Finance Receivables - DriveTime

The following is a summary of finance receivables:



	As of March 31, 2013		As of December 31, 2012
	(In thousands)
Principal Balances	$	1,707,051	$	1,601,710
Accrued Interest	15,366		16,414
Loan Origination Costs	17,123		16,498
Finance Receivables	$	1,739,540	$	1,634,622

Our finance receivables are defined as one segment and class of loan, which is the sub-prime consumer auto loan. Therefore, the disaggregation of information into portfolio segment and classes for assets with different risk characteristics is limited, and the level of risks inherent in our financing receivables are managed as one homogeneous pool and further segmented with our proprietary credit scoring system as described below in "—Credit Quality Indicators." We have chosen our internal customer credit scoring model since it has a direct and prominent impact in managing our portfolio receivables and monitoring its performance.

Finance receivables pledged as collateral associated with liabilities in our warehouse facilities, asset backed securitizations, and bank term financings, are provided in Note 5—Debt Obligations. We do not place loans on nonaccrual status, nor do we classify loans as impaired, since accounts are charged-off when the loan becomes 91 -121 days contractually past due at month end under our charge-off policy. We do not have loans that meet the definition of troubled debt restructurings.

Credit quality information for our finance receivables portfolio is provided as of the dates indicated below:

Age Analysis of Past Due Finance Receivables



	March 31, 2013				December 31, 2012				March 31, 2012
	Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal
	($ In thousands)
Days Delinquent:
Current	61.4	%	$	1,047,962	49.1	%	$	786,765	65.8	%	$	1,030,752
01-30 Days	28.0	%	478,861		33.0	%	528,300		27.4	%	429,219
31-60 Days	6.9	%	117,721		10.0	%	161,157		4.3	%	67,359
61-90 Days	3.2	%	54,537		5.1	%	81,378		2.2	%	34,463
91-120 Days	0.5	%	7,970		2.8	%	44,110		0.3	%	4,699
Total Past Due	38.6	%	$	659,089	50.9	%	$	814,945	34.2	%	$	535,740
Total Finance Receivables	100.0	%	$	1,707,051	100.0	%	$	1,601,710	100.0	%	$	1,566,492

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Delinquencies may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Delinquencies are presented on a Sunday-to-Sunday basis, which reflects delinquencies as of the nearest Sunday to period end. Sunday is used to eliminate any impact of the day of the week on delinquencies since delinquencies tend to be higher mid-week.

Credit Quality Indicators

Our proprietary credit grading system segments our customers into eight distinct credit grades. These credit grades range from A+ to D-, with A+ being the lowest risk credit grade and a D- being the highest risk credit grade. Generally, the lower the risk grade, the lower the unit loss rate. A summary of our portfolio by our internally assigned credit risk ratings at March 31, 2013, and December 31, 2012, is as follows:

At March 31, 2013



Grade	Average FICO Score ⁽¹⁾	Percentage of Portfolio Loans	Total Loans ⁽²⁾	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	555	10.3%	15,019	10.5%	$	178,406
A	540	18.3%	26,575	18.6%	317,210
B	517	37.3%	54,078	38.0%	648,685
C	504	28.8%	41,790	28.3%	483,127
C-	489	3.8%	5,546	3.3%	56,882
D+/D/D-	482	1.5%	2,202	1.3%	22,741
		100.0%	145,210	100.0%	$	1,707,051

At December 31, 2012



Grade	Average FICO Score ⁽¹⁾	Percentage of Portfolio Contracts	Total Loans	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	556	10.4%	14,660	10.6%	$	169,023
A	539	18.5%	25,998	18.8%	301,173
B	517	37.3%	52,476	38.2%	612,084
C	503	28.4%	40,066	27.8%	445,497
C-	488	3.9%	5,447	3.3%	53,512
D+/D/D-	478	1.5%	2,101	1.3%	20,421
		100.0%	140,748	100.0%	$	1,601,710


⁽¹⁾	^{Average FICO score is provided as an external metric of credit quality. FICO score is not utilized as the primary tool in determining internal credit grade.}


⁽²⁾	^{Excludes Carvana originations}

Concentration of Credit Risk

As of March 31, 2013, and December 31, 2012, our portfolio concentration by state was as follows:



As of March 31, 2013					As of December 31, 2012
State	Percent of Portfolio		Loan Principal (In thousands)		State	Percent of Portfolio		Loan Principal (In thousands)
Texas	22.4	%	$	384,359	Texas	23.0	%	$	369,021
Florida	15.2	%	261,348		Florida	15.4	%	247,281
North Carolina	9.6	%	163,058		North Carolina	9.9	%	157,670
Georgia	7.7	%	130,818		Georgia	7.6	%	122,027
Virginia	6.5	%	110,887		Arizona	6.8	%	108,792
Arizona	6.4	%	108,947		Virginia	6.7	%	106,749
Tennessee	4.9	%	83,020		Tennessee	4.6	%	72,967
California	4.4	%	75,524		California	4.4	%	71,005
Nevada	3.8	%	64,948		Nevada	4.0	%	63,346
South Carolina	3.7	%	63,827		South Carolina	3.6	%	58,163
Alabama	3.1	%	53,224		New Mexico	3.0	%	48,421
New Mexico	2.9	%	48,745		Alabama	2.8	%	44,787
Oklahoma	2.3	%	38,703		Oklahoma	2.3	%	36,109
Colorado	2.1	%	35,458		Colorado	2.2	%	35,268
Ohio	1.7	%	28,409		Indiana	1.3	%	21,603
Indiana	1.4	%	24,084		Ohio	1.1	%	17,417
Mississippi	1.1	%	19,371		Mississippi	1.0	%	15,847
Arkansas	0.4	%	6,252		Arkansas	0.2	%	3,218
Missouri	0.4	%	6,069		Missouri	0.1	%	2,019
	100.0	%	$	1,707,051		100.0	%	$	1,601,710

Allowance for Credit Losses

The following table sets forth the rollforward of the allowance for credit losses for the periods indicated:



	Three months ended March 31,
	2013			2012
	($ In thousands)
Allowance Activity:
Balance, beginning of period	$	252,590		$	221,533
Provision for credit losses	77,842			60,342
Net charge-offs	(60,810		)	(44,848		)
Balance, end of period	$	269,622		$	237,027
Allowance as a percent of portfolio principal	15.7		%	15.1		%
Charge off Activity:
Principal balances	$	(97,917	)	$	(82,851	)
Recoveries, net	37,107			38,003
Net charge-offs	$	(60,810	)	$	(44,848	)

At March 31, 2013 and December 31, 2012 recovery receivables of $29.4 million and $37.0 million, respectively, were included as a component of other assets in the accompanying condensed consolidated balance sheets.