Loans Principal, Interest and Financing Service Fee Receivables

9 Months Ended

Sep. 30, 2022

Loans principal, interest and financing service fee receivables

	Note	December 31, 2021			September 30, 2022
		RMB			RMB
Home equity loan:	(i)
Loans principal, interest and financing service fee receivables			9,412,717,366			9,259,642,529

Less: allowance for credit losses	(a)
- Individually assessed			(61,479,897	)		(45,635,286	)
- Collectively assessed			(914,370,954	)		(965,307,764	)

Subtotal			(975,850,851	)		(1,010,943,050	)

Net loans principal, interest and financing service fee receivables of home equity loan			8,436,866,515			8,248,699,479

Corporate loan:	(ii)
Loans principal, interest and financing service fee receivables			-			284,982,538

Less: allowance for credit losses			-			(6,136,295	)

Net loans principal, interest and financing service fee receivables of corporate loan			-			278,846,243

Net loans principal, interest and financing service fee receivables			8,436,866,515			8,527,545,722

(i) Home equity loan

(a)

Allowance for credit losses

The table below presents the components of allowances for loans principal, interest and financing service fee receivables by impairment methodology with the recorded investment as of September 30, 2021 and September 30, 2022.

	Nine months ended September 30, 2022
	Allowance for loans which are collectively assessed			Allowance for loans which are individually assessed			Total
	RMB			RMB			RMB

As of January 1		914,370,954			61,479,897			975,850,851
Provision for credit losses		39,674,709			173,064,064			212,738,773
Charge-offs⁽¹⁾		(193,168,795	)		(242,947,778	)		(436,116,573	)
Increase in guaranteed recoverable assets		204,430,896			25,223,738			229,654,634
Recoveries		-			28,815,365			28,815,365

As of September 30		965,307,764			45,635,286			1,010,943,050

Net loans principal, interest and financing service fee receivables		8,154,672,302			94,027,177			8,248,699,479

Recorded investment		9,119,980,066			139,662,463			9,259,642,529

	Nine months ended September 30, 2021
	Allowance for loans which are collectively assessed			Allowance for loans which are individually assessed			Total
	Subtotal			Subtotal			RMB
	RMB			RMB

As of January 1		535,967,177			71,998,321			607,965,498
Provision for credit losses		(116,550,594	)		128,060,127			11,509,533
Charge-offs⁽¹⁾		(1,198,134	)		(243,302,896	)		(244,501,030	)
Increase in guaranteed recoverable assets		81,609,992			155,066,460			236,676,452
Recoveries		-			23,577,905			23,577,905

As of September 30		499,828,441			135,399,917			635,228,358

Net loans principal, interest and financing service fee receivables		9,758,829,979			251,002,604			10,009,832,583

Recorded investment		10,258,658,420			386,402,521			10,645,060,941

(1)

In 2020, the Group revised its charge-off policy so that loans that are 180 days past due are charged down to net realizable value (fair value of collateral, less estimated costs to sell) unless the loans are both well-secured and in the process of collection.

The Group charges off loans principal, interest and financing service fee receivables if the remaining balance is considered uncollectable. Recovery of loans principal, interest and financing service fee receivables previously charged off would be recorded when received.

For the description of the Group’s related accounting policies of allowance for credit losses, see Note 2(f) Loans.

The following tables present the aging of allowance for credit losses as of September 30, 2022.

	Total current		1 - 30 days past due		31 - 90 days past due		91 - 180 days past due		Total loans
	RMB		RMB		RMB		RMB		RMB
The collaboration model
First lien		237,910,121		77,116,334		55,178,321		8,899,717		379,104,493
Second lien		413,700,563		101,187,722		79,975,921		36,735,569		631,599,775

Subtotal		651,610,684		178,304,056		135,154,242		45,635,286		1,010,704,268

The traditional facilitation model
First lien		5,703		-		149,955		-		155,658
Second lien		83,124		-		-		-		83,124

Subtotal		88,827		-		149,955		-		238,782

Allowance for credit losses		651,699,511		178,304,056		135,304,197		45,635,286		1,010,943,050

The following tables present the aging of allowance for credit losses as of December 31,2021.

