Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2023

(4) LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table shows the major classification of loans, inclusive of capitalized loan origination costs, as of September 30, 2023 and December 31, 2022.


	September 30, 2023						December 31, 2022
(Dollars in thousands)	Amount			As a Percent of Gross Loans			Amount			As a Percent of Gross Loans
Recreation	$	1,346,440			61	%	$	1,183,512			62	%
Home improvement		750,508			34			626,399			33
Commercial		100,322			5			92,899			5
Medallion		3,927		*				13,571			1
Strategic partnership		1,841		*				572		*
Total gross loans		2,203,038			100	%		1,916,953			100	%
Allowance for credit losses		(79,133	)					(63,845	)
Total net loans	$	2,123,905					$	1,853,108

(*) Less than 1%.

The following tables show the activity of the gross loans for the three and nine months ended September 30, 2023 and 2022.


Three Months Ended September 30, 2023 (Dollars in thousands)	Recreation			Home Improvement			Commercial			Medallion			Strategic Partnership			Total
Gross loans – June 30, 2023	$	1,331,114		$	728,468		$	92,637		$	3,448		$	1,331		$	2,156,998
Loan originations		92,603			79,333			8,900			100			36,457			217,393
Principal payments, sales, maturities, and recoveries		(61,885	)		(53,095	)		(1,657	)		(281	)		(35,947	)		(152,865	)
Charge-offs		(11,684	)		(3,890	)		—			—			—			(15,574	)
Transfer to loan collateral in process of foreclosure, net		(4,730	)		—			—			—			—			(4,730	)
Amortization of origination costs		(3,259	)		647			—			—			—			(2,612	)
FASB origination costs, net		4,281			(955	)		—			660			—			3,986
Paid-in-kind interest		—			—			442			—			—			442
Gross loans – September 30, 2023	$	1,346,440		$	750,508		$	100,322		$	3,927		$	1,841		$	2,203,038

Nine Months Ended September 30, 2023 (Dollars in thousands)	Recreation			Home Improvement			Commercial			Medallion			Strategic Partnership			Total
Gross loans – December 31, 2022	$	1,183,512		$	626,399		$	92,899		$	13,571		$	572		$	1,916,953
Loan originations		384,291			291,349			16,650			2,023			96,637			790,950
Principal payments, sales, maturities, and recoveries		(181,565	)		(158,300	)		(9,413	)		(6,207	)		(95,368	)		(450,853	)
Charge-offs		(33,440	)		(8,379	)		(900	)		(3,814	)		—			(46,533	)
Transfer to loan collateral in process of foreclosure, net		(13,078	)		—			—			(2,306	)		—			(15,384	)
Amortization of origination costs		(9,177	)		1,898			—			—			—			(7,279	)
FASB origination costs, net		15,897			(2,459	)		—			660			—			14,098
Paid-in-kind interest		—			—			1,086			—			—			1,086
Gross loans – September 30, 2023	$	1,346,440		$	750,508		$	100,322		$	3,927		$	1,841		$	2,203,038


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

The following table sets forth the activity in the allowance for credit losses for the three and nine months ended September 30, 2023 and 2022.


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2023			2022			2023			2022
Allowance for credit losses – beginning balance (1)	$	74,971		$	59,152		$	63,845		$	50,166
CECL transition amount upon ASU 2016-13 adoption		—			—			13,712			—
Charge-offs
Recreation		(11,684	)		(7,534	)		(33,440	)		(17,675	)
Home improvement		(3,890	)		(1,780	)		(8,379	)		(3,948	)
Commercial		—			(3,857	)		(900	)		(5,441	)
Medallion		—			—			(3,814	)		(75	)
Total charge-offs		(15,574	)		(13,171	)		(46,533	)		(27,139	)
Recoveries
Recreation		2,651			3,348			8,705			10,473
Home improvement		882			713			2,141			1,857
Commercial		—			—			10			47
Medallion		1,671			1,446			10,208			5,085
Total recoveries		5,204			5,507			21,064			17,462
Net charge-offs (2)		(10,370	)		(7,664	)		(25,469	)		(9,677	)
Provision for credit losses		14,532			10,047			27,045			21,046
Allowance for credit losses – ending balance (3)	$	79,133		$	61,535		$	79,133		$	61,535

(1)

Represents allowance prior to the adoption of ASU 2016-13.

