Finance Receivables

9 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Finance Receivables

4. Finance Receivables

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

	December 31,			March 31,
	2015			2015
Finance receivables, gross contract	$	494,808,526		$	457,974,758
Unearned interest		(153,498,759	)		(139,262,996	)
Finance receivables, net of unearned interest		341,309,767			318,711,762
Unearned dealer discounts		(18,633,833	)		(17,779,690	)
Finance receivables, net of unearned interest and unearned dealer discounts		322,675,934			300,932,072
Allowance for credit losses		(12,361,841	)		(12,028,012	)
Finance receivables, net	$	310,314,093		$	288,904,060

The terms of the Contracts range from 12 to 72 months and the Direct Loans range from 12 to 60 months. The Contracts and Direct Loans bear a weighted average effective interest rate of 22.71% and 25.75% as of December 31, 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 December 31,						Nine months ended December 31,
	2015			2014			2015			2014
Balance at beginning of period	$	10,953,844		$	11,942,694		$	11,325,222		$	12,889,082
Current period provision		7,437,522			5,658,695			18,402,211			14,799,782
Losses absorbed		(7,583,543	)		(6,948,034	)		(20,453,767	)		(18,844,447	)
Recoveries		694,452			682,830			2,228,609			2,491,768
Balance at end of period	$	11,502,275		$	11,336,185		$	11,502,275		$	11,336,185

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 December 31, 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 December 31,						Nine months ended December 31,
	2015			2014			2015			2014
Balance at beginning of period	$	779,921		$	734,500		$	702,789		$	590,278
Current period provision		161,667			137,953			363,534			382,916
Losses absorbed		(83,454	)		(82,948	)		(223,740	)		(202,063	)
Recoveries		1,432			3,403			16,983			21,777
Balance at end of period	$	859,566		$	792,908		$	859,566		$	792,908

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 December 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 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:

	December 31, 2015				December 31, 2014
	Contracts		Direct Loans		Contracts		Direct Loans
Performing accounts	$	467,285,487	$	11,931,941	$	422,592,527	$	11,575,091
Non-performing accounts		11,111,916		100,393		9,284,558		105,818
Total	$	478,397,403	$	12,032,334	$	431,877,085	$	11,680,909
Chapter 13 bankrupt accounts		4,340,698		38,091		3,872,186		26,774
Finance receivables, gross contract	$	482,738,101	$	12,070,425	$	435,749,271	$	11,707,683

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
December 31, 2015	$	478,397,403	$	23,970,608		$	7,029,791		$	4,082,125		$	35,082,524
				5.01	%		1.47	%		0.85	%		7.33	%
December 31, 2014	$	431,877,085	$	21,749,891		$	6,103,607		$	3,180,951		$	31,034,449
				5.04	%		1.41	%		0.74	%		7.19	%
Direct Loans	Gross Balance Outstanding		31 – 60 days			61 – 90 days			Over 90 days			Total
December 31, 2015	$	12,032,334	$	211,921		$	63,543		$	36,850		$	312,314
				1.76	%		0.53	%		0.31	%		2.60	%
December 31, 2014	$	11,680,909	$	164,347		$	59,043		$	46,776		$	270,166
				1.40	%		0.51	%		0.40	%		2.31	%