Note 4. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

Finance receivables for the periods indicated consisted of the following:


	December 31,
In thousands	2017		2016
Small loans	$	375,772	$	358,471
Large loans		347,218		235,349
Automobile loans		61,423		90,432
Retail loans		33,050		33,523

Finance receivables	$	817,463	$	717,775

The contractual delinquency of the finance receivable portfolio by product and aging for the periods indicated are as follows:


	December 31, 2017
	Small					Large					Automobile					Retail					Total
In thousands	$		%			$		%			$		%			$		%			$		%
Current	$	301,114		80.1	%	$	299,467		86.3	%	$	43,140		70.2	%	$	25,730		77.8	%	$	669,451		81.9	%
1 to 29 days past due		39,412		10.5	%		29,211		8.4	%		13,387		21.8	%		4,523		13.7	%		86,533		10.6	%

Delinquent accounts
30 to 59 days		9,738		2.6	%		5,949		1.6	%		2,162		3.6	%		879		2.7	%		18,728		2.2	%
60 to 89 days		8,755		2.3	%		4,757		1.4	%		1,046		1.7	%		739		2.2	%		15,297		1.9	%
90 to 119 days		6,881		1.9	%		3,286		1.0	%		701		1.1	%		471		1.5	%		11,339		1.4	%
120 to 149 days		5,284		1.4	%		2,537		0.7	%		636		1.0	%		408		1.2	%		8,865		1.1	%
150 to 179 days		4,588		1.2	%		2,011		0.6	%		351		0.6	%		300		0.9	%		7,250		0.9	%

Total delinquency	$	35,246		9.4	%	$	18,540		5.3	%	$	4,896		8.0	%	$	2,797		8.5	%	$	61,479		7.5	%

Total finance receivables	$	375,772		100.0	%	$	347,218		100.0	%	$	61,423		100.0	%	$	33,050		100.0	%	$	817,463		100.0	%

Finance receivables in nonaccrual status	$	16,753		4.5	%	$	7,834		2.3	%	$	1,688		2.7	%	$	1,179		3.6	%	$	27,454		3.4	%


	December 31, 2016
	Small					Large					Automobile					Retail					Total
In thousands	$		%			$		%			$		%			$		%			$		%
Current	$	288,983		80.6	%	$	204,063		86.8	%	$	66,936		74.0	%	$	27,220		81.2	%	$	587,202		81.9	%
1 to 29 days past due		36,533		10.2	%		19,172		8.1	%		17,196		19.0	%		4,205		12.5	%		77,106		10.7	%

Delinquent accounts
30 to 59 days		9,408		2.6	%		3,948		1.7	%		2,654		3.0	%		717		2.2	%		16,727		2.3	%
60 to 89 days		7,110		2.0	%		2,920		1.2	%		1,171		1.3	%		440		1.3	%		11,641		1.6	%
90 to 119 days		6,264		1.8	%		2,271		1.0	%		1,110		1.2	%		376		1.1	%		10,021		1.4	%
120 to 149 days		5,424		1.5	%		1,710		0.7	%		743		0.8	%		328		1.0	%		8,205		1.1	%
150 to 179 days		4,749		1.3	%		1,265		0.5	%		622		0.7	%		237		0.7	%		6,873		1.0	%

Total delinquency	$	32,955		9.2	%	$	12,114		5.1	%	$	6,300		7.0	%	$	2,098		6.3	%	$	53,467		7.4	%

Total finance receivables	$	358,471		100.0	%	$	235,349		100.0	%	$	90,432		100.0	%	$	33,523		100.0	%	$	717,775		100.0	%

Finance receivables in nonaccrual status	$	16,437		4.6	%	$	5,246		2.2	%	$	2,475		2.7	%	$	941		2.8	%	$	25,099		3.5	%

The allowance for credit losses consists of general and specific components. Prior to September 30, 2016, the general component reflected estimated credit losses for groups of finance receivables on a collective basis and was primarily based on historical loss rates (adjusted for qualitative factors). Effective September 30, 2016, the general component is primarily based on delinquency roll rates. Delinquency roll rate modeling is forward-looking and common practice in the consumer finance industry. As a result of this change, the Company decreased the provision for credit losses for the year ended December 31, 2016 by $0.5 million, which increased net income by $0.3 million, or $0.03 diluted earnings per share.

Changes in the allowance for credit losses for the periods indicated are as follows:


	Year Ended December 31,
In thousands	2017			2016			2015
Balance at beginning of period	$	41,250		$	37,452		$	40,511
Provision for credit losses		77,339			63,014			47,348
Credit losses		(75,880	)		(64,064	)		(55,043	)
Recoveries		6,201			4,848			4,636

Balance at end of period	$	48,910		$	41,250		$	37,452

In September 2017, the Company recorded a $3.0 million increase to the allowance for credit losses related to estimated incremental credit losses on customer accounts impacted by the hurricanes. The incremental hurricane allowance resulted in a decrease to net income of $1.9 million, or $0.16 diluted earnings per share, for the three months ended September 30, 2017.

On an annual basis, the Company updates the estimated loss emergence period for each finance receivable type. During 2015, the loss emergence period of large loan finance receivables increased from ten to twelve months as the Company originated longer term loans. As a result, the Company increased the allowance for credit losses by $0.5 million, which decreased net income for the year ended December 31, 2015 by $0.3 million, or $0.02 diluted earnings per share. The increase in the allowance for credit losses due to the change in the loss emergence period was offset by a decrease in the Company’s normal allowance for credit losses on qualitative factors surrounding finance receivables growth and credit quality. The overall large loan allowance for credit losses as a percentage of loans declined from 4.3% to 3.8% as of December 31, 2014 and 2015, respectively.

