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LOANS AND LEASES, NET
 3 Months Ended
Dec. 31, 2024
Loans and Leases Receivable Disclosure [Abstract]  
LOANS AND LEASES, NET LOANS AND LEASES, NET
Loans and leases consist of the following:
(Dollars in thousands)December 31, 2024September 30, 2024
Term lending$1,735,539 $1,554,641 
Asset-based lending608,261 471,897 
Factoring364,477 362,295 
Lease financing138,305 152,174 
SBA/USDA595,965 568,628 
Other commercial finance174,097 185,964 
Commercial finance3,616,644 3,295,599 
Consumer finance280,001 248,800 
Tax services45,051 8,825 
Warehouse finance624,251 517,847 
Total loans and leases4,565,947 4,071,071 
Net deferred loan origination costs (fees)(3,266)4,124 
Total gross loans and leases4,562,681 4,075,195 
Allowance for credit losses(48,977)(45,336)
Total loans and leases, net$4,513,704 $4,029,859 

During the three months ended December 31, 2024 and 2023, the Company originated $853.1 million and $631.9 million of commercial finance and consumer finance as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $618.4 million and a $4.4 million gain on sale during the three months ended December 31, 2024. The Company sold held for sale loans resulting in proceeds of $626.3 million and a nominal gain on sale during the three months ended December 31, 2023.

See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information on the sale of the Company's commercial insurance premium finance business.
Loans purchased and sold by portfolio segment, including participation interests, were as follows:
Three Months Ended December 31,
(Dollars in thousands)20242023
Loans Purchased
Loans held for investment:
Commercial finance$19,540 $— 
Warehouse finance119,819 89,390 
Total purchases$139,359 $89,390 
Loans Sold
Loans held for sale:
Commercial finance$65,802 $3,872 
Consumer finance552,630 622,464 
Total sales$618,432 $626,336 

Leasing Portfolio. The net investment in direct financing and sales-type leases was comprised of the following:
(Dollars in thousands)December 31, 2024September 30, 2024
Minimum lease payments receivable$147,969 $162,757 
Unguaranteed residual assets8,097 9,300 
Unamortized initial direct costs129 102 
Unearned income(17,726)(19,883)
Total net investment in direct financing and sales-type leases$138,469 $152,276 

The components of total lease income were as follows:
Three Months Ended December 31,
(Dollars in thousands)20242023
Interest income - loans and leases
Interest income on net investments in direct financing and sales-type leases$3,187 $3,108 
Leasing and equipment finance noninterest income
Lease income from operating lease payments13,448 13,255 
Other(1)
1,307 724 
Total leasing and equipment finance noninterest income14,755 13,979 
Total lease income$17,942 $17,087 
(1) Other leasing and equipment finance noninterest income consists of gains (losses) on sales of leased equipment, fees and service charges on leases and gains (losses) on sales of leases.
Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at December 31, 2024 were as follows:
(Dollars in thousands)
Remaining in 2025$43,987 
202642,905 
202728,342 
202816,599 
202910,401 
Thereafter5,735 
Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases147,969 
Third-party residual value guarantees— 
Total carrying amount of direct financing and sales-type leases$147,969 

The Company did not record any contingent rental income from direct financing and sales-type leases in the three months ended December 31, 2024.

