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Finance Receivables | 9 Months Ended
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Dec. 31, 2019
Receivables [Abstract] |
Finance Receivables | 4. Finance Receivables Finance Receivables Portfolio Finance receivables consist of Contracts and Direct Loans and are detailed as follows:
|  | (In thousands) |
|  | December 31, 2019 |  |  | March 31, 2019 |  |  | December 31, 2018 |
Finance receivables |  | $ | 211,813 |  |  | $ | 228,994 |  |  | $ | 250,279 |
Accrued interest receivable |  |  | 3,088 |  |  |  | 2,889 |  |  |  | 2,421 |
Unearned dealer discounts |  |  | (8,436 | ) |  |  | (10,083 | ) |  |  | (10,757 | )
Unearned insurance and fee commissions |  |  | (2,644 | ) |  |  | (2,826 | ) |  |  | (2,758 | )
Finance receivables, net of unearned |  |  | 203,821 |  |  |  | 218,974 |  |  |  | 239,185 |
Purchase price discount |  |  | (222 | ) |  |  | — |  |  |  | — |
Allowance for credit losses |  |  | (13,272 | ) |  |  | (16,932 | ) |  |  | (19,975 | )
Finance receivables, net |  | $ | 190,327 |  |  | $ | 202,042 |  |  | $ | 219,210 |
During the quarter ended December 31, 2019, the Company completed a bulk asset purchase of $1.1 million of Contract loans. Contracts and Direct Loans each comprise a portfolio segment. The following tables present selected information on the entire portfolio of the Company:
|  | As of December 31, |
Contract Portfolio |  | 2019 |  |  | 2018 |
Average APR |  |  | 22.7 | % |  |  | 22.7 | %
Average discount |  |  | 7.7 | % |  |  | 7.5 | %
Average term (months) |  |  | 51 |  |  |  | 53 |
Number of active contracts |  |  | 25,995 |  |  |  | 29,061 |
|  | As of December 31, |
Direct Loan Portfolio |  | 2019 |  |  | 2018 |
Average APR |  |  | 27.0 | % |  |  | 26.0 | %
Average term (months) |  |  | 26 |  |  |  | 27 |
Number of active contracts |  |  | 3,376 |  |  |  | 2,641 |
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 predominantly for used vehicles. As of December 31, 2019, the average model year of vehicles collateralizing the portfolio was a 2011 vehicle. Direct Loans are typically for amounts ranging from $500 to $11,000 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 better credit risk than the typical Contract due to the customer’s prior payment history with the Company; however, the underlying collateral is “typically” less valuable. In deciding whether 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 current or former customers, the payment history of the borrower is a significant factor in making the loan decision. As of December 31, 2019, loans made by the Company pursuant to its Direct Loan program constituted approximately 5.4% 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 primarily by consideration the composition of the portfolio, current economic conditions, the estimated net realizable value of the underlying collateral, historical loan loss experience, delinquency, non-performing assets, and bankrupt accounts when determining management’s estimate of probable credit losses and adequacy of the allowance for credit losses. If the allowance for credit losses is determined to be inadequate, then an additional charge to the provision would be recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio. Additionally, credit loss trends over several reporting periods are utilized in estimating future losses and overall portfolio performance. Conversely, the Company could identify abnormalities in the composition of the portfolio, which would indicate the calculation is overstated and management judgement may be required to determine the allowance of credit losses for both Contracts and Direct Loans. Each portfolio segment consists of smaller balance homogeneous loans which are collectively evaluated for impairment. Allowance for Credit Losses The following table sets forth a reconciliation of the changes in the allowance for credit losses on Contracts and Direct Loans for the three months ended December 31, 2019 and 2018:
