(3) Finance Receivables - DriveTime

The following is a summary of DriveTime customer finance receivables:



	As of September 30, 2013		As of December 31, 2012
	(In thousands)
Principal Balances	$	1,851,055	$	1,601,710
Accrued Interest	17,561		16,414
Loan Origination Costs	18,137		16,498
Finance Receivables	$	1,886,753	$	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 segments 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 proprietary credit scoring system to segregate risk characteristics of the portfolio as it has a direct impact in managing our portfolio risk and monitoring loan 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, as 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



	September 30, 2013				December 31, 2012				September 30, 2012
	Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal
	($ In thousands)
Days Delinquent:
Current	54.9	%	$	1,016,229	49.1	%	$	786,765	56.3	%	$	925,332
01-30 Days	30.6	%	566,423		33.0	%	528,300		31.1	%	511,389
31-60 Days	8.7	%	161,042		10.0	%	161,157		8.0	%	132,120
61-90 Days	4.3	%	79,595		5.1	%	81,378		4.2	%	68,196
91-120 Days	1.5	%	27,766		2.8	%	44,110		0.4	%	6,244
Total Past Due	45.1	%	$	834,826	50.9	%	$	814,945	43.7	%	$	717,949
Total Finance Receivables	100.0	%	$	1,851,055	100.0	%	$	1,601,710	100.0	%	$	1,643,281

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 as 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 September 30, 2013, and December 31, 2012, is as follows:

At September 30, 2013



Grade	Average FICO Score ⁽¹⁾	Percentage of Portfolio Loans	Total Loans	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	554	10.4%	15,692	10.5%	$	194,200
A	541	18.4%	27,912	18.8%	347,452
B	518	38.1%	57,665	38.6%	715,545
C	505	28.4%	43,020	28.0%	517,836
C-	493	3.4%	5,136	2.9%	54,345
D+/D/D-	486	1.3%	2,006	1.2%	21,677
		100.0%	151,431	100.0%	$	1,851,055

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.}

Concentration of Credit Risk

As of September 30, 2013 and December 31, 2012, our portfolio concentration by state was as follows:



As of September 30, 2013					As of December 31, 2012
State	Percent of Portfolio		Loan Principal (In thousands)		State	Percent of Portfolio		Loan Principal (In thousands)
Texas	21.4	%	$	398,341	Texas	23.0	%	$	369,021
Florida	15.5	%	286,213		Florida	15.4	%	247,281
North Carolina	8.9	%	165,152		North Carolina	9.9	%	157,670
Georgia	7.7	%	142,390		Georgia	7.6	%	122,027
Arizona	6.3	%	117,849		Arizona	6.8	%	108,792
Virginia	6.1	%	114,118		Virginia	6.7	%	106,749
Tennessee	5.5	%	99,956		Tennessee	4.6	%	72,967
California	4.4	%	82,082		California	4.4	%	71,005
South Carolina	3.9	%	71,485		Nevada	4.0	%	63,346
Nevada	3.6	%	66,448		South Carolina	3.6	%	58,163
Alabama	3.5	%	64,653		New Mexico	3.0	%	48,421
New Mexico	2.6	%	47,784		Alabama	2.8	%	44,787
Oklahoma	2.4	%	44,005		Oklahoma	2.3	%	36,109
Ohio	2.4	%	43,935		Colorado	2.2	%	35,268
Colorado	1.9	%	34,396		Indiana	1.3	%	21,603
Indiana	1.5	%	26,888		Ohio	1.1	%	17,417
Mississippi	1.2	%	22,025		Mississippi	1.0	%	15,847
Missouri	0.7	%	12,487		Arkansas	0.2	%	3,218
Arkansas	0.5	%	10,128		Missouri	0.1	%	2,019
Kentucky	—	%	720
	100.0	%	$	1,851,055		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 September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	($ In thousands)
Allowance Activity:
Balance, beginning of period	$	284,719		$	244,811		$	252,590		$	221,533
Provision for credit losses	92,335			70,110			240,489			181,840
Net charge-offs	(76,430		)	(63,506		)	(192,455		)	(151,958		)
Balance, end of period	$	300,624		$	251,415		$	300,624		$	251,415
Allowance as a percent of portfolio principal, end of period	16.2		%	15.2		%	16.2		%	15.2		%
Charge off Activity:
Principal balances	$	(117,383	)	$	(102,060	)	$	(302,241	)	$	(257,986	)
Recoveries, net	40,953			38,554			109,786			106,028
Net charge-offs	$	(76,430	)	$	(63,506	)	$	(192,455	)	$	(151,958	)

At September 30, 2013 and December 31, 2012, recovery receivables of $28.9 million and $37.0 million, respectively, were included as a component of other assets in the accompanying condensed consolidated balance sheets.