A number of factors that affected the economic environment in 2023 continued throughout 2024 including geopolitical conflict, supply chain disruptions, inflation, and increased interest rates, with the Federal Reserve beginning to lower the target federal funds rate at the end of 2024. The 2023 bank failures that were brought on by, among other things, rising interest rates, deposit outflows and liquidity crises also continued to impact the banking industry. Management continues to evaluate the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses and the impact to our customers and businesses as a result of these factors impacting the economy and will refine its estimate as developments occur and more information becomes available.
Activity in the allowance for credit losses by portfolio segment was as follows:
Three Months Ended December 31, 2024
(Dollars in thousands)Beginning BalanceProvision (Reversal)Charge-offsRecoveriesEnding Balance
Allowance for credit losses:
Term lending$30,394 $7,289 $(8,375)$617 $29,925 
Asset-based lending1,356 406 — — 1,762 
Factoring5,757 (170)(74)252 5,765 
Lease financing1,189 (247)(63)2 881 
Insurance premium finance— 91 (93)2 — 
SBA/USDA3,273 831 (297)— 3,807 
Other commercial finance607 (186)— — 421 
Commercial finance42,576 8,014 (8,902)873 42,561 
Consumer finance2,240 2,792 (33)2 5,001 
Tax services2 1,301 (741)228 790 
Warehouse finance518 107 — — 625 
Total loans and leases45,336 12,214 (9,676)1,103 48,977 
Unfunded commitments(1)
695 (182)— — 513 
Total $46,031 $12,032 $(9,676)$1,103 $49,490 
(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.
Three Months Ended December 31, 2023
(Dollars in thousands)Beginning BalanceProvision (Reversal)Charge-offsRecoveriesEnding Balance
Allowance for credit losses:
Term lending$25,686 $5,822 $(5,121)$626 $27,013 
Asset-based lending2,738 (1,510)— 142 1,370 
Factoring6,566 751 (23)139 7,433 
Lease financing3,302 766 (153)93 4,008 
Insurance premium finance2,637 (239)(365)90 2,123 
SBA/USDA2,962 327 — — 3,289 
Other commercial finance3,089 223 — — 3,312 
Commercial finance46,980 6,140 (5,662)1,090 48,548 
Consumer finance2,346 2,097 (63)— 4,380 
Tax services2 1,356 (1,145)294 507 
Warehouse finance377 (27)— — 350 
Total loans and leases49,705 9,566 (6,870)1,384 53,785 
Unfunded commitments(1)
272 324 — — 596 
Total $49,977 $9,890 $(6,870)$1,384 $54,381 
(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.
Information on loans and leases that are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:
(Dollars in thousands)At December 31, 2024At September 30, 2024
Term lending$14,034 $15,491 
Lease financing1,302 5,300 
SBA/USDA680 1,419 
Commercial finance(1)
16,016 22,210 
Total$16,016 $22,210 
(1) For commercial finance, collateral dependent financial assets have collateral in the form of cash, equipment, or other business assets.

Management has identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk. Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually. The balance of these pass rated cash collateral loans totaled $116.4 million and $105.1 million at December 31, 2024 and at September 30, 2024, respectively.

Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

Pass - A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating.
 
Watch - A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures. Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention. These assets are of better quality than special mention assets.

Special Mention - A special mention asset is a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher.
 
The adverse classifications are as follows:
 
Substandard - A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position. Assets so classified will have well-defined weaknesses creating a distinct possibility the Bank will sustain some loss if the weaknesses are not corrected. Loss potential does not have to exist for an asset to be classified as substandard.

Doubtful - A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort. Due to pending factors, the asset’s classification as loss is not yet appropriate.

Loss - A loss asset is considered uncollectible and of such little value that the asset’s continuance on the Bank’s balance sheet is no longer warranted. This classification does not necessarily mean an asset has no recovery or salvage value leaving room for future collection efforts.

Loans and leases, or portions thereof, are generally charged off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 120 days or more for consumer credit products and leases, and 90 days or more for commercial finance loans. Action is taken to charge off electronic return originator ("ERO") loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as modifications or loans and leases on nonaccrual status.
The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location. Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the allowable Allowance for Credit Losses.

