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Finance Receivables

9 Months Ended

Dec. 31, 2011

Receivables [Abstract]

4. Finance Receivables

4. Finance Receivables

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


		December 31, 2011				March 31, 2011
Finance receivables, gross contract		$	381,787,355			$	372,950,283
Unearned interest			(108,215,780	)			(106,512,562	)

Finance receivables, net of unearned interest			273,571,575				266,437,721
Allowance for credit losses			(36,086,381	)			(36,273,867	)

Finance receivables, net		$	237,485,194			$	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 23.2% as of December 31, 2011 and 23.5% as of 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 December 31,								Nine months ended December 31,
		2011				2010				2011				2010
Balance at beginning of period		$	36,356,666			$	33,922,731			$	35,895,449			$	30,408,578
Discounts acquired on new volume			2,729,337				2,779,357				8,805,428				9,228,856
Current period provision			450,951				1,127,064				559,659				4,382,230
Losses absorbed			(4,474,500	)			(3,960,465	)			(11,269,063	)			(11,214,673	)
Recoveries			559,716				511,261				1,664,824				1,649,787
Discounts accreted			(8,570	)			(31,507	)			(42,697	)			(106,337	)

Balance at end of period		$	35,613,600			$	34,348,441			$	36,613,600			$	34,348,441

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 December 31, 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 91%, at the time of purchase. 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 December 31, 2011 and 2010 was 8.41% and 8.74%, respectively. The average dealer discount associated with new volume for the nine months ended December 31, 2011 and 2010 was 8.46% and 8.76%, respectively.

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


		Three months ended December 31,								Nine months ended December 31,
		2011				2010				2011				2010
Balance at beginning of period		$	489,978			$	351,310			$	378,418			$	382,869
Current period provision			3,388				74,108				152,124				126,476
Losses absorbed			(26,150	)			(43,204	)			(77,244	)			(153,611	)
Recoveries			5,565				9,052				19,483				35,532

Balance at end of period		$	472,781			$	391,266			$	472,781			$	391,266

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 December 31, 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 61 days past due. A non-performing account is defined as an account that is contractually delinquent for 61 days or more and the accrual of interest income is suspended. When an account is 120 days contractually delinquent, the account is written off.


		December 31, 2011								December 31, 2010
		Contracts				Direct Loans				Contracts				Direct Loans
Non-bankrupt accounts		$	374,923,192			$	6,479,256			$	353,711,759			$	5,250,997
Bankrupt accounts			382,858				2,049				251,805				1,549

Total		$	375,306,050			$	6,481,305			$	353,963,564			$	5,252,546


Performing accounts		$	371,050,744			$	6,463,927			$	350,219,972			$	5,219,677
Non-performing accounts			4,255,306				17,378				3,743,592				32,869

Total		$	375,306,050			$	6,481,305			$	353,963,564			$	5,252,546

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				31 – 60 days				61 – 90 days				Over 90 days				Total
December 31, 2011		$	375,306,050			$	13,643,453			$	3,129,675			$	1,125,631			$	17,898,759
							3.64	%			0.83	%			0.30	%			4.77	%
December 31, 2010		$	353,963,564			$	10,065,353			$	2,807,904			$	935,688			$	13,808,945
							2.84	%			0.79	%			0.26	%			3.89	%
Direct Loans		Gross Balance Outstanding				31 – 60 days				61 – 90 days				Over 90 days				Total
December 31, 2011		$	6,481,305			$	98,826			$	11,716			$	5,662			$	116,204
							1.53	%			0.18	%			0.09	%			1.80	%
December 31, 2010		$	5,252,546			$	63,680			$	18,491			$	14,378			$	96,549
							1.21	%			0.35	%			0.27	%			1.83	%

The delinquency percentage for Contracts more than thirty days past due as of December 31, 2011 was 4.77% as compared to 3.89% as of December 31, 2010. The delinquency percentage for Direct Loans more than thirty days past due as of December 31, 2011 was 1.80% as compared to 1.83% as of December 31, 2010.

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.