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Finance Receivables

12 Months Ended

Mar. 31, 2015

Receivables [Abstract]

Finance Receivables

3. Finance Receivables

Finance receivables consist of Contracts and 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 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:


		2015				2014				2013
Indirect finance receivables, gross contract		$	447,042,854			$	413,613,292			$	386,940,093
Unearned interest			(136,895,592	)			(121,996,483	)			(111,121,493	)

Indirect finance receivables, net of unearned interest			310,147,262				291,616,809				275,818,600
Unearned dealer discounts			(17,779,690	)			(17,214,269	)			(16,415,169	)

Indirect finance receivables, net of unearned interest and unearned dealer discounts			292,367,572				274,402,540				259,403,431
Allowance for credit losses			(11,325,222	)			(12,889,082	)			(16,090,652	)

Indirect finance receivables, net		$	281,042,350			$	261,513,458			$	243,312,779

The terms of the Contracts range from 12 to 72 months and bear a weighted average contractual interest rate of 22.86% and 23.08% as of March 31, 2015 and 2014, 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:


		2015				2014				2013
Balance at beginning of year		$	12,889,082			$	16,090,652			$	19,499,208
Provision for credit losses			20,008,166				14,693,841				13,252,382
Losses absorbed			(25,041,833	)			(21,690,010	)			(19,851,080	)
Recoveries			3,469,807				3,794,599				3,190,142

Balance at end of year		$	11,325,222			$	12,889,082			$	16,090,652

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, 2015, the average model year of vehicles collateralizing the portfolio was 2007. The average loan to value ratio, which expresses the amount of the Contract as a percentage of the value of the automobile, is approximately 96%. The Company utilizes a static pool approach to track portfolio performance. 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 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.

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


		2015				2014				2013
Direct finance receivables, gross contract		$	10,931,904			$	10,730,901			$	8,781,637
Unearned interest			(2,367,404	)			(2,310,486	)			(1,800,698	)

Direct finance receivables, net of unearned interest			8,564,500				8,420,415				6,980,939
Allowance for credit losses			(702,790	)			(590,278	)			(467,917	)

Direct finance receivables, net		$	7,861,710			$	7,830,137			$	6,513,022

The terms of the Direct Loans range from 6 to 48 months and bear a weighted average contractual interest rate of 26.14% and 26.32% as of March 31, 2015 and 2014, 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:


		2015				2014				2013
Balance at beginning of year		$	590,278			$	467,917			$	492,184
Provision for credit losses			362,364				285,375				139,493
Losses absorbed			(278,333	)			(192,156	)			(190,871	)
Recoveries			28,481				29,142				27,111

Balance at end of year		$	702,790			$	590,278			$	467,917

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; however, the underlying collateral is less valuable. 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, 2015, 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.

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 or is a Chapter 13 bankrupt account, and the accrual of interest income is suspended. When an account is 120 days contractually delinquent, the account is written off. Upon notification of a bankruptcy, an account is monitored for collection with other Chapter 13 bankrupt accounts. In the event the debtors balance has been reduced by the bankruptcy court, the Company will record a loss equal to the amount of principal balance reduction. The remaining balance will be reduced as payments are received by the bankruptcy court. In the event an account is dismissed from bankruptcy, the Company will decide, based on several factors, to begin repossession proceedings or to allow the customer to begin making regularly scheduled payments.

The following table is an assessment of the credit quality by creditworthiness as of March 31, and excludes Chapter 13 Bankrupt accounts.


		2015								2014
		Contracts				Direct Loans				Contracts				Direct Loans
Performing accounts		$	438,317,584			$	10,855,209			$	405,691,402			$	10,656,685
Non-performing accounts			4,765,425				56,636				4,840,819				47,860

Total		$	443,083,009			$	10,911,845			$	410,532,221			$	10,704,545
Chapter 13 bankrupt accounts, net of unearned interest			3,959,845				20,059				3,081,071				26,356

Finance receivables, gross contract		$	447,042,854			$	10,931,904			$	413,613,292			$	10,730,901

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and Direct Loans, excluding any Chapter 13 bankrupt accounts:


Contracts		Gross Balance Outstanding				30 – 59 days				60 – 89 days				90 + days				Total
March 31, 2015		$	443,083,009			$	13,694,370			$	3,435,332			$	1,330,093			$	18,459,795
							3.09	%			0.78	%			0.30	%			4.17	%
March 31, 2014		$	410,532,221			$	11,713,021			$	2,944,228			$	1,896,591			$	16,553,840
							2.85	%			0.72	%			0.46	%			4.03	%
March 31, 2013		$	386,324,595			$	10,421,500			$	2,631,617			$	1,188,160			$	14,241,277
							2.70	%			0.68	%			0.31	%			3.69	%

Direct Loans		Gross Balance Outstanding				30 – 59 days				60 – 89 days				90 + days				Total
March 31, 2015		$	10,911,845			$	122,718			$	41,984			$	14,652			$	179,354
							1.12	%			0.39	%			0.13	%			1.64	%
March 31, 2014		$	10,704,545			$	143,624			$	25,345			$	22,515			$	191,484
							1.34	%			0.23	%			0.21	%			1.78	%
March 31, 2013		$	8,781,637			$	72,364			$	21,509			$	13,790			$	107,663
							0.82	%			0.25	%			0.16	%			1.23	%