The Company has various portfolios of consumer finance and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in its evaluation of the appropriateness of the ACL on these portfolios, and as such, these loans are not included in the asset classification table below. The outstanding balances of consumer finance loans and tax services loans were $280.0 million and $45.1 million at December 31, 2024, respectively, and $248.8 million and $8.8 million at September 30, 2024, respectively. The amortized cost basis of loans and leases by asset classification and year of origination was as follows:
Amortized Cost Basis
(Dollars in thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesTotal
At December 31, 202420252024202320222021Prior
Term lending
Pass$166,954 $579,028 $406,327 $108,421 $73,456 $58,759 $— $1,392,945 
Watch16,193 29,618 35,022 26,480 21,118 12,300 — 140,731 
Special mention1,160 57,525 6,151 8,911 16,720 332 — 90,799 
Substandard8,110 9,337 31,501 22,152 14,933 20,498 — 106,531 
Doubtful— 466 855 1,765 468 979 — 4,533 
Total192,417 675,974 479,856 167,729 126,695 92,868 — 1,735,539 
Current period charge-offs4,385 2,043 1,408 423 85 31 — 8,375 
Asset-based lending
Pass— — — — — — 372,119 372,119 
Watch— — — — — — 213,107 213,107 
Special mention— — — — — — 19,510 19,510 
Substandard— — — — — — 3,525 3,525 
Total— — — — — — 608,261 608,261 
Current period charge-offs— — — — — — — — 
Factoring
Pass— — — — — — 295,712 295,712 
Watch— — — — — — 63,573 63,573 
Special mention— — — — — — 1,620 1,620 
Substandard— — — — — — 3,553 3,553 
Doubtful— — — — — — 19 19 
Total— — — — — — 364,477 364,477 
Current period charge-offs— — — — — — 74 74 
Lease financing
Pass8,349 41,145 40,805 10,546 7,156 7,854 — 115,855 
Watch— 703 3,046 61 387 1,877 — 6,074 
Special mention— — 235 253 — 177 — 665 
Substandard— — 6,489 2,276 5,758 1,185 — 15,708 
Doubtful— — — — 3 — — 3 
Total8,349 41,848 50,575 13,136 13,304 11,093 — 138,305 
Current period charge-offs— — — 31 32 — — 63 
Insurance premium finance
Current period charge-offs62 31 — — — — — 93 
SBA/USDA
Pass10,265 83,724 169,125 175,510 20,514 65,396 — 524,534 
Watch— 6,218 6,813 2,140 631 3,805 — 19,607 
Special mention— — — — 156 361 — 517 
Substandard— 795 16,859 12,031 1,984 19,369 — 51,038 
Doubtful— — — 55 55 159 — 269 
Total10,265 90,737 192,797 189,736 23,340 89,090 — 595,965 
Current period charge-offs— 171 — — 14 112 — 297 
Other commercial finance
Pass369 71,724 2,180 144 12,234 67,632 — 154,283 
Watch— — 2,466 — — — — 2,466 
Substandard— — 493 — 16,855 — — 17,348 
Total369 71,724 5,139 144 29,089 67,632 — 174,097 
Current period charge-offs— — — — — — — — 
Warehouse finance
Pass— — — — — — 624,251 624,251 
Total— — — — — — 624,251 624,251 
Current period charge-offs— — — — — — — — 
Total loans and leases
Pass185,937 775,621 618,437 294,621 113,360 199,641 1,292,082 3,479,699 
Watch16,193 36,539 47,347 28,681 22,136 17,982 276,680 445,558 
Special mention1,160 57,525 6,386 9,164 16,876 870 21,130 113,111 
Substandard8,110 10,132 55,342 36,459 39,530 41,052 7,078 197,703 
Doubtful— 466 855 1,820 526 1,138 19 4,824 
Total$211,400 $880,283 $728,367 $370,745 $192,428 $260,683 $1,596,989 $4,240,895 
Current period charge-offs$4,447 $2,245 $1,408 $454 $131 $143 $74 $8,902 
Amortized Cost Basis
(Dollars in thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesTotal
At September 30, 202420242023202220212020Prior
Term lending
Pass$548,597 $398,832 $117,180 $77,585 $42,950 $24,166 $— $1,209,310 
Watch47,765 52,317 34,964 31,025 2,720 2,312 — 171,103 
Special mention44,617 3,106 9,121 14,772 7,238 2 — 78,856 
Substandard9,798 24,187 18,537 11,660 18,894 2,631 — 85,707 
Doubtful4,314 1,465 2,247 758 114 767 — 9,665 
Total655,091 479,907 182,049 135,800 71,916 29,878 — 1,554,641 
Current period charge-offs114 3,102 8,502 3,576 2,184 715 — 18,193 
Asset-based lending
Pass— — — — — — 233,268 233,268 
Watch— — — — — — 221,521 221,521 
Special mention— — — — — — 13,187 13,187 
Substandard— — — — — — 3,921 3,921 
Total— — — — — — 471,897 471,897 
Current period charge-offs— — — — — — — — 
Factoring
Pass— — — — — — 292,436 292,436 
Watch— — — — — — 62,270 62,270 
Special mention— — — — — — 271 271 
Substandard— — — — — — 7,306 7,306 
Doubtful— — — — — — 12 12 
Total— — — — — — 362,295 362,295 
Current period charge-offs— — — — — — 2,453 2,453 
Lease financing
Pass44,883 48,851 12,862 7,101 7,938 1,733 — 123,368 
Watch1,837 3,537 370 6,264 1,362 40 — 13,410 
Special mention— 250 — — 174 — — 424 
Substandard— 6,691 2,723 2,717 2,069 603 — 14,803 
Doubtful— — — 138 31 — — 169 
Total46,720 59,329 15,955 16,220 11,574 2,376 — 152,174 
Current period charge-offs— — — 207 80 — — 287 
Insurance premium finance
Current period charge-offs86 890 173 — — — — 1,149 
SBA/USDA
Pass60,636 171,136 179,490 20,825 28,588 39,319 — 499,994 
Watch5,244 6,967 — 639 10 3,026 — 15,886 
Special mention— — — 156 — 363 — 519 
Substandard1,037 15,923 12,158 2,003 9,519 11,134 — 51,774 
Doubtful— 185 55 55 62 98 — 455 
Total66,917 194,211 191,703 23,678 38,179 53,940 — 568,628 
Current period charge-offs— 549 79 — 127 — — 755 
Other commercial finance
Pass73,330 2,210 6,685 12,351 1,274 70,203 — 166,053 
Watch— 2,480 — — — — — 2,480 
Substandard— 508 — 16,923 — — — 17,431 
Total73,330 5,198 6,685 29,274 1,274 70,203 — 185,964 
Current period charge-offs— — — — — — — — 
Warehouse finance
Pass— — — — — — 517,847 517,847 
Total— — — — — — 517,847 517,847 
Current period charge-offs— — — — — — — — 
Total loans and leases
Pass727,446 621,029 316,217 117,862 80,750 135,421 1,043,551 3,042,276 
Watch54,846 65,301 35,334 37,928 4,092 5,378 283,791 486,670 
Special mention44,617 3,356 9,121 14,928 7,412 365 13,458 93,257 
Substandard10,835 47,309 33,418 33,303 30,482 14,368 11,227 180,942 
Doubtful4,314 1,650 2,302 951 207 865 12 10,301 
Total$842,058 $738,645 $396,392 $204,972 $122,943 $156,397 $1,352,039 $3,813,446 
Current period charge-offs$200 $4,541 $8,754 $3,783 $2,391 $715 $2,453 $22,837 

