Loans and Allowance for Loan Losses

3 Months Ended

Mar. 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 March 31, 2022 and December 31, 2021.


	March 31, 2022						December 31, 2021
(Dollars in thousands)	Amount			As a Percent of Gross Loans			Amount			As a Percent of Gross Loans
Recreation	$	1,004,091			64	%	$	961,320			65	%
Home improvement		473,408			30			436,772			29
Commercial		77,867			5			76,696			5
Medallion		13,849			1			14,046			1
Strategic partnership		226			0			90			—
Total gross loans		1,569,441			100	%		1,488,924			100	%
Allowance for loan losses		(50,686	)					(50,166	)
Total net loans	$	1,518,755					$	1,438,758

The following tables show the activity of the gross loans for the three months ended March 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		114,406			89,820			4,400			92			5,009			213,727
Principal payments, sales, maturities, and recoveries		(65,116	)		(52,164	)		(1,817	)		(85	)		(4,873	)		(124,055	)
Charge-offs		(5,067	)		(1,060	)		(1,584	)		(75	)		—			(7,786	)
Transfer to loan collateral in process of foreclosure, net		(2,911	)		—			—			(129	)		—			(3,040	)
Amortization of origination costs		(2,439	)		320			—			—			—			(2,119	)
Amortization of loan premium		(60	)		(90	)		—			—			—			(150	)
FASB origination costs, net		3,958			(190	)		—			—			—			3,768
Paid-in-kind interest		—			—			172			—			—			172
Gross loans – March 31, 2022	$	1,004,091		$	473,408		$	77,867		$	13,849		$	226		$	1,569,441


(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		93,850			48,059			4,156			—			1,944			148,009
Principal payments, sales, maturities, and recoveries		(55,958	)		(39,637	)		(10,965	)		(636	)		(1,910	)		(109,106	)
Charge-offs		(5,053	)		(681	)					(1,114	)		—			(6,848	)
Transfer to loan collateral in process of foreclosure, net		(3,053	)		—			—			(696	)		—			(3,749	)
Amortization of origination costs		(2,162	)		497			11			(2	)		—			(1,656	)
Amortization of loan premium		(41	)		(76	)		—			(70	)		—			(187	)
FASB origination costs, net		2,663			(74	)		—			—			—			2,589
Paid-in-kind interest		—			—			325			—			—			325
Gross loans – March 31, 2021	$	822,932		$	342,121		$	58,854		$	35,250		$	58		$	1,259,215

The following table sets forth the activity in the allowance for loan losses for the three months ended March 31, 2022 and 2021.


	Three Months Ended March 31,
(Dollars in thousands)	2022			2021
Allowance for loan losses – beginning balance	$	50,166		$	57,548
Charge-offs
Recreation		(5,067	)		(5,053	)
Home improvement		(1,060	)		(681	)
Commercial		(1,584	)		—
Medallion		(75	)		(1,114	)
Total charge-offs		(7,786	)		(6,848	)
Recoveries
Recreation		3,510			2,469
Home improvement		559			432
Commercial		34			—
Medallion		963			1,189
Total recoveries		5,066			4,090
Net charge-offs (1)		(2,720	)		(2,758	)
Provision for loan losses		3,240			3,019
Allowance for loan losses – ending balance (2)	$	50,686		$	57,809

(1)

As of March 31, 2022, cumulative net charge-offs of loans and loan collateral in process of foreclosure in the medallion loan portfolio were $257.0 million, some of which may represent collection opportunities for the Company.

(2)

As of March 31, 2022 and March 31, 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 March 31, 2022 and December 31, 2021.


March 31, 2022 (Dollars in thousands)	Amount		Percentage of Allowance			Allowance as a Percent of Loan Category			Allowance as a Percent of Nonaccrual
Recreation (1)	$	32,558		64	%		3.24	%		98.99	%
Home improvement (2)		8,059		16			1.70			24.50
Commercial		828		2			1.06			2.52
Medallion		9,241		18			66.73			28.10
Total	$	50,686		100	%		3.23	%		154.10	%


December 31, 2021 (Dollars in thousands)	Amount		Percentage of Allowance			Allowance as a Percent of Loan Category			Allowance as a Percent of Nonaccrual
Recreation (1)	$	32,435		64	%		3.37	%		91.18	%
Home improvement (2)		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.