|  | Three months ended December 31, 2019 |  |  | Nine months ended December 31, 2019 |
|  | Contracts |  |  | Direct Loans |  |  | Consolidated |  |  | Contracts |  |  | Direct Loans |  |  | Consolidated |
Balance at beginning of period |  | $ | 12,680 |  |  | $ | 850 |  |  | $ | 13,530 |  |  | $ | 16,575 |  |  | $ | 357 |  |  | $ | 16,932 |
Provision for credit losses |  |  | 4,597 |  |  |  | - |  |  |  | 4,597 |  |  |  | 12,177 |  |  |  | 805 |  |  |  | 12,982 |
Charge-offs |  |  | (7,350 | ) |  |  | (144 | ) |  |  | (7,494 | ) |  |  | (22,057 | ) |  |  | (483 | ) |  |  | (22,540 | )
Recoveries |  |  | 2,626 |  |  |  | 13 |  |  |  | 2,639 |  |  |  | 5,858 |  |  |  | 40 |  |  |  | 5,898 |
Balance at December 31, 2019 |  | $ | 12,553 |  |  | $ | 719 |  |  | $ | 13,272 |  |  | $ | 12,553 |  |  | $ | 719 |  |  | $ | 13,272 |
|  | Three months ended December 31, 2018 |  |  | Nine months ended December 31, 2018 |
|  | Contracts |  |  | Direct Loans |  |  | Consolidated |  |  | Contracts |  |  | Direct Loans |  |  | Consolidated |
Balance at beginning of period |  | $ | 18,692 |  |  | $ | 484 |  |  | $ | 19,176 |  |  | $ | 19,433 |  |  | $ | 833 |  |  | $ | 20,266 |
Provision for credit losses |  |  | 7,743 |  |  |  | 127 |  |  |  | 7,870 |  |  |  | 21,655 |  |  |  | 15 |  |  |  | 21,670 |
Charge-offs |  |  | (7,337 | ) |  |  | (103 | ) |  |  | (7,440 | ) |  |  | (22,965 | ) |  |  | (357 | ) |  |  | (23,322 | )
Recoveries |  |  | 359 |  |  |  | 10 |  |  |  | 369 |  |  |  | 1,334 |  |  |  | 27 |  |  |  | 1,361 |
Balance at December 31, 2018 |  | $ | 19,457 |  |  | $ | 518 |  |  | $ | 19,975 |  |  | $ | 19,457 |  |  | $ | 518 |  |  | $ | 19,975 |
During the first quarter of the fiscal year ending March 31, 2019, the Company began using the trailing six-month charge-offs, annualized, to calculate the allowance for credit losses. Additionally, the Company completed bulk sales of charge-off accounts, which included $1.5 million of bankruptcy accounts and $0.1 million of non-performing accounts. These bulk sales impacted the provision for credit losses, charge-off, and recoveries amounts for the three and nine months ended for December 31, 2019, respectively. The Company’s allowance for credit losses also incorporates recent trends such as delinquency, non-performing assets, and bankruptcy. The Company believes that this approach reflects the current trends of incurred losses within the portfolio and better aligns the allowance for credit losses with the portfolio’s performance indicators. The following table is an assessment of the credit quality by creditworthiness:
|  | (In thousands) |
|  | December 31, 2019 |  |  | December 31, 2018 |
|  | Contracts |  |  | Direct Loans |  |  | Total |  |  | Contracts |  |  | Direct Loans |  |  | Total |
Performing accounts |  | $ | 191,773 |  |  | $ | 11,229 |  |  | $ | 203,002 |  |  | $ | 224,248 |  |  | $ | 8,272 |  |  | $ | 232,520 |
Non-performing accounts |  |  | 8,319 |  |  |  | 194 |  |  |  | 8,513 |  |  |  | 13,935 |  |  |  | 198 |  |  |  | 14,133 |
Total |  |  | 200,092 |  |  |  | 11,423 |  |  |  | 211,515 |  |  |  | 238,183 |  |  |  | 8,470 |  |  |  | 246,653 |
Chapter 13 bankruptcy accounts |  |  | 289 |  |  |  | 9 |  |  |  | 298 |  |  |  | 3,564 |  |  |  | 62 |  |  |  | 3,626 |
Finance receivables |  | $ | 200,381 |  |  | $ | 11,432 |  |  | $ | 211,813 |  |  | $ | 241,747 |  |  | $ | 8,532 |  |  | $ | 250,279 |