Past due loans and leases were as follows:
At December 31, 2024
Accruing and Nonaccruing Loans and LeasesNonperforming Loans and Leases
(Dollars in thousands)30-59 Days Past Due60-89 Days Past Due> 89 Days Past DueTotal Past DueCurrentTotal Loans and Leases Receivable> 89 Days Past Due and AccruingNonaccrual BalanceTotal
Loans held for sale$— $— $— $— $72,648 $72,648 $— $— $— 
Term lending19,298 4,901 20,122 44,321 1,691,218 1,735,539 5,010 22,226 27,236 
Asset-based lending— — — — 608,261 608,261 — 603 603 
Factoring— — — — 364,477 364,477 — 561 561 
Lease financing4,278 3,878 1,440 9,596 128,709 138,305 59 2,038 2,097 
SBA/USDA1,504 187 1,983 3,674 592,291 595,965 486 1,803 2,289 
Other commercial finance— — — — 174,097 174,097 — — — 
Commercial finance25,080 8,966 23,545 57,591 3,559,053 3,616,644 5,555 27,231 32,786 
Consumer finance4,502 2,936 2,423 9,861 270,140 280,001 2,423 — 2,423 
Tax services— — — — 45,051 45,051 — — — 
Warehouse finance— — — — 624,251 624,251 — — — 
Total loans and leases held for investment29,582 11,902 25,968 67,452 4,498,495 4,565,947 7,978 27,231 35,209 
Total loans and leases$29,582 $11,902 $25,968 $67,452 $4,571,143 $4,638,595 $7,978 $27,231 $35,209 
At September 30, 2024
Accruing and Nonaccruing Loans and LeasesNonperforming Loans and Leases
(Dollars in thousands)30-59 Days Past Due60-89 Days Past Due> 89 Days Past DueTotal Past DueCurrentTotal Loans and Leases Receivable> 89 Days Past Due and AccruingNonaccrual BalanceTotal
Loans held for sale$2,266 $1,361 $1,050 $4,677 $684,193 $688,870 $1,050 $— $1,050 
Term lending19,776 5,124 17,694 42,594 1,512,047 1,554,641 1,923 23,462 25,385 
Asset-based lending— — — — 471,897 471,897 — — — 
Factoring— — — — 362,295 362,295 — 29 29 
Lease financing3,605 1,595 109 5,309 146,865 152,174 60 746 806 
SBA/USDA— 952 2,172 3,124 565,504 568,628 331 2,175 2,506 
Other commercial finance— — — — 185,964 185,964 — — — 
Commercial finance23,381 7,671 19,975 51,027 3,244,572 3,295,599 2,314 26,412 28,726 
Consumer finance3,962 3,186 3,053 10,201 238,599 248,800 3,053 — 3,053 
Tax services— — 8,733 8,733 92 8,825 8,733 — 8,733 
Warehouse finance— — — — 517,847 517,847 — — — 
Total loans and leases held for investment27,343 10,857 31,761 69,961 4,001,110 4,071,071 14,100 26,412 40,512 
Total loans and leases$29,609 $12,218 $32,811 $74,638 $4,685,303 $4,759,941 $15,150 $26,412 $41,562 

