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Other income and operating expenses | 9 Months Ended
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Sep. 30, 2022
Other income and operating expenses |
Other income and operating expenses | Note 20. Other income and operating expenses ​ Paycheck Protection Program In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or “Round 1”), signed into law on March 27, 2020, and the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (the “Economic Aid Act” or “Round 2”), signed into law on December 27, 2020, established and extended the PPP, respectively. Both the CARES Act and the Economic Aid Act, among other things, provide certain measures to support individuals and businesses in maintaining solvency through monetary relief in the form of financing and loan forgiveness and/or forbearance. The primary catalyst of small business stimulus is the PPP, an SBA loan that temporarily supports businesses to retain their workforce and cover certain operating expenses during the COVID-19 pandemic. Furthermore, the PPP includes a 100% guarantee from the federal government and principal forgiveness for borrowers if the funds are used for defined purposes. ​ The Company has participated in the PPP as both direct lender and service provider. Under the CARES Act, the Company originated $109.5 million of PPP loans and was a Lender Service Provider (“LSP”) for $2.5 billion of PPP loans. For the Company’s originations as direct lender, it elected the fair value option and thus, classified the loans as held at fair value on the consolidated balance sheets. Fees totaling $5.2 million were recognized in the period of origination. For loans processed under the LSP, the Company was obligated to perform certain services including: 1) assistance and services to the third-party in the underwriting, marketing, processing and funding of loans, 2) processing forgiveness of the loans with the SBA and 3) servicing and management of subsequently resulting PPP loan portfolios. Such loans are not carried on the consolidated balance sheet and fees totaling $43.3 million were recognized as services were performed. Unrecognized fees as of September 30, 2022 were $0.2 million. Expenses related to PPP loans under the CARES Act are recognized in the period in which they are incurred. The table below presents details about the Company’s assets and liabilities related to its PPP activities. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | September 30, 2022 |  | December 31, 2021
Assets | ​ | ​ | ​ | ​ | ​ | ​
Paycheck Protection Program loans | ​ | $ | 275,162 | ​ | $ | 867,109
Paycheck Protection Program loans, at fair value | ​ |  | 599 | ​ |  | 3,243
PPP fee receivable | ​ |  | 338 | ​ |  | 407
Accrued interest receivable | ​ |  | 2,328 | ​ |  | 7,025
Total PPP related assets | ​ | $ | 278,427 | ​ | $ | 877,784
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Paycheck Protection Program Liquidity Facility borrowings | ​ | $ | 305,797 | ​ | $ | 941,505
Interest payable | ​ | ​ | 1,532 | ​ | ​ | 2,358
Deferred LSP revenue | ​ | ​ | 151 | ​ | ​ | 286
Accrued PPP related costs | ​ | ​ | 4,294 | ​ | ​ | 12,460
Payable to third parties | ​ |  | 360 | ​ |  | 2,091
Repair and denial reserve | ​ | ​ | 5,855 | ​ | ​ | 12,844
Total PPP related liabilities | ​ | $ | 317,989 | ​ | $ | 971,544
​ In the table above,
| ● | Originations of PPP loans under the Economic Aid Act were $2.2 billion. These loans are classified as held-for-investment and are accounted for under ASC 310-10, Receivables.
| ● | Total net fees of $123.7 million are deferred over the expected life of the loans and will be recognized as interest income.
| ● | As of September 30, 2022, PPPLF borrowings exceed PPP loans on the balance sheet due to net fees of $13.9 million. In addition, PPP loans are forgiven before the related PPPLF borrowings are repaid. These proceeds are unrestricted and held in cash and cash equivalents on the consolidated balance sheet.
​ The table below presents details about the Company’s income and expenses related to its pre-tax PPP activities. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, | ​ | Nine Months Ended September 30, | ​ | Financial statement account
(in thousands) | 2022 | 2021 | ​ | 2022 | 2021 | ​
Income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
LSP fee income | $ | 26 | $ | 417 | $ | 5,336 | $ | 10,275 | ​ | Servicing income
Interest income | ​ | 14,000 | ​ | 18,680 | ​ | 50,140 | ​ | 51,927 | ​ | Interest income
Repair and denial reserve | ​ | 2,153 | ​ | (196) | ​ | 6,553 | ​ | (5,585) | ​ | Other income - change in repair and denial reserve
Total PPP related income | $ | 16,179 | $ | 18,901 | $ | 62,029 | $ | 56,617 | ​ | ​
Expense | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Direct operating expenses | $ | 93 | $ | (25) | $ | 434 | $ | 8,193 | ​ | Other operating expenses - origination costs
Interest expense | ​ | 323 | ​ | 1,196 | ​ | 1,470 | ​ | 13,818 | ​ | Interest expense
Total PPP related expenses (direct) | $ | 416 | $ | 1,171 | $ | 1,904 | $ | 22,011 | ​ | ​
Net PPP related income | $ | 15,763 | $ | 17,730 | $ | 60,125 | $ | 34,606 | ​ | ​
​ Other income and expenses The table below presents the composition of other income and operating expenses. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Three Months Ended September 30, | ​ | Nine Months Ended September 30,
(in thousands) | 2022 |  | 2021 |  | 2022 |  | 2021
Other income: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Origination income | $ | 3,660 | ​ | $ | 2,794 |  | $ | 8,039 | ​ | $ | 6,297
Change in repair and denial reserve | ​ | 1,864 | ​ | ​ | 45 |  | ​ | 5,362 | ​ | ​ | (6,108)
Employee retention credit consulting income | ​ | 6,958 | ​ | ​ | — | ​ | ​ | 7,261 | ​ | ​ | —
Other | ​ | 3,668 | ​ | ​ | 2,835 |  | ​ | 10,323 | ​ | ​ | 5,368
Total other income | $ | 16,150 | ​ | $ | 5,674 | ​ | $ | 30,985 | ​ | $ | 5,557
Other operating expenses: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Origination costs | $ | 3,288 | ​ | $ | 4,041 | ​ | $ | 10,390 | ​ | $ | 20,069
Technology expense |  | 2,619 | ​ | ​ | 2,058 | ​ |  | 7,035 | ​ | ​ | 5,968
Impairment on real estate |  | — | ​ | ​ | 184 | ​ |  | 2,667 | ​ | ​ | 1,462
Rent and property tax expense |  | 1,764 | ​ | ​ | 1,538 | ​ |  | 4,423 | ​ | ​ | 4,967
Recruiting, training and travel expense |  | 395 | ​ | ​ | 297 | ​ |  | 1,221 | ​ | ​ | 1,126
Marketing expense | ​ | 575 | ​ | ​ | 1,121 | ​ | ​ | 1,499 | ​ | ​ | 2,306
Loan acquisition costs | ​ | (36) | ​ | ​ | 115 | ​ | ​ | 182 | ​ | ​ | 449
Financing costs on purchased future receivables | ​ | 40 | ​ | ​ | 31 | ​ | ​ | 102 | ​ | ​ | 87
Other |  | 6,751 | ​ | ​ | 3,541 | ​ |  | 14,902 | ​ | ​ | 9,166
Total other operating expenses | $ | 15,396 | ​ | $ | 12,926 | ​ | $ | 42,421 | ​ | $ | 45,600
​

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