(2)

As of September 30, 2023, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the taxi medallion loan portfolio were $201.7 million, some of which may represent collection opportunities for the Company.

(3)

As of September 30, 2023 and September 30, 2022, there were no allowance for credit losses and net charge-offs related to the strategic partnership loans.

With the adoption of ASC 326, the Company also adopted ASU 2022-02, Financial Instruments – Credit Losses, or Topic 326: Troubled Debt Restructurings and Vintage Disclosures. Under this standard, the Company is required to disclose current period gross write-offs, by year of origination, for financing receivables.

The following table sets forth the gross charge-offs for the three months ended September 30, 2023, by the year of origination:


(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Total
Recreation	$	890	$	4,587	$	2,250	$	1,175	$	1,273	$	1,509	$	11,684
Home improvement		964		1,783		733		158		106		146		3,890
Commercial		—		—		—		—		—		—		—
Medallion		—		—		—		—		—		—		—
Total	$	1,854	$	6,370	$	2,983	$	1,333	$	1,379	$	1,655	$	15,574

The following table sets forth the gross charge-offs for the nine months ended September 30, 2023, by the year of origination:


(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Total
Recreation	$	934	$	11,763	$	7,664	$	3,631	$	3,745	$	5,703	$	33,440
Home improvement		1,003		4,235		1,834		459		328		520		8,379
Commercial		—		—		—		—		900		—		900
Medallion		—		—		—		—		—		3,814		3,814
Total	$	1,937	$	15,998	$	9,498	$	4,090	$	4,973	$	10,037	$	46,533

The following tables set forth the allowance for credit losses by type as of September 30, 2023 and December 31, 2022.


September 30, 2023 (Dollars in thousands)	Amount		Percentage of Allowance			Allowance as a Percent of Loan Category			Allowance as a Percent of Nonaccrual
Recreation	$	57,032		72	%		4.24	%		276.21	%
Home improvement		17,300		22			2.31			83.79
Commercial		3,114		4			3.10			15.08
Medallion		1,687		2			42.97			8.17
Total	$	79,133		100	%		3.59	%		383.25	%


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	%

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, 2023			December 31, 2022
Total nonaccrual loans	$	20,648		$	32,133
Interest foregone quarter to date		190			231
Amount of foregone interest applied to principal in the quarter		49			94
Interest foregone year to date		618			1,267
Amount of foregone interest applied to principal for the year		183			375
Interest foregone life-to-date		1,837			2,419
Amount of foregone interest applied to principal life-to-date		839			1,204
Percentage of nonaccrual loans to gross loan portfolio		0.9	%		1.7	%
Percentage of allowance for credit losses to nonaccrual loans		383.2	%		198.7	%

The following tables present the performance status of loans as of September 30, 2023 and December 31, 2022.


September 30, 2023 (Dollars in thousands)	Performing		Nonperforming		Total		Percentage of Nonperforming to Total
Recreation	$	1,339,934	$	6,506	$	1,346,440		0.48	%
Home improvement		749,528		980		750,508		0.13
Commercial		91,087		9,235		100,322		9.21
Medallion		—		3,927		3,927		100.00
Strategic partnership		1,841		—		1,841		—
Total	$	2,182,390	$	20,648	$	2,203,038		0.94	%

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	%

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, 2023 and December 31, 2022, all of which had an allowance recorded against the principal balance.