Nonaccrual loans and leases by year of origination were as follows:
Amortized Cost Basis
(Dollars in thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesTotalNonaccrual with No ACL
At December 31, 202420252024202320222021Prior
Term lending$— $5,456 $6,958 $4,703 $1,200 $3,909 $— $22,226 $6,552 
Asset-based lending— — — — — — 603 603 — 
Factoring— — — — — — 561 561 — 
Lease financing— — 533 — 1,323 182 — 2,038 — 
SBA/USDA— — 513 90 55 1,145 — 1,803 — 
Commercial finance— 5,456 8,004 4,793 2,578 5,236 1,164 27,231 6,552 
Total nonaccrual loans and leases$— $5,456 $8,004 $4,793 $2,578 $5,236 $1,164 $27,231 $6,552 
Amortized Cost Basis
(Dollars in thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesTotalNonaccrual with No ACL
At September 30, 202420242023202220212020Prior
Term lending$9,281 $3,433 $5,369 $1,386 $625 $3,368 $— $23,462 $2,579 
Factoring— — — — — — 29 29 — 
Lease financing— 577 11 46 2 110 — 746 — 
SBA/USDA— 738 55 55 742 585 — 2,175 681 
Commercial finance9,281 4,748 5,435 1,487 1,369 4,063 29 26,412 3,260 
Total nonaccrual loans and leases$9,281 $4,748 $5,435 $1,487 $1,369 $4,063 $29 $26,412 $3,260 
Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:
Amortized Cost Basis
(Dollars in thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesTotal
At December 31, 202420252024202320222021Prior
Term lending$— $— $— $560 $4,448 $2 $— $5,010 
Lease financing— 55 1 — 1 2 — 59 
SBA/USDA— — — 330 156 — — 486 
Commercial finance— 55 1 890 4,605 4 — 5,555 
Consumer finance— 976 1,235 190 22 — — 2,423 
Total loans and leases held for investment— 1,031 1,236 1,080 4,627 4 — 7,978 
Total 90 days or more delinquent and accruing$— $1,031 $1,236 $1,080 $4,627 $4 $— $7,978 
Amortized Cost Basis
(Dollars in thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesTotal
At September 30, 202420242023202220212020Prior
Loans held for sale$1,031 $19 $— $— $— $— $— $1,050 
Term lending— 621 354 719 217 12 — 1,923 
Lease financing— — — 2 58 — — 60 
SBA/USDA— — 331 — — — — 331 
Commercial finance— 621 685 721 275 12 — 2,314 
Consumer finance736 1,841 388 88 — — — 3,053 
Tax services8,733 — — — — — — 8,733 
Total loans and leases held for investment9,469 2,462 1,073 809 275 12 — 14,100 
Total 90 days or more delinquent and accruing$10,500 $2,481 $1,073 $809 $275 $12 $— $15,150 

Certain loans and leases 90 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due.

The following table provides the average recorded investment in nonaccrual loans and leases:
Three Months Ended December 31,
(Dollars in thousands)20242023
Term lending$23,208 $17,419 
Asset-based lending591 9,711 
Factoring265 1,180 
Lease financing1,565 1,623 
SBA/USDA1,900 1,488 
Commercial finance27,529 31,421 
Total loans and leases$27,529 $31,421 

The recognized interest income on the Company's nonaccrual loans and leases for the three months ended December 31, 2024 and 2023 was not significant.

Modifications made to borrowers experiencing financial difficulty during the three months ended December 31, 2024 were $3.3 million in the commercial finance loan portfolio. The types of modifications granted were term extensions. Modifications made to borrowers experiencing financial difficulty during the three months ended December 31, 2023 were insignificant.
During the three months ended December 31, 2024, the Company had $1.4 million of commercial finance loans where a modification was granted in the previous 12 months in which there was a payment default. As of December 31, 2024, no modifications granted were in the 60-89 days past due category. During the three months ended December 31, 2023, there were no modifications granted in the previous 12 months in which there was a payment default.