Accounts Receivable

12 Months Ended

Dec. 31, 2021

Loan Receivables Held for Sale

The following table summarizes the activity in the balance of loan receivables held for sale, net at lower of cost or fair value during the periods indicated.


	Year Ended December 31,
	2021		2020		2019
Beginning balance	$	571,415	$	51,926	$	2,876
Additions(1)	1,748,789		1,775,807		157,928
Proceeds from sales and borrower payments(2)	(2,277,258)		(1,181,867)		(104,858)
Loss on sale(3)	(39,543)		(57,043)		—
Decrease (increase) in valuation allowance(4)	6,209		(8,241)		(1,289)
Transfers(5)	3,436		344		251
Write-offs and other(6)	(7,728)		(9,511)		(2,982)
Ending balance	$	5,320	$	571,415	$	51,926

(1)Includes purchases of $1,622 million and $1,114 million, respectively, participations in loans through the Warehouse SPV for the years ended December 31, 2021 and 2020.

(2)We retain servicing arrangements on sold loan receivables with comparable terms and conditions as loans that are not participated by our Bank Partners. Additions also include accrued interest and fees, recoveries of previously charged-off loan receivables held for sale, as well as proceeds from transferring our rights to charged-off receivables attributable to loan receivables held for sale. Income from loan receivables held for sale activities is recorded within interest and other revenue in the Consolidated Statements of Operations.

(3)Recorded within cost of revenue in the Consolidated Statements of Operations.

(4)Valuation allowance for the year ended December 31, 2021 includes a decrease in lower of cost or fair value adjustments on our Warehouse Loan Participations of $3.2 million, partially offset by lower of cost or fair value adjustments on all other loan receivables held for sale of $301 thousand. Valuation allowance for the year ended December 31, 2020 includes an increase in lower of cost or fair value adjustments on our Warehouse Loan Participations of $6.2 million and an increase in lower of cost or fair value adjustments on all other loan receivables held for sale of $109 thousand. Provision for credit losses decreased $3.3 million, and increased $1.9 million and $1.3 million during the years ended December 31, 2021, 2020 and 2019, respectively.

(5)We temporarily hold certain loan receivables, which are originated by a Bank Partner, while non-originating Bank Partner eligibility is being determined. Once we determine that a loan receivable meets the investment requirements of an eligible Bank Partner, we transfer the loan receivable to the Bank Partner at cost plus any accrued interest. The reported amount also includes loan receivables that have been placed on non-accrual and non-payment status while we investigate consumer inquiries.

(6)We received recovery payments of $376 thousand, $399 thousand and $50 thousand during the years ended December 31, 2021, 2020 and 2019, respectively. Recoveries of principal and finance charges and fees on previously written off loan receivables held for sale are recognized on a collected basis, and the cash proceeds received are recorded within sales, general and administrative expense in the Consolidated Statements of Operations.

The following table presents activities associated with our loan receivable sales and servicing activities during the periods indicated.


	Year Ended December 31,
	2021		2020		2019
Gain (loss) on sold loan receivables	$	(39,543)	$	(57,043)	$	—
Cash Flows
Sales of loans	$	1,897,890	$	875,051	$	91,946
Servicing fees	18,187		5,978		3,901

The following tables present information about loan receivables held for sale that were transferred and qualified for sales treatment under ASC 860, and therefore are no longer recorded in our Consolidated Balance Sheets, but with which we have a continuing involvement through our servicing arrangements. As such, for sold loan receivables held for sale where servicing is the only form of continuing involvement, the Company would only experience a loss if it were required to repurchase a loan participation due to a breach in representations and warranties

associated with its loan sale or servicing contracts.


	December 31,
	2021		2020
Total principal balance	$	2,132,603	$	1,061,634
Delinquent loans (unpaid principal balance)	49,762		29,092


	Year Ended December 31,
	2021		2020		2019
Net charge-offs (unpaid principal balance)	$	21,441	$	10,573	$	16,333

In November 2021, as provided for as a condition to the Merger Agreement, the Company entered into a backstop purchase facility arrangement with Goldman Sachs Bank. This agreement includes (i) a forward flow commitment from Goldman Sachs Bank to purchase up to $800 million in loan participations during the period from the execution of such arrangements through the earlier of the consummation of the Mergers or the termination of the Merger Agreement, and (ii) in the event that the Merger Agreement is terminated in accordance with its terms prior to the consummation of the Mergers, up to $1.0 billion in loan participations during the period from the Merger Agreement termination date through the last day of the ninth full calendar month following such termination date. Pursuant to this arrangement, the Company sold $226.2 million in loan participations in December 2021.

Accounts Receivable

As of December 31, 2021, our allowance for losses on accounts receivable was measured under ASC 326. Historically, the majority of our pools of accounts receivable did not have write-offs. For the pool of accounts receivable for which we had historical write-offs, we used an aging method and the average 12-month historical loss rate as a basis for estimating credit losses on the current accounts receivable balance. In the absence of relevant historical loss experience for the other pools of accounts receivables, we also used this average 12-month loss rate to inform our estimate of credit losses on those balances. For each pool of accounts receivable, we considered the conditions at the measurement date and reasonable and supportable forecasts about future conditions to consider if adjustments to the historical loss rate were warranted. Given (i) our methods of collecting funds on merchant and servicing receivables, (ii) we have not observed meaningful changes in our counterparties' abilities to pay, and (iii) we establish an allowance for all delinquent accounts receivable (typically deemed to be 31 days or more past due), providing for a maximum 30-day term of our accounts receivable balances, we determined that our historical loss rates remain most indicative of our lifetime expected losses.

Accounts receivable consisted of the following as of the dates indicated.


	Accounts Receivable, Gross		Allowance for Uncollectible Amounts		Accounts Receivable, Net
December 31, 2021
Transaction related	$	6,916	$	(150)	$	6,766
Servicing related	12,339		—		12,339
Total	$	19,255	$	(150)	$	19,105
December 31, 2020
Transaction related	$	10,533	$	(313)	$	10,220
Servicing related	11,738		—		11,738
Total	$	22,271	$	(313)	$	21,958

The following table summarizes the activity in the balance of allowance for uncollectible amounts during the period from January 1, 2021 through December 31, 2021.


	December 31, 2021
Beginning balance	$	(313)
Provision for expected losses	(35)
Write-offs	201
Recoveries	(3)
Ending balance	$	(150)

GreenSky, Inc. 10-K