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Finance Receivables

12 Months Ended

Mar. 31, 2012

Receivables [Abstract]

Finance Receivables

3. Finance Receivables

Finance receivables consist of Contracts and direct consumer loans (“Direct Loans”), each of which comprise a portfolio segment. Each portfolio segment consists of smaller balance homogeneous loans which are collectively evaluated for impairment.

The Company purchases individual Contracts from new and used automobile dealers in its markets. There is no relationship between the Company and the dealer with respect to a given contract once the assignment of that contract is complete. The dealer has no vested interest in the performance of any installment contract the Company purchases. The Company charges-off receivables when an individual account has become more than 120 days contractually delinquent. In the event of repossession the charge-off will occur in the month in which the vehicle was repossessed.

Contracts included in finance receivables are detailed as follows as of fiscal years ended March 31:


		2012				2011				2010
Indirect finance receivables, gross contract		$	382,766,667			$	368,099,418			$	320,579,222
Unearned interest			(109,456,018	)			(105,622,007	)			(91,385,145	)

Indirect finance receivables, net of unearned interest			273,310,649				262,477,411				229,194,077
Allowance for credit losses			(35,495,684	)			(35,895,449	)			(30,408,578	)

Indirect finance receivables, net		$	237,814,965			$	226,581,962			$	198,785,499

The terms of the Contracts range from 12 to 72 months and bear a weighted average effective interest rate of 23.58% and 23.49% as of March 31, 2012 and 2011, respectively.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts for the fiscal years ended March 31:


		2012				2011				2010

Balance at beginning of year		$	35,895,449			$	30,408,578			$	24,926,076
Discounts acquired on new volume			12,415,896				12,919,492				11,087,231
Provision for credit losses			(176,745	)			4,484,284				11,189,432
Losses absorbed			(14,971,422	)			(14,036,888	)			(18,404,659	)
Recoveries			2,405,750				2,255,683				1,962,496
Discounts accreted			(73,244	)			(135,700	)			(351,998	)

Balance at end of year		$	35,495,684			$	35,895,449			$	30,408,578

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 March 31, 2012, the average model year of vehicles collateralizing the portfolio was 2005. The average loan to value ratio, which expresses the amount of the Contract as a percentage of the 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. The entire amount of discount is related to credit quality and is considered to be part of the allowance for credit losses. The Company utilizes a static pool approach to track portfolio performance. A static pool retains an amount equal to 100% of the discount as an allowance for credit losses. Subsequent to the purchase, if the allowance 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 fiscal years ended March 31, 2012 and 2011 was 8.47% and 8.78%, respectively

Direct Loans are also included in finance receivables and are detailed as follows as of fiscal years ended March 31:


		2012				2011				2010

Direct finance receivables, gross contract		$	6,221,688			$	4,850,865			$	4,840,381
Unearned interest			(1,195,948	)			(890,555	)			(803,257	)

Direct finance receivables, net of unearned interest			5,025,740				3,960,310				4,037,124
Allowance for credit losses			(492,184	)			(378,418	)			(382,869	)

Direct finance receivables, net		$	4,533,556			$	3,581,892			$	3,654,255

The terms of the Direct Loans range from 6 to 48 months and bear a weighted average effective interest rate of 26.14% and 25.93% as of March 31, 2012 and 2011, respectively.

The following table sets forth a reconciliation of the changes in the allowance for credit losses on Direct Loans for the fiscal years ended March 31:


		2012				2011				2010

Balance at beginning of year		$	378,418			$	382,869			$	513,067
Provision for credit losses			182,062				125,937				132,417
Losses absorbed			(93,041	)			(173,970	)			(324,521	)
Recoveries			24,745				43,582				61,906

Balance at end of year		$	492,184			$	378,418			$	382,869

Direct Loans are loans originated directly between the Company and the consumer. These loans are typically for amounts ranging from $1,000 to $9,000 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 Contracts 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 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 March 31, 2012, loans made by the Company pursuant to its direct loan program constituted approximately 2% 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 credit loss 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 as of March 31. 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.


		2012								2011
		Contracts				Direct Loans				Contracts				Direct Loans
Non-bankrupt accounts		$	382,358,608			$	6,221,688			$	367,685,305			$	4,844,683
Bankrupt accounts			408,059				—				414,113				6,182

Total		$	382,766,667			$	6,221,688			$	368,099,418			$	4,850,865


Performing accounts		$	380,213,503			$	6,202,498			$	366,081,821			$	4,833,310
Non-performing accounts			2,553,164				19,190				2,017,597				17,555

Total		$	382,766,667			$	6,221,688			$	368,099,418			$	4,850,865

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and Direct Loans:


						Delinquencies
Contracts		Gross Balance Outstanding				30 – 59 days				60 – 89 days				90 + days				Total

March 31, 2012		$	382,766,667			$	8,994,485			$	1,889,643			$	663,521			$	11,547,649
							2.35	%			0.49	%			0.17	%			3.01	%

March 31, 2011		$	368,099,418			$	6,106,211			$	1,468,079			$	549,518			$	8,123,808
							1.66	%			0.40	%			0.15	%			2.21	%

March 31, 2010		$	320,579,222			$	7,613,284			$	1,752,638			$	778,606			$	10,144,528
							2.37	%			0.55	%			0.24	%			3.16	%

Direct Loans		Gross Balance Outstanding				30 – 59 days				60 – 89 days				90 + days				Total

March 31, 2012		$	6,221,688			$	48,899			$	14,257			$	4,933			$	68,089
							0.79	%			0.23	%			0.07	%			1.09	%

March 31, 2011		$	4,850,865			$	37,399			$	5,636			$	11,919			$	54,954
							0.77	%			0.11	%			0.25	%			1.13	%

March 31, 2010		$	4,840,381			$	98,854			$	34,864			$	14,383			$	148,101
							2.04	%			0.72	%			0.30	%			3.06	%