During 2017, the loss emergence period for each finance receivable type changed as follows: small loan finance receivables increased from six to seven months; large loan finance receivables decreased from twelve to ten months; and retail loan finance receivables increased from ten to eleven months. These net changes in the loss emergence periods increased the Company’s total allowance for credit losses by $0.1 million, which decreased net income for the year ended December 31, 2017 by $0.1 million, or $0.01 diluted earnings per share.

In December 2015, the Company began selling previously charged-off loans for all products in the portfolio to a third-party debt buyer. The proceeds from these sales were recognized as a recovery in the allowance for credit losses. Recoveries during the year ended December 31, 2015 included $2.0 million from the bulk sale of previously charged-off loans. In January 2016, the Company began selling the flow of charged-off loans. The flow sales are recognized as recoveries in the allowance for credit losses and as a reduction of the provision for credit losses. In September 2017, the Company recognized a recovery of $1.0 million from the bulk sale of previously charged-off customer accounts in bankruptcy. These accounts had been excluded from previous sales of charged-off loans.

The following is a reconciliation of the allowance for credit losses by product for the periods indicated:


In thousands	Balance January 1, 2017		Provision		Credit Losses			Recoveries		Balance December 31, 2017		Finance Receivables December 31, 2017		Allowance as Percentage of Finance Receivables December 31, 2017
Small loans	$	21,770	$	45,104	$	(45,612	)	$	3,487	$	24,749	$	375,772		6.6	%
Large loans		11,460		25,024		(20,088	)		1,152		17,548		347,218		5.1	%
Automobile loans		5,910		4,210		(7,424	)		1,329		4,025		61,423		6.6	%
Retail loans		2,110		3,001		(2,756	)		233		2,588		33,050		7.8	%

Total	$	41,250	$	77,339	$	(75,880	)	$	6,201	$	48,910	$	817,463		6.0	%


In thousands	Balance January 1, 2016		Provision		Credit Losses			Recoveries		Balance December 31, 2016		Finance Receivables December 31, 2016		Allowance as Percentage of Finance Receivables December 31, 2016
Small loans	$	21,535	$	41,119	$	(43,797	)	$	2,913	$	21,770	$	358,471		6.1	%
Large loans		5,593		14,261		(8,946	)		552		11,460		235,349		4.9	%
Automobile loans		8,828		4,785		(8,886	)		1,183		5,910		90,432		6.5	%
Retail loans		1,496		2,849		(2,435	)		200		2,110		33,523		6.3	%

Total	$	37,452	$	63,014	$	(64,064	)	$	4,848	$	41,250	$	717,775		5.7	%


In thousands	Balance January 1, 2015		Provision		Credit Losses			Recoveries		Balance December 31, 2015		Finance Receivables December 31, 2015		Allowance as Percentage of Finance Receivables December 31, 2015
Small loans	$	25,280	$	33,428	$	(40,059	)	$	2,886	$	21,535	$	338,157		6.4	%
Large loans		1,980		6,032		(2,762	)		343		5,593		146,553		3.8	%
Automobile loans		11,776		6,285		(10,466	)		1,233		8,828		116,109		7.6	%
Retail loans		1,475		1,603		(1,756	)		174		1,496		27,625		5.4	%

Total	$	40,511	$	47,348	$	(55,043	)	$	4,636	$	37,452	$	628,444		6.0	%

Impaired finance receivables as a percentage of total finance receivables were 2.1% and 1.6% for the years ended December 31, 2017 and 2016, respectively. The following is a summary of finance receivables evaluated for impairment for the periods indicated:


	December 31, 2017
In thousands	Small		Large		Automobile		Retail		Total
Impaired receivables specifically evaluated	$	5,094	$	10,303	$	1,724	$	109	$	17,230
Finance receivables evaluated collectively		370,678		336,915		59,699		32,941		800,233

Finance receivables outstanding	$	375,772	$	347,218	$	61,423	$	33,050	$	817,463

Impaired receivables in nonaccrual status	$	707	$	931	$	129	$	31	$	1,798

Amount of the specific reserve for impaired accounts	$	1,190	$	2,183	$	373	$	20	$	3,766

Amount of the general component of the allowance	$	23,559	$	15,365	$	3,652	$	2,568	$	45,144


	December 31, 2016
In thousands	Small		Large		Automobile		Retail		Total
Impaired receivables specifically evaluated	$	2,409	$	6,441	$	2,460	$	101	$	11,411
Finance receivables evaluated collectively		356,062		228,908		87,972		33,422		706,364

Finance receivables outstanding	$	358,471	$	235,349	$	90,432	$	33,523	$	717,775

Impaired receivables in nonaccrual status	$	288	$	610	$	175	$	7	$	1,080

Amount of the specific reserve for impaired accounts	$	563	$	1,216	$	576	$	19	$	2,374

Amount of the general component of the allowance	$	21,207	$	10,244	$	5,334	$	2,091	$	38,876

Average recorded investment in impaired finance receivables for the periods indicated are as follows:


	December 31,
In thousands	2017		2016
Small loans	$	3,946	$	1,686
Large loans		8,205		4,478
Automobile loans		2,062		2,801
Retail loans		107		114

Total average recorded investment	$	14,320	$	9,079

It is not practical to compute the amount of interest earned on impaired loans.