LOSSES

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


	As of December 31,
	2022						2021
(Dollars in thousands)	Amount			As a Percent of Gross Loans			Amount			As a Percent of Gross Loans
Recreation	$	1,183,512			62	%	$	961,320			65	%
Home improvement		626,399			33			436,772			29
Commercial		92,899			5			76,696			5
Medallion		13,571			1			14,046			1
Strategic partnership		572		*				90		*
Total gross loans		1,916,953			100	%		1,488,924			100	%
Allowance for loan losses		(63,845	)					(50,166	)
Total net loans	$	1,853,108					$	1,438,758

(*) Less than 1%.

The following tables show the activity of the gross loans for the years ended December 31, 2022 and 2021.


(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		513,062			392,543			28,172			605			49,526			983,908
Principal payments, sales, maturities, and recoveries		(259,326	)		(196,203	)		(6,610	)		(419	)		(49,044	)		(511,602	)
Charge-offs		(27,055	)		(6,393	)		(6,083	)		(314	)		—			(39,845	)
Transfer to loan collateral in process of foreclosure, net		(12,444	)		—			—			(347	)		—			(12,791	)
Amortization of origination costs		(10,470	)		1,763			—			—			—			(8,707	)
Amortization of loan premium		(213	)		(322	)		—			—			—			(535	)
FASB origination costs, net		18,638			(1,761	)		—			—			—			16,877
Paid-in-kind interest		—			—			724			—			—			724
Gross loans – December 31, 2022	$	1,183,512		$	626,399		$	92,899		$	13,571		$	572		$	1,916,953


(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		441,921			258,038			36,415			—			10,997			747,371
Principal payments, sales, maturities, and recoveries		(252,293	)		(153,044	)		(25,873	)		(1,363	)		(10,931	)		(443,504	)
Charge-offs		(14,712	)		(2,949	)		—			(15,287	)		—			(32,948	)
Transfer to loan collateral in process of foreclosure, net		(10,431	)		—			—			(5,457	)		—			(15,888	)
Amortization of origination costs		(9,678	)		1,671			13			(2	)		—			(7,996	)
Amortization of loan premium		(221	)		(346	)		—			(1,615	)		—			(2,182	)
FASB origination costs, net		14,048			(631	)		—			2			—			13,419
Paid-in-kind interest		—			—			814			—			—			814
Gross loans – December 31, 2021	$	961,320		$	436,772		$	76,696		$	14,046		$	90		$	1,488,924

The following table sets forth the activity in the allowance for loan losses for the years ended December 31, 2022 and 2021.


	December 31,
(Dollars in thousands)	2022			2021
Allowance for loan losses – beginning balance	$	50,166		$	57,548
Charge-offs
Recreation		(27,055	)		(14,712	)
Home improvement		(6,393	)		(2,949	)
Commercial		(6,083	)		—
Medallion		(314	)		(15,287	)
Total charge-offs		(39,845	)		(32,948	)
Recoveries
Recreation		13,785			12,131
Home improvement		2,761			2,398
Commercial		47			—
Medallion		6,872			6,415
Total recoveries		23,465			20,944
Net charge-offs (1)		(16,380	)		(12,004	)
Provision for loan losses		30,059			4,622
Allowance for loan losses – ending balance (2)	$	63,845		$	50,166

(1)

As of December 31, 2022, cumulative charge-offs of loans and loan collateral in process of foreclosure in the medallion loan portfolio were $244.2 million, some of which represent collection opportunities for the Company.

(2)

As of December 31, 2022 and 2021, there was 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 December 31, 2022 and 2021.


December 31, 2022 (Dollars in thousands)	Amount		Percentage of Allowance			Allowance as a Percent of Loan Category			Allowance as a Percent of Nonaccrual
Recreation	$	41,966		66	%		3.55	%		130.60	%
Home improvement		11,340		18			1.81			35.29
Commercial		1,049		1			1.13			3.26
Medallion		9,490		15			69.93			29.53
Total	$	63,845		100	%		3.33	%		198.69	%


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, substantially all of which is in the medallion portfolio. The fluctuation in nonaccrual interest foregone is due to past due loans and market conditions.


	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Total nonaccrual loans	$	32,133		$	35,571		$	61,767
Interest foregone for the year		1,267			1,620			3,311
Amount of foregone interest applied to principal for the year		375			432			602
Interest foregone life-to-date		2,419			3,623			5,252
Amount of foregone interest applied to principal life-to-date		1,204			942			792
Percentage of nonaccrual loans to gross loan portfolio		1.7	%		2.4	%		5.0	%
Percentage of allowance for loan losses to nonaccrual loans		198.7	%		141.0	%		93.0	%

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


December 31, 2022 (Dollars in thousands)	Performing		Nonperforming		Total		Percentage of Nonperforming to Total
Recreation	$	1,173,846	$	9,666	$	1,183,512		0.82	%
Home improvement		625,820		579		626,399		0.09
Commercial		84,165		8,734		92,899		9.40
Medallion		—		13,571		13,571		100.00
Strategic partnership		572		—		572		—
Total	$	1,884,403	$	32,550	$	1,916,953		1.70	%

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 December 31, 2022 and 2021, all of which had an allowance recorded against the principal balance.