A performing account is defined as an account that is less than 61 days past due. The Company defines an automobile contract as delinquent when more than 10% of a payment contractually due by a certain date has not been paid by the immediately following due date, which date may have been extended within limits specified in the servicing agreements or as a result of a deferral. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable. In certain circumstances, the Company will grant obligors one-month payment extensions. The only modification of terms in those circumstances is to advance the obligor’s next due date by one month and extend the maturity date of the receivable. There are no other concessions, such as a reduction in interest rate, or forgiveness of principal or of accrued interest. Accordingly, the Company considers such extensions to be insignificant delays in payments rather than troubled debt restructurings. A non-performing account is defined as an account that is contractually delinquent for 61 days or more or is a Chapter 13 bankruptcy account for which the corresponding bankruptcy plan has not been confirmed by the relevant court. Once the account is deemed non-performing, the accrual of interest income is suspended. As of February 2019, the Company changed the charge-off policy from 181 days contractually delinquent to 121 days contractually delinquent. Also, as of February 2019, once Chapter 13 bankruptcy plans are confirmed by the relevant court, the corresponding accounts are charged off. 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 Company does consider Chapter 13 bankruptcy accounts, for which the corresponding bankruptcy plan has not been confirmed as of the period end to be troubled debt restructurings and included in the Company’s allowance for credit losses is a specific reserve of approximately $774,000 for these accounts as of December 31, 2018. Based on declining balances of the bankruptcy accounts and the overall portfolio, the Company determined that no additional reserves for bankruptcy accounts was warranted as of December 31, 2019. The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and Direct Loans, excluding Chapter 13 bankruptcy accounts:
|  | Contracts |
|  | (In thousands, except percentages) |
|  | Balance Outstanding |  |  | 30 – 59 days |  |  | 60 – 89 days |  |  | 90 – 119 days |  |  | 120+ |  |  | Total |
December 31, 2019 |  | $ | 200,092 |  |  | $ | 16,748 |  |  | $ | 5,993 |  |  | $ | 2,279 |  |  | $ | 47 |  |  | $ | 25,067 |
|  |  |  |  |  |  | 8.37 | % |  |  | 3.00 | % |  |  | 1.14 | % |  |  | 0.02 | % |  |  | 12.53 | %
December 31, 2018 |  | $ | 238,183 |  |  | $ | 19,552 |  |  | $ | 7,577 |  |  | $ | 3,919 |  |  | $ | 2,439 |  |  | $ | 33,487 |
|  |  |  |  |  |  | 8.21 | % |  |  | 3.18 | % |  |  | 1.65 | % |  |  | 1.02 | % |  |  | 14.06 | %
|  | Direct Loans |
|  | Balance Outstanding |  |  | 30 – 59 days |  |  | 60 – 89 days |  |  | 90 – 119 days |  |  | 120+ |  |  | Total |
December 31, 2019 |  | $ | 11,423 |  |  | $ | 331 |  |  | $ | 123 |  |  | $ | 68 |  |  | $ | 3 |  |  | $ | 525 |
|  |  |  |  |  |  | 2.90 | % |  |  | 1.08 | % |  |  | 0.60 | % |  |  | 0.03 | % |  |  | 4.60 | %
December 31, 2018 |  | $ | 8,470 |  |  | $ | 189 |  |  | $ | 95 |  |  | $ | 35 |  |  | $ | 68 |  |  | $ | 387 |
|  |  |  |  |  |  | 2.23 | % |  |  | 1.12 | % |  |  | 0.41 | % |  |  | 0.80 | % |  |  | 4.57 | %

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- Definition The entire disclosure for financing receivable. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2196816 + Details
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