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


	(In thousands)
	June 30, 2023			March 31, 2023
Finance receivables	$	112,244		$	128,170
Accrued interest receivable		1,621			1,932
Unearned dealer discounts		(3,487	)		(4,286	)
Unearned insurance commissions and fees		(1,111	)		(1,419	)
Unearned purchase price discount		(54	)		(82	)
Finance receivables, net of unearned discounts and fees and accrued interest receivable		109,213			124,315
Allowance for credit losses		(15,359	)		(17,396	)
Finance receivables, net	$	93,854		$	106,919

Contracts and Direct Loans each comprise a portfolio segment which consists of groups of loans sharing common risk factors. The following tables present selected information on the entire portfolio of the Company:


	As of June 30,			As of March 31,
Contract Portfolio	2023			2023
Average APR		22.8	%		22.8	%
Average discount		6.5	%		6.8	%
Average term (months)		49			49
Number of active contracts		12,769			14,081


	As of June 30,			As of March 31,
Direct Loan Portfolio	2023			2023
Average APR		28.8	%		29.1	%
Average term (months)		29			28
Number of active contracts		4,558			5,322

Allowance for Credit Losses (ACL)

The ACL reflects the difference between the amortized cost basis and the present value of the expected cash flows of finance receivables. Provisions for credit losses are recorded in amounts sufficient to maintain an ACL at an adequate level to provide for estimated losses over the lives of the finance receivables. Portfolio segments are comprised of homogeneous loans sharing common risk factors. Accordingly, loans are not individually evaluated for collectability. Consistent with the application during prior reporting years, the Company continues charging credit losses against the allowance when the account reaches 120 days contractually delinquent and any recoveries on finance receivables previously charged to the ACL are credited to the ACL when collected.

The Company uses a Discounted Cash Flow (DCF) model to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company has utilized its own historical data as well as its peer group companies' data from FFIEC Call Report filings. This data has been used to produce regression analyses designed to quantify the impact of reasonable and supportable forecasts in projective models.

The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature. The Company considers changes in international, national, regional and local conditions, changes in the volume and severity of past due loans, portfolio bankruptcy trends, maturity terms extensions, changes in the value of underlying collateral for collateral dependent loans, the effect of other external factors, such as competition, legal and regulatory requirements on the level of estimated credit losses, the existence and effect of any concentrations of credit and changes in the levels of such concentrations, changes in the nature and volume of the portfolio and terms of loans, changes in the quality of the loan review system, changes in the experience, depth, and ability of lending management, and reasonable and supportable economic forecasts, which cover the lives of the finance receivables.

The Company discounts expected cash flows at the financial asset’s effective interest rate. The effective interest rate is defined in the ASC 326 as the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial assets. For the Company, this is calculated using prepayment adjusted contractual cash flows relative to the amortized cost. The Company also considers prepayment and curtailment effects in calculation of its effective interest rate.

According to ASC 326-20-30-9, estimating expected credit losses is highly judgmental and requires to produce reasonable and supportable forecasts of expected credit losses. The Company has elected to forecast the first four quarters of the credit loss estimate and revert to a long-run average of each considered economic factor as permitted in ASC 326-20-30-9. Based on the final values in the forecast and the uncertainty of a post-pandemic recovery, management has elected to revert over four quarters. The Company also uses information provided by the FOMC to obtain various forecasts for unemployment rate and gross domestic product, as well as other economic factors that are considered as part of its ACL calculations.

The Company elected not to measure an allowance on accrued interest which included as a component of amortized cost and limited to performing accounts, defined as an account that is less than 61 days past due. Accrual of interest income on finance receivables is suspended when a loan is contractually delinquent for 61 days or more, or the collateral is repossessed, whichever is earlier. Consistent with the application in the prior reporting periods, the Company continue timely reversing the accrual of interest income when the loan is contractually delinquent 61 days or more. All of these such accounts are accounted for in the calculation for allowance for credit losses.

