4. Finance Receivables

Finance receivables consist of automobile finance installment Contracts and Direct Loans and are detailed as follows:


	September 30, 2011			March 31, 2011
Finance receivables, gross contract	$	383,019,564		$	372,950,283
Unearned interest		(109,240,396	)		(106,512,562	)

Finance receivables, net of unearned interest		273,779,168			266,437,721
Allowance for credit losses		(36,846,644	)		(36,273,867	)

Finance receivables, net	$	236,932,524		$	230,163,854

The terms of the finance receivables range from 12 to 72 months and the direct consumer loans range from 6 to 48 months. The receivables bear a weighted average interest rate of approximately 23.5% as of September 30, 2011 and March 31, 2011.

Finance receivables consist of Contracts and Direct Loans, each of which comprises a portfolio segment. Each portfolio segment consists of smaller balance homogeneous loans which are collectively evaluated for impairment.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts:


	Three months ended September 30,						Six months ended September 30,
	2011			2010			2011			2010
Balance at beginning of period	$	36,534,432		$	32,334,059		$	35,895,449		$	30,408,578
Discounts acquired on new volume		2,966,280			3,282,702			6,076,091			6,449,499
Current period provision		109,516			1,654,329			108,708			3,255,166
Losses absorbed		(3,777,929	)		(3,879,066	)		(6,794,563	)		(7,254,208	)
Recoveries		542,240			558,914			1,105,108			1,138,526
Discounts accreted		(17,873	)		(28,207	)		(34,127	)		(74,830	)

Balance at end of period	$	36,356,666		$	33,922,731		$	36,356,666		$	33,922,731

The Company purchases Contracts from automobile dealers at a negotiated price that is less than the original principal amount being financed by the purchaser of the automobile. The Contracts are predominately for used vehicles. As of September 30, 2011, the average model year of vehicles collateralizing the portfolio was a 2005 vehicle. The average loan to value ratio, which expresses the amount of the Contract as a percentage of the average wholesale value of the automobile, is approximately 90%. A dealer discount represents the difference between the finance receivable, net of unearned interest, of a Contract, and the amount of money the Company actually pays for the Contract. The discount negotiated by the Company is a function of the credit quality of the customer, the wholesale value of the vehicle, and competition in any given market. In making decisions regarding the purchase of a particular Contract the Company considers the following factors related to the borrower: place and length of residence; current and prior job status; history in making installment payments for automobiles; current income; and credit history. In addition, the Company examines its prior experience with Contracts purchased from the dealer from which the Company is purchasing the Contract, and the value of the automobile in relation to the purchase price and the term of the Contract. For allowance purposes, the entire amount of discount is related to credit quality and is considered to be part of the credit loss reserve. The Company utilizes a static pool approach to track portfolio performance. A static pool retains an amount equal to 100% of the discount as a reserve for credit losses. Subsequent to the purchase, if the reserve for credit losses is determined to be inadequate for a static pool, then an additional charge to income through the provision is used to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, and current economic conditions. Such evaluation, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for an adequate allowance for credit losses.

The average dealer discount associated with new volume for the three months ended September 30, 2011 and 2010 was 8.45% and 8.70%, respectively. The average dealer discount associated with new volume for the six months ended September 30, 2011 and 2010 was 8.48% and 8.78%, respectively.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Direct Loans:


	Three months ended September 30,						Six months ended September 30,
	2011			2010			2011			2010
Balance at beginning of period	$	447,271		$	342,367		$	378,418		$	382,869
Current period provision		68,513			57,544			148,736			52,368
Losses absorbed		(32,648	)		(60,355	)		(51,094	)		(110,407	)
Recoveries		6,842			11,754			13,918			26,480

Balance at end of period	$	489,978		$	351,310		$	489,978		$	351,310

Direct Loans are loans originated directly between the Company and the consumer. These loans are typically for amounts ranging from $1,000 to $8,000 and are generally secured by a lien on an automobile, watercraft or other permissible tangible personal property. The majority of Direct Loans are originated with current or former customers under the Company’s automobile financing program. The typical direct loan represents a significantly better credit risk than our typical Contract due to the customer’s historical payment history with the Company. In deciding whether or not to make a loan, the Company considers the individual’s credit history, job stability, income and impressions created during a personal interview with a Company loan officer. Additionally, because most of the direct consumer loans made by the Company to date have been made to borrowers under Contracts previously purchased by the Company, the payment history of the borrower under the Contract is a significant factor in making the loan decision. As of September 30, 2011, loans made by the Company pursuant to its direct loan program constituted approximately 1% of the aggregate principal amount of the Company’s loan portfolio.

Changes in the allowance for credit losses for both Contracts and Direct Loans were driven by current economic conditions and trends over several reporting periods which are useful in estimating future losses and overall portfolio performance.

The following table is an assessment of the credit quality by creditworthiness. A performing account is defined as an account that is less than 60 days past due. A non-performing account is defined as an account that is contractually delinquent for 60 days or more and the accrual of interest income is suspended. When an account is 120 days contractually delinquent, the account is written off.


	September 30, 2011				September 30, 2010
	Contracts		Direct Loans		Contracts		Direct Loans
Non-bankrupt accounts	$	376,895,455	$	5,721,768	$	349,857,565	$	5,007,919
Bankrupt accounts		402,341		—		485,420		—

Total	$	377,297,796	$	5,721,768	$	350,342,985	$	5,007,919

Performing accounts	$	373,068,536	$	5,685,981	$	346,081,444	$	4,952,479
Non-performing accounts		4,229,260		35,787		4,261,541		55,440

Total	$	377,297,796	$	5,721,768	$	350,342,985	$	5,007,919

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and under its direct consumer loan program:


			Delinquencies
Contracts	Gross Balance Outstanding		30 – 59 days			60 – 89 days			90 + days			Total
September 30, 2011	$	377,297,796	$	10,934,539		$	3,188,022		$	1,041,238		$	15,163,799
				2.90	%		0.84	%		0.28	%		4.02	%
September 30, 2010	$	350,342,985	$	8,987,387		$	3,288,209		$	973,332		$	13,248,928
				2.56	%		0.94	%		0.28	%		3.78	%
Direct Loans	Gross Balance Outstanding		30 – 59 days			60 – 89 days			90 + days			Total
September 30, 2011	$	5,721,768	$	22,229		$	20,229		$	15,558		$	58,016
				0.39	%		0.35	%		0.27	%		1.01	%
September 30, 2010	$	5,007,919	$	59,277		$	41,963		$	13,477		$	114,717
				1.18	%		0.84	%		0.27	%		2.29	%

The delinquency percentage for Contracts more than thirty days past due as of September 30, 2011 was 4.02% as compared to 3.78% as of September 30, 2010. The delinquency percentage for Direct Loans more than thirty days past due as of September 30, 2011 was 1.01% as compared to 2.29% as of September 30, 2011.

When the Company receives a payment for a Contract that was contractually delinquent for more than 60 days, the payment is posted to the account. At the time of the payment, the interest that was paid is recorded as income by the Company and the Contract is no longer considered over 60 days contractually delinquent; therefore, the accruing of interest is resumed.