	Total current		1 - 30 days past due		31 - 90 days past due		91 - 180 days past due		Total loans
	RMB		RMB		RMB		RMB		RMB
The collaboration model
First lien		189,814,922		86,537,327		66,784,464		31,394,514		374,531,227
Second lien		340,800,002		124,542,266		80,395,050		26,996,820		572,734,138

Subtotal		530,614,924		211,079,593		147,179,514		58,391,334		947,265,365

The traditional facilitation model
First lien		5,618,913		3,503,613		4,980,213		1,574,208		15,676,947
Second lien		5,491,292		2,285,562		3,617,330		1,514,355		12,908,539

Subtotal		11,110,205		5,789,175		8,597,543		3,088,563		28,585,486

Allowance for credit losses		541,725,129		216,868,768		155,777,057		61,479,897		975,850,851

(b)

Loan delinquency and non-accrual details

The following tables present the aging of past-due loan principal and financing service fee receivables as of September 30, 2022.

	Total current		1 - 30 days past due		31 - 90 days past due		91 - 180 days past due		181 - 270 days past due		271 - 360 days past due		over 360 days past due		Total loans		Total non-accrual
	RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB
The collaboration model
First lien		3,031,554,612		276,591,737		190,294,075		16,290,631		6,932,328		5,243,293		18,862,267		3,545,768,943		47,328,519
Second lien		4,981,904,634		362,675,696		275,220,859		60,098,879		10,763,925		6,698,897		13,297,348		5,710,660,238		90,859,049

Subtotal		8,013,459,246		639,267,433		465,514,934		76,389,510		17,696,253		11,942,190		32,159,615		9,256,429,181		138,187,568

The traditional facilitation model
First lien		502,127		-		524,474		-		-		209,094		218,082		1,453,777		427,176
Second lien		711,852		-		-		-		-		-		1,047,719		1,759,571		1,047,719

Subtotal		1,213,979		-		524,474		-		-		209,094		1,265,801		3,213,348		1,474,895

Loans principal, interest and financing service fee receivables		8,014,673,225		639,267,433		466,039,408		76,389,510		17,696,253		12,151,284		33,425,416		9,259,642,529		139,662,463

The following tables present the aging of past-due loan principal and financing service fee receivables as of December 31, 2021.

	Total current		1 - 30 days past due		31 - 90 days past due		91 - 180 days past due		181 - 270 days past due		271 - 360 days past due		over 360 days past due		Total loans		Total non-accrual
	RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB
The collaboration model
First lien		2,814,226,880		325,090,831		230,622,938		65,080,342		6,979,995		5,972,352		24,768,894		3,472,742,232		102,801,583
Second lien		5,030,913,080		467,836,400		276,784,712		52,043,750		7,455,656		6,468,134		17,308,803		5,858,810,535		83,276,343

Subtotal		7,845,139,960		792,927,231		507,407,650		117,124,092		14,435,651		12,440,486		42,077,697		9,331,552,767		186,077,926

The traditional facilitation model
First lien		20,814,948		6,532,393		8,334,398		4,887,949		285,023		122,845		653,689		41,631,245		5,949,506
Second lien		21,237,555		4,238,098		6,081,004		5,027,879		360,727		673,625		1,914,466		39,533,354		7,976,697

Subtotal		42,052,503		10,770,491		14,415,402		9,915,828		645,750		796,470		2,568,155		81,164,599		13,926,203

Loans principal, interest and financing service fee receivables		7,887,192,463		803,697,722		521,823,052		127,039,920		15,081,401		13,236,956		44,645,852		9,412,717,366		200,004,129

Loans principal, interest and financing service fee receivables are placed on non-accrual status when payments are 90 days contractually past.

Any interest accrued on non-accrual loans is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.