The Company defines a non-performing asset as one that is 61 or more days past due, a Chapter 7 bankruptcy account, or a Chapter 13 bankruptcy account that has not been confirmed by the courts, for which the accrual of interest income is suspended. Upon confirmation of a Chapter 13 bankruptcy account (BK13), the account is immediately charged-off. Upon notification of a Chapter 7 bankruptcy, an account is monitored for collectability. In the event the debtors’ balance is reduced by the bankruptcy court, the Company records a loss equal to the amount of principal balance reduction. The remaining balance is reduced as payments are received. In the event an account is dismissed from bankruptcy, the Company will decide whether to begin repossession proceedings or to allow the customer to make regularly scheduled payments.

Prior to adoption of ASU 2016-13 the Company was periodically evaluating 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 the adequacy of the allowance for credit losses. Management utilized significant judgment in determining probable incurred losses and in identifying and evaluating qualitative factors. This approach aligned with the Company’s lending policies and underwriting standards. If the allowance for credit losses is determined to be inadequate, then an additional charge to the provision is recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio.

The Company used a trailing twelve-month net charge-off as a percentage of average finance receivables, and applied this percentage to ending finance receivables to estimate probable credit losses. This approach reflected the current trends of incurred losses within the portfolio and closely aligns the allowance for credit losses with the portfolio’s performance indicators. Estimating the allowance for credit losses using the trailing twelve-month charge-off analysis reflected portfolio performance adjusted for seasonality. Management evaluated qualitative factors to support its allowance for credit losses. The Company examined the impact of macro-economic factors, such as year-over-year inflation, as well as portfolio performance characteristics, such as changes in the value of underlying collateral, level of nonperforming accounts, delinquency trends, and accounts with extended terms.

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 June 30, 2023 and 2022 (in thousands):


	Three months ended June 30, 2023
	Contracts			Direct Loans			Total
Balance at beginning of period, prior to adoption of ASU 2016-13	$	16,265		$	1,131		$	17,396
Impact of adoption of ASU 2016-13		(562	)		772			210
Provision for credit losses		596			49			645
Charge-offs		(4,656	)		(691	)		(5,347	)
Recoveries		2,221			234			2,455
Balance at June 30, 2023	$	13,864		$	1,495		$	15,359

	Three months ended June 30, 2022
	Contracts			Direct Loans			Total
Balance at beginning of period	$	1,961		$	988		$	2,949
Provision for credit losses		3,102			542			3,644
Charge-offs		(4,045	)		(349	)		(4,394	)
Recoveries		1,442			45			1,487
Balance at June 30, 2022	$	2,460		$	1,226		$	3,686

The following table presents details of the allowance for credit losses segregated by portfolio segment as of June 30, 2023, calculated in accordance with the current expected credit losses methodology (in thousands):



	As of June 30, 2023
	Contracts		Direct Loans		Total
Modeled expected credit losses	$	11,437	$	1,145	$	12,582
Qualitative adjustments		2,427		350		2,777
Total	$	13,864	$	1,495	$	15,359

The following table presents gross charge-offs and recoveries by receivable origination year for total portfolio:


	(In thousands)
	Three months ended June 30, 2023
	Gross Charge-offs		Gross Recoveries		Net Charge-offs
2024	$	—	$	—	$	—
2023		2,847		685		2,162
2022		1,606		774		832
2021		447		218		229
2020		220		292		(72	)
Prior		227		486		(259	)
Total	$	5,347	$	2,455	$	2,892

The following table presents gross charge-offs and recoveries by receivable origination year for Contract segment of portfolio:


	(In thousands)
	Three months ended June 30, 2023
	Gross Charge-offs		Gross Recoveries		Net Charge-offs
2024	$	—	$	—	$	—
2023		2,323		580		1,743
2022		1,447		679		768
2021		441		202		239
2020		218		281		(63	)
Prior		227		479		(252	)
Total	$	4,656	$	2,221	$	2,435

