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. In March 2019, the Company changed its charge off policy from 181 days past due to 121 days past due. In addition, Chapter 13 Bankruptcies, once confirmed by the courts, are also charged off. This policy change resulted in a one-time charge of approximately $6.4 million during the 4^th quarter of fiscal 2019. This policy change was made because current management believes it is more 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)
	2020			2019
Finance receivables	$	219,366		$	228,994
Accrued interest receivable		3,164			2,889
Unearned dealer discounts		(8,056	)		(10,083	)
Unearned insurance and fee commissions		(2,616	)		(2,826	)
Purchase price discount		(915	)		-
Finance receivables, net of unearned		210,943			218,974
Allowance for credit losses		(11,162	)		(16,932	)
Finance receivables, net	$	199,781		$	202,042

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, 2020, the average model year of vehicles collateralizing the portfolio was a 2011 vehicle. The terms of the Contracts range from 12 to 60 months and bear an average contractual interest rate of 22.6% and 22.7% as of March 31, 2020 and 2019, respectively.

Direct Loans are typically for amounts ranging from $1,000 to $15,000 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 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. As of March 31, 2020, loans made by the Company pursuant to its Direct Loan program constituted approximately 5% of the aggregate principal amount of the Company’s loan portfolio. The terms of the Direct Loans range from 12 to72 months and bear an average contractual interest rate of 27.3% and 26.0% as of March 31, 2020 and 2019, respectively.

During the first quarter of the fiscal year ended March 31, 2019, the Company began using the trailing six-month net charge-off percentage, annualized, and applied to ending finance receivables to calculate the allowance for credit losses. This change was made to reflect changes in the Company’s lending policies and underwriting standards, which resulted from the Company changing its business strategies. The Company re-focused on financing primary transportation to and from work for the subprime borrower. This change resulted in purchasing higher yielding loans, with smaller amounts financed and shorter monthly terms. A trailing six-month, annualized, is also more in line with the industry practice, which uses a trailing twelve-month. Management believes a trailing six-month will more accurately reflect changes in the portfolio.

As of March 2019, the Company changed its charge-off policy from 181 days past due to 121 days past due, which resulted in the Company charging-off approximately $6.4 million of finance receivables during the fourth quarter of fiscal 2019. This one-time charge-off, of approximately $6.4 million, was excluded from the March 31, 2019 allowance for credit losses calculation.

In addition, the Company takes into consideration the composition of the portfolio, current economic conditions, 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 is recorded to maintain adequate reserves based on management’s evaluation of the risk inherent in the loan portfolio. 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.

The following presents the activity in our allowance for credit losses, shown below and on the next page:

	For the year ended March 31, 2020
	(In thousands)
	Indirect			Direct			Total
Balance at beginning of year	$	16,575		$	357		$	16,932
Provision for credit losses		16,096			805			16,901
Charge-offs		(29,174	)		(663	)		(29,837	)
Recoveries*		6,936			230			7,166
Balance at end of year	$	10,433		$	729		$	11,162

*For the year ended March 31, 2020, the Company completed bulk sales of charge-off accounts, which included $1.6 million of bankruptcy accounts and $0.1 million of non-performing accounts.

	For the year ended March 31, 2019
	(In thousands)
	Indirect			Direct			Total
Balance at beginning of year	$	19,433		$	833		$	20,266
Provision for credit losses		32,715			121			32,836
Charge-offs		(37,514	)		(638	)		(38,152	)
Recoveries		1,941			41			1,982
Balance at end of year	$	16,575		$	357		$	16,932

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 25% 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, 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, and 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. This change aligned the Company’s charge-off policy with practices within the subprime auto financing segment. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more details.

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)
	2020						2019
	Contracts		Direct Loans		Total		Contracts		Direct Loans		Total
Performing accounts	$	201,045	$	11,649	$	212,694	$	213,542	$	7,889	$	221,431
Non-performing accounts		6,202		195		6,397		7,453		110		7,563
Total		207,247		11,844		219,091		220,995		7,999		228,994
Chapter 13 bankruptcy		274		1		275		-		-		-
Finance receivables	$	207,521	$	11,845	$	219,366	$	220,995	$	7,999	$	228,994

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, 2020	$	207,247	$	14,977		$	4,290		$	1,893		$	19		$	21,179
				7.23	%		2.07	%		0.91	%		0.01	%		10.22	%
March 31, 2019	$	220,995	$	14,897		$	5,155		$	2,288		$	10		$	22,350
				6.74	%		2.33	%		1.04	%		0.00	%		10.11	%

Direct Loans	Balance Outstanding		30 – 59 days			60 –89 days			90-119 days			120+ days			Total
March 31, 2020	$	11,844	$	344		$	136		$	59			—		$	539
				2.90	%		1.15	%		0.50	%		0.00	%		4.55	%
March 31, 2019	$	7,999	$	197		$	79		$	31		$	-		$	307
				2.46	%		0.99	%		0.39	%		0.00	%		3.84	%