(Dollars in thousands)	March 31, 2022			December 31, 2021
Total nonaccrual loans	$	32,891		$	35,571
Interest foregone for the year		754			1,620
Amount of foregone interest applied to principal for the year		107			432
Interest foregone life-to-date		2,458			3,623
Amount of foregone interest applied to principal life-to-date		1,016			942
Percentage of nonaccrual loans to gross loan portfolio		2	%		2	%
Percentage of allowance for loan losses to nonaccrual loans		154	%		141	%

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


March 31, 2022 (Dollars in thousands)	Performing		Nonperforming		Total		Percentage of Nonperforming to Total
Recreation	$	998,590	$	5,501	$	1,004,091		0.55	%
Home improvement		473,114		294		473,408		0.06
Commercial		64,357		13,510		77,867		17.35
Medallion		—		13,849		13,849		100.00
Strategic partnership		226		—		226		—
Total	$	1,536,287	$	33,154	$	1,569,441		2.11	%

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


	March 31, 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	$	5,501	$	5,501	$	186	$	5,557	$	5,557	$	188
Home improvement		294		294		5		132		132		2
Commercial		13,510		13,555		828		16,330		16,360		1,141
Medallion		13,849		14,821		9,241		14,046		14,958		8,837
Total nonperforming loans with an allowance	$	33,154	$	34,171	$	10,260	$	36,065	$	37,007	$	10,168


	For the Three Months Ended March 31,
	2022				2021
(Dollars in thousands)	Average Investment Recorded		Interest Income Recognized		Average Investment Recorded		Interest Income Recognized
With an allowance recorded
Recreation	$	5,207	$	129	$	5,617	$	184
Home improvement		298		1		150		—
Commercial		16,368		—		17,358		—
Medallion		15,943		—		35,535		—
Total nonperforming loans with an allowance	$	37,816	$	130	$	58,660	$	184

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


March 31, 2022	Days Past Due												Recorded Investment 90 Days and
(Dollars in thousands)	30-59		60-89		90 +		Total		Current		Total (1)		Accruing
Recreation	$	18,927	$	6,096	$	3,802	$	28,825	$	944,347	$	973,172	$	—
Home improvement		1,379		672		297		2,348		473,179		475,527		—
Commercial		—		—		74		74		77,793		77,867		—
Medallion		—		146		—		146		13,704		13,850		—
Strategic partnership		—		—		—		—		226		226		—
Total	$	20,306	$	6,914	$	4,173	$	31,393	$	1,509,249	$	1,540,642	$	—

(1)

Excludes loan premiums of $0.4 million and $28.4 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 295% as of March 31, 2022 and December 31, 2021.

The following table shows the TDRs which the Company entered into during the three months ended March 31, 2022.


(Dollars in thousands)	Number of Loans		Pre- Modification Investment		Post- Modification Investment
Recreation loans		10		129		129
Medallion loans		2		252		252

During the twelve months ended March 31, 2022, there were no medallion loans modified as TDRs in default as of March 31, 2022, 24 recreation loans modified as TDRs were in default and had an investment value of $0.3 million as of March 31, 2022, and no commercial loans modified as TDRs were in default.

The following table shows the TDRs which the Company entered into during the three months ended March 31, 2021.


(Dollars in thousands)	Number of Loans		Pre- Modification Investment		Post- Modification Investment
Recreation loans		18		172		166
Medallion loans		8		2,738		2,738

During the twelve months ended March 31, 2021, 35 medallion loans modified as TDRs were in default and had an investment value of $20.6 million as of March 31, 2021, net of a $16.1 million allowance for loan losses, and 36 recreation loans modified as TDRs were in default and had an investment value of $0.4 million as of March 31, 2021 and an allowance for loan losses of less than $0.1 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 months ended March 31, 2022 and 2021.


Three Months Ended March 31, 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		2,911			129			3,040
Sales		(2,252	)		(116	)		(2,368	)
Cash payments received		—			(2,872	)		(2,872	)
Collateral valuation adjustments		(1,010	)		(386	)		(1,396	)
Loan collateral in process of foreclosure – March 31, 2022	$	1,369		$	32,465		$	33,834


Three Months Ended March 31, 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		3,053			749			3,802
Sales		(2,298	)		—			(2,298	)
Cash payments received		—			(1,329	)		(1,329	)
Collateral valuation adjustments		(1,217	)		(2,785	)		(4,002	)
Loan collateral in process of foreclosure – March 31, 2021	$	970		$	49,763		$	50,733

As of March 31, 2022, medallion loans in the process of foreclosure included 481 medallions in the New York market, 335 medallions in the Chicago market, 61 medallions in the Newark market, and 47 medallions in other markets.