The following table presents gross charge-offs and recoveries by receivable origination year for Direct segment of portfolio:


	(In thousands)
	Three months ended June 30, 2023
	Gross Charge-offs		Gross Recoveries		Net Charge-offs
2024	$	—	$	—	$	—
2023		524		105		419
2022		159		95		64
2021		6		16		(10	)
2020		2		11		(9	)
Prior		-		7		(7	)
Total	$	691	$	234	$	457

The following table shows portfolio delinquencies by origination fiscal year as of June 30, 2023:


	(In thousands)
	2024		2023		2022		2021		2020		Prior		Total
Current	$	2,682	$	31,930	$	32,675	$	13,056	$	5,109	$	3,895	$	89,347
30-59		12		3,942		4,829		1,648		858		830		12,119
60-89		-		3,743		3,402		1,185		445		413		9,188
90-120		-		517		757		158		76		82		1,590
Total	$	2,694	$	40,132	$	41,663	$	16,047	$	6,488	$	5,220	$	112,244

The following table shows Contracts portfolio delinquencies by origination fiscal year as of June 30, 2023:


	(In thousands)
	2024		2023		2022		2021		2020		Prior		Total
Current	$	2,682	$	25,588	$	27,722	$	12,627	$	5,065	$	3,889	$	77,573
30-59		12		3,030		4,112		1,620		857		830		10,461
60-89		-		2,764		2,717		1,164		443		413		7,501
90-120		-		378		660		158		76		82		1,354
Total	$	2,694	$	31,760	$	35,211	$	15,569	$	6,441	$	5,214	$	96,889

The following table shows Direct loans portfolio delinquencies by origination fiscal year as of June 30, 2023:


	(In thousands)
	2024		2023		2022		2021		2020		Prior		Total
Current	$	—	$	6,342	$	4,953	$	429	$	44	$	6	$	11,774
30-59		-		912		717		28		1		-		1,658
60-89		-		979		685		21		2		-		1,687
90-120		-		139		97		-		-		-		236
Total	$	-	$	8,372	$	6,452	$	478	$	47	$	6	$	15,355

The following table is an assessment of the credit quality by creditworthiness:


	(In thousands)
	June 30, 2023						March 31, 2023
	Contracts		Direct Loans		Total		Contracts		Direct Loans		Total
Performing accounts	$	87,649	$	13,392	$	101,041	$	101,856	$	16,926	$	118,782
Non-performing accounts		8,676		1,862		10,538		6,972		1,728		8,700
Total		96,325		15,254		111,579		108,828		18,654		127,482
Chapter 13 bankruptcy accounts		564		101		665		590		98		688
Finance receivables	$	96,889	$	15,355	$	112,244	$	109,418	$	18,752	$	128,170

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 immediately by the 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.

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 accrual interest income has been suspended. The Company’s charge-off policy is to charge off an account in the month the contract becomes 121 days contractually delinquent.

In the event an account is dismissed from bankruptcy, the Company will decide whether to begin repossession proceedings or to allow the customer to make regularly scheduled payments.

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
June 30, 2023	$	96,325	$	10,394		$	7,425		$	1,251		$	—	$	19,070
				10.79	%		7.71	%		1.30	%	0.00%			19.80	%

March 31, 2023	$	108,828	$	10,083		$	3,274		$	3,698		$	—	$	17,055
				9.27	%		3.01	%		3.40	%	0.00%			15.67	%


	Direct Loans
	(In thousands, except percentages)
	Balance Outstanding		30 – 59 days			60 – 89 days			90 – 119 days			120+		Total
June 30, 2023	$	15,254	$	1,646		$	1,640		$	222		$	—	$	3,508
				10.79	%		10.75	%		1.46	%	0.00%			23.00	%

March 31, 2023	$	18,654	$	1,448		$	654		$	1,074		$	—	$	3,176
				7.76	%		3.51	%		5.76	%	0.00%			17.03	%