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Finance Receivables

6 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Finance Receivables

4. Finance Receivables

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


		September 30,				March 31,
		2015				2015
Finance receivables, gross contract		$	491,064,286			$	457,974,758
Unearned interest			(152,502,120	)			(139,262,996	)

Finance receivables, net of unearned interest			338,562,166				318,711,762
Unearned dealer discounts			(18,719,104	)			(17,779,690	)

Finance receivables, net of unearned interest and unearned dealer discounts			319,843,062				300,932,072
Allowance for credit losses			(11,733,765	)			(12,028,012	)

Finance receivables, net		$	308,109,297			$	288,904,060

The terms of the Contracts range from 12 to 72 months and the Direct Loans range from 6 to 60 months. The Contracts and Direct Loans bear a weighted average effective interest rate of 22.77% and 25.81% as of September 30, 2015, respectively and 22.86% and 26.14% as of March 31, 2015, respectively.

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,
		2015				2014				2015				2014
Balance at beginning of period		$	11,523,526			$	12,933,905			$	11,325,222			$	12,889,082
Current period provision			6,078,219				5,067,689				10,964,689				9,141,087
Losses absorbed			(7,347,395	)			(7,046,790	)			(12,870,224	)			(11,896,413	)
Recoveries			699,494				987,890				1,534,157				1,808,938

Balance at end of period		$	10,953,844			$	11,942,694			$	10,953,844			$	11,942,694

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, 2015, the average model year of vehicles collateralizing the portfolio was a 2007 vehicle. The average loan to value ratio, which expresses the amount of the Contract as a percentage of the value of the automobile, is approximately 97%. 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.

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,
		2015				2014				2015				2014
Balance at beginning of period		$	754,757			$	706,960			$	702,789			$	590,278
Current period provision			98,901				86,546				201,867				244,963
Losses absorbed			(81,310	)			(65,015	)			(140,286	)			(119,115	)
Recoveries			7,573				6,009				15,551				18,374

Balance at end of period		$	779,921			$	734,500			$	779,921			$	734,500

Direct Loans are 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 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 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 September 30, 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 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 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 Chapter 13 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:


		September 30, 2015								September 30, 2014
		Contracts				Direct Loans				Contracts				Direct Loans
Performing accounts		$	466,911,165			$	11,619,304			$	419,111,304			$	11,268,405
Non-performing accounts			8,178,141				53,891				8,085,319				101,071

Total		$	475,089,306			$	11,673,195			$	427,196,623			$	11,369,476
Chapter 13 bankrupt accounts			4,268,637				33,148				3,585,641				32,355

Finance receivables, gross contract		$	479,357,943			$	11,706,343			$	430,782,264			$	11,401,831

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


Contracts		Gross Balance Outstanding				31 – 60 days				61 – 90 days				Over 90 days				Total
September 30, 2015		$	475,089,306			$	19,746,203			$	5,603,230			$	2,574,911			$	27,924,344
							4.16	%			1.18	%			0.54	%			5.88	%
September 30, 2014		$	427,196,623			$	19,923,081			$	5,241,042			$	2,844,277			$	28,008,400
							4.66	%			1.23	%			0.67	%			6.56	%

Direct Loans		Gross Balance Outstanding				31 – 60 days				61 – 90 days				Over 90 days				Total
September 30, 2015		$	11,673,195			$	156,375			$	27,819			$	26,072			$	210,266
							1.34	%			0.24	%			0.22	%			1.80	%
September 30, 2014		$	11,369,476			$	215,570			$	77,219			$	23,852			$	316,641
							1.90	%			0.68	%			0.21	%			2.79	%