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 used and new 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’s charge off policy is 121 days past due. In addition, Chapter 13 Bankruptcies, once the Company is notified of such, is notated on the customer's account of the bankruptcy status. When the Company receives notice that a Chapter 13 Bankruptcy plan is not confirmed by the courts or the loan is 121 days past due, the loan is charged off. This policy is in line with industry standards, considering the sub-prime nature of our customers. In the event of repossession, the charge-off will occur after standard collection practices by the Company, as determined by the residency state of a customer. This practice is consistent with the sub-prime industry.

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


	(In thousands)
	2023			2022
Finance receivables	$	128,170		$	178,786
Accrued interest receivable		1,932			2,315
Unearned dealer discounts		(4,286	)		(6,894	)
Unearned purchase price discounts		(82	)		(212	)
Unearned insurance and fee commissions		(1,419	)		(2,446	)
Finance receivables, net of unearned		124,315			171,549
Allowance for credit losses		(17,396	)		(2,949	)
Finance receivables, net	$	106,919		$	168,600

Contracts

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 March 31, 2023, the average model year of vehicles collateralizing the portfolio was a 2012 vehicle. The terms of the Contracts range from 12 to 84 months and bear an average contractual interest rate of 22.2% and 22.9% as of March 31, 2023 and 2022, respectively.

Direct Loans are typically for amounts ranging from $1 thousand to $15 thousands 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 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.

During fiscal 2023, the Company has cancelled, not renewed, or otherwise terminated all of such Direct Loan licenses. Consequently, the Company has not originated any new Direct Loans since the end of the third quarter of fiscal 2023 and the Company does not intend to originate any new Direct Loans going forward. However, the Company expects its third-party service provider to continue to service the Company’s existing Direct Loans. Direct Loans constituted approximately 15% of the aggregate principal amount of the Company’s loan portfolio as of March 31, 2023, and 14% of the aggregate principal amount of the Company’s loan portfolio as of March 31, 2022. The terms of the Direct Loans range from 6 to 72 months and bear an average contractual interest rate of 30.4% and 29.8% as of March 31, 2023 and 2022, respectively. The Company expects its total Direct Loans portfolio to be reduced over time as such Direct Loans are paid off or otherwise liquidated until there are no Direct Loans in the Company’s portfolio, which at the current rate of such activity, is expected to occur sometime during the fiscal year ending March 31, 2027.

The following presents the activity in our allowance for credit losses:


	For the year ended March 31, 2023
	(In thousands)
	Indirect			Direct			Total
Balance at beginning of year	$	1,961		$	988		$	2,949
Provision for credit losses		37,125			3,533			40,658
Charge-offs		(28,391	)		(3,621	)		(32,012	)
Recoveries		5,570			231			5,801
Balance at end of year	$	16,265		$	1,131		$	17,396


	For the year ended March 31, 2022
	(In thousands)
	Indirect			Direct			Total
Balance at beginning of year	$	6,001		$	153		$	6,154
Provision for credit losses		4,210			1,755			5,965
Charge-offs		(13,515	)		(980	)		(14,495	)
Recoveries		5,265			60			5,325
Balance at end of year	$	1,961		$	988		$	2,949

A performing account is defined as an account that is less than 60 days past due. The Company defines an automobile contract as delinquent when more than 25% of payments 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, 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 60 days or more or is a Chapter 13 bankruptcy account, and the accrual of interest income is suspended. The Company’s charge-off policy for contractually delinquent is 121 days. The Company’s charge-off policy aligns with practices within the subprime auto financing segment.

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:


	(In thousands)
	2023						2022
	Contracts		Direct Loans		Total		Contracts		Direct Loans		Total
Performing accounts	$	101,856	$	16,926	$	118,782	$	149,976	$	24,102	$	174,078
Non-performing accounts		6,972		1,728		8,700		4,167		274		4,441
Total		108,828		18,654		127,482		154,143		24,376		178,519
Chapter 13 bankruptcy		590		98		688		254		13		267
Finance receivables	$	109,418	$	18,752	$	128,170	$	154,397	$	24,389	$	178,786

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 bankruptcy accounts:


	(In thousands)
Contracts	Balance Outstanding		30 – 59 days			60 –89 days			90-119 days			120+ days			Total
March 31, 2023	$	108,828	$	10,083		$	3,274		$	3,698		$	-		$	17,055
				9.27	%		3.01	%		3.40	%		0.00	%		15.67	%
March 31, 2022	$	154,143	$	7,097		$	2,936		$	1,183		$	48		$	11,264
				4.60	%		1.90	%		0.77	%		0.03	%		7.31	%


Direct Loans	Balance Outstanding		30 – 59 days			60 –89 days			90-119 days			120+ days			Total
March 31, 2023	$	18,654	$	1,448		$	654		$	1,074		$	-		$	3,176
				7.76	%		3.51	%		5.76	%		0.00	%		17.03	%
March 31, 2022	$	24,376	$	607		$	197		$	77		$	-		$	881
				2.49	%		0.81	%		0.32	%		0.00	%		3.61	%