(c)

Impaired loans

(1)

Impaired loans summary

	Recorded investment
	Unpaid principal balance		Impaired loans		Impaired loans with related allowance for credit losses		Impaired loans without related allowance for credit losses		Related allowance for credit losses
	RMB		RMB		RMB		RMB		RMB

First lien		43,112,851		47,755,694		13,977,803		33,777,892		8,899,717
Second lien		89,049,877		91,906,769		57,305,289		34,601,479		36,735,569

As of September 30, 2022		132,162,728		139,662,463		71,283,092		68,379,371		45,635,286

First lien		102,914,225		108,751,090		64,871,825		43,879,265		32,968,721
Second lien		88,073,367		91,253,039		50,995,087		40,257,952		28,511,176

As of December 31, 2021		190,987,592		200,004,129		115,866,912		84,137,217		61,479,897

Impaired loans are those loans where the Group, based on current information and events, believes it is probable all amounts due according to the contractual terms of the loan will not be collected. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans without an allowance generally represent loans that the fair value of the underlying collateral meets or exceeds the loan’s amortized cost.

(2)

Average recorded investment in impaired loans

	Nine months ended September 30, 2021				Nine months ended September 30, 2022
	Average recorded investment		Interest and fees income recognized		Average recorded investment		Interest and fees income recognized
	RMB		RMB		RMB		RMB

First lien		209,780,721		40,805,772		64,281,802		59,959,073
Second lien		204,379,990		42,672,917		86,125,497		63,190,093

Impaired loans		414,160,711		83,478,689		150,407,299		123,149,166

(i)

Average recorded investment represents ending balance for the last three quarters and does not include the related allowance for credit losses.

(ii)

The interest and fees income recognized are those interest and financing service fees recognized related to impaired loans. All the amounts are recognized on cash basis.

No debt restructuring in which contractual terms of loans are modified, has occurred during the period from January 1 to September 30, 2021 and 2022.

The Group transferred loans with carrying amounts of RMB939,112,508 and RMB1,896,205,225 to third party investors, including sales partners, and recorded the transfers as sales for the period from January 1 to September 30, 2021 and 2022, respectively. The Group recognized net gain of RMB17,878,084 and RMB51,040,366 from transfers accounted for as sales of loans for the period from January 1 to September 30, 2021 and 2022, respectively.

The Group carries out pre-approval, review and credit approval of loans by professionals for credit risk arising from micro credit business. During the post-transaction monitoring process, the Group conducts a visit of customers regularly after disbursement of loans, and conducts on-site inspection when the Group considers it is necessary. The review focuses on the status of the collateral. The Group delegates sales partners to assist in the aforementioned credit risk assessment activities.

The Group adopts a loan risk classification approach to manage the loan portfolio risk. Loans are classified as non-impaired and impaired based on the different risk level. When one or more event demonstrates there is objective evidence of impairment and causes losses, corresponding loans are considered to be classified as impaired. The allowance for credit losses on impaired loans are determined with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) model.

The Group applies a series of criteria in determining the classification of loans. The loan classification criteria focus on a number of factors, including (i) the borrower’s ability to repay the loan; (ii) the borrower’s repayment history; (iii) the borrower’s willingness to repay; (iv) the net realizable value of any collateral; and (v) the prospect for the support from any financially responsible guarantor. The Group also takes into account the length of time for which payments of principal and interest on a loan are overdue.

(d)

Loans held-for-sale

Loans held-for-sale are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loans transferred to held-for-sale category were RMB733,975,352 (including RMB24,696,075 measured at fair value) and RMB1,016,173,196 (including RMB11,694,198 measured at fair value) as of December 31, 2021 and September 30, 2022, respectively.

(ii)

Corporate loan

Corporate loan represents loans granted to businesses to assist its funding of operating costs and capital expenditures, which are not collateralized. Net loans principal, interest and financing service fee receivables of corporate loan were nil and RMB278,846,243 as of December 31, 2021 and September 30, 2022.