	December 31,
	2022						2021
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With an allowance recorded
Recreation	$	9,666	$	9,666	$	343	$	5,557	$	5,557	$	188
Home improvement		579		579		10		132		132		2
Commercial		8,734		8,823		963		16,330		16,360		1,141
Medallion		13,571		14,686		9,490		14,046		14,958		8,837
Total nonperforming loans with an allowance	$	32,550	$	33,754	$	10,806	$	36,065	$	37,007	$	10,168


	Year Ended December 31,
	2022				2021
(Dollars in thousands)	Average Investment Recorded		Interest Income Recognized		Average Investment Recorded		Interest Income Recognized
With an allowance recorded
Recreation	$	9,093	$	401	$	5,618	$	515
Home improvement		514		4		108		—
Commercial		13,381		—		16,816		93
Medallion		16,019		—		17,538		—
Total nonperforming loans with an allowance	$	39,007	$	405	$	40,080	$	608

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


December 31, 2022	Days Past Due												Recorded Investment 90 Days and
(Dollars in thousands)	30-59		60-89		90 +		Total		Current		Total (1)		Accruing
Recreation	$	31,781	$	11,877	$	7,365	$	51,023	$	1,095,072	$	1,146,095	$	—
Home improvement		3,266		1,256		579		5,101		623,776		628,877		—
Commercial		—		—		74		74		93,396		93,470		—
Medallion		142		393		885		1,420		12,151		13,571		—
Strategic partnership		—		—		—		—		572		572		—
Total	$	35,189	$	13,526	$	8,903	$	57,618	$	1,824,967	$	1,882,585	$	—

(1)

Excludes $34.9 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 339% and 295% as of December 31, 2022 and 2021.

The following table shows the TDRs which the Company entered into during the year ended December 31, 2022.


(Dollars in thousands)	Number of Loans		Pre- Modification Investment		Post- Modification Investment
Recreation loans		80		1,203		1,203
Medallion loans		2		252		252

As of December 31, 2022, no medallion loans and two commercial loans were modified as TDRs in the previous 12 months. Modified medallion loans and commercial loans had a respective investment value of $0.9 million and $5.3 million. As of December 31, 2022, 63 recreation loans modified as TDRs were in default and had an investment value of $0.9 million.

The following table shows the TDRs which the Company entered into during the year ended December 31, 2021.


(Dollars in thousands)	Number of Loans		Pre- Modification Investment		Post- Modification Investment
Recreation loans		56		668		585
Medallion loans		11		3,071		3,071

As of December 31, 2021, one medallion loan modified as TDRs in the previous 12 months were in default and had an investment value of $0.2 million. As of December 31, 2021, 31 recreation loans modified as TDRs were in default and had an investment value of $0.3 million.

The following tables show the activity of the loan collateral in process of foreclosure, which relates only to the recreation and medallion loans, for the years ended December 31, 2022 and 2021.


Year Ended December 31, 2022 (Dollars in thousands)	Recreation			Medallion(1)			Total
Loan collateral in process of foreclosure – December 31, 2021	$	1,720		$	35,710		$	37,430
Transfer from loans, net		12,444			347			12,791
Sales		(7,707	)		(2,668	)		(10,375	)
Cash payments received		—			(12,289	)		(12,289	)
Collateral valuation adjustments		(5,081	)		(657	)		(5,738	)
Loan collateral in process of foreclosure – December 31, 2022	$	1,376		$	20,443		$	21,819

(1)

As of December 31, 2022, medallion loans in the process of foreclosure included 452 medallions in the New York market, 335 medallions in the Chicago market, 54 medallions in the Newark market, and 39 medallions in various other markets.


Year Ended December 31, 2021 (Dollars in thousands)	Recreation			Medallion(1)			Total
Loan collateral in process of foreclosure – December 31, 2020	$	1,432		$	53,128		$	54,560
Transfer from loans, net		10,431			5,457			15,888
Sales		(6,951	)		(2,928	)		(9,879	)
Cash payments received		—			(14,173	)		(14,173	)
Collateral valuation adjustments		(3,192	)		(5,774	)		(8,966	)
Loan collateral in process of foreclosure – December 31, 2021	$	1,720		$	35,710		$	37,430

(1)

As of December 31, 2021, medallion loans in the process of foreclosure included 516 medallions in the New York market, 335 medallions in the Chicago market, 62 medallions in the Newark market, and 48 medallions in various other markets.