	September 30, 2023						December 31, 2022
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With an allowance recorded
Recreation	$	6,506	$	6,506	$	276	$	9,666	$	9,666	$	343
Home improvement		980		980		23		579		579		10
Commercial		9,235		9,344		1,121		8,734		8,823		963
Medallion		3,927		4,657		1,687		13,571		14,686		9,490
Total nonperforming loans with an allowance	$	20,648	$	21,487	$	3,107	$	32,550	$	33,754	$	10,806


	Three Months Ended September 30,
	2023				2022
(Dollars in thousands)	Average Investment Recorded		Interest Income Recognized		Average Investment Recorded		Interest Income Recognized
With an allowance recorded
Recreation	$	6,361	$	7	$	6,903	$	114
Home improvement		980		2		491		—
Commercial		3,085		—		13,577		—
Medallion		4,571		—		16,128		—
Total nonperforming loans with an allowance	$	14,997	$	9	$	37,099	$	114

	Nine Months Ended September 30,
	2023				2022
(Dollars in thousands)	Average Investment Recorded		Interest Income Recognized		Average Investment Recorded		Interest Income Recognized
With an allowance recorded
Recreation	$	6,300	$	10	$	6,895	$	303
Home improvement		865		2		459		—
Commercial		5,229		—		13,494		—
Medallion		4,795		—		16,326		—
Total nonperforming loans with an allowance	$	17,189	$	12	$	37,174	$	303

The following tables show the aging of all loans as of September 30, 2023 and December 31, 2022.


September 30, 2023	Days Past Due												Recorded Investment 90 Days and
(Dollars in thousands)	30-59		60-89		90 +		Total		Current		Total (1)		Accruing
Recreation	$	33,187	$	12,328	$	5,913	$	51,428	$	1,250,877	$	1,302,305	$	—
Home improvement		4,177		1,613		980		6,770		746,777		753,547		—
Commercial		—		—		74		74		102,183		102,257		—
Medallion		—		16		—		16		3,911		3,927		—
Strategic partnership		—		—		—		—		1,841		1,841		—
Total	$	37,364	$	13,957	$	6,967	$	58,288	$	2,105,589	$	2,163,877	$	—

(1)

Excludes $41.0 million of capitalized loan origination costs.


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.

The Company estimates that the weighted average loan-to-value ratio of the taxi medallion loans was approximately 189% and 339% as of September 30, 2023 and December 31, 2022.

Under ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," concurrent with the elimination of troubled debt restructuring, or TDR, disclosures, the Company must disclose loans to borrowers experiencing financial difficulty that were modified during the reporting period. The Company did not have any such loan modifications on January 1, 2023 or during the nine months ended September 30, 2023.

The following table shows the TDRs that 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 taxi 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 tables show the activity of loan collateral in process of foreclosure, which relate only to the recreation and taxi medallion loans, for the three and nine months ended September 30, 2023 and 2022.


Three Months Ended September 30, 2023 (Dollars in thousands)	Recreation			Medallion			Total
Loan collateral in process of foreclosure – June 30, 2023	$	729		$	16,074		$	16,803
Transfer from loans, net		4,730			—			4,730
Sales		(1,080	)		(117	)		(1,197	)
Cash payments received		(163	)		(1,939	)		(2,102	)
Collateral valuation adjustments		(2,281	)		(30	)		(2,311	)
Loan collateral in process of foreclosure – September 30, 2023	$	1,935		$	13,988		$	15,923

Nine Months Ended September 30, 2023 (Dollars in thousands)	Recreation			Medallion			Total
Loan collateral in process of foreclosure – December 31, 2022	$	1,376		$	20,443		$	21,819
Transfer from loans, net		13,078			2,306			15,384
Sales		(5,858	)		(685	)		(6,543	)
Cash payments received		(291	)		(7,773	)		(8,064	)
Collateral valuation adjustments		(6,370	)		(303	)		(6,673	)
Loan collateral in process of foreclosure – September 30, 2023	$	1,935		$	13,988		$	15,923


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

As of September 30, 2023, taxi medallion loans in the process of foreclosure included 429 taxi medallions in the New York City market, 230 taxi medallions in the Chicago market, 32 taxi medallions in the Newark market, and 31 taxi medallions in other markets.