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Finance Receivables, net (Tables)

9 Months Ended

Sep. 30, 2020

Finance receivables, net consisted of the following at September 30, 2020 (amounts in thousands):


Amortized cost	$	—
Negative allowance for expected recoveries (1)	3,332,748
Balance at end of period	$	3,332,748

(1) The negative allowance balance includes certain portfolios of nonperforming loans for which the Company holds a beneficial interest representing approximately 1% of the balance.

Schedule of Changes in Negative Allowance for Expected Recoveries

Changes in the negative allowance for expected recoveries by portfolio segment for the three months ended September 30, 2020 were as follows (amounts in thousands):


	For the Three Months Ended September 30, 2020
	Core		Insolvency		Total
Balance at beginning of period	$	2,908,136	$	443,396	$	3,351,532
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	159,069		18,531		177,600
Foreign currency translation adjustment	53,934		6,752		60,686
Recoveries applied to negative allowance (2)	(246,738)		(35,735)		(282,473)
Changes in expected recoveries (3)	23,744		1,659		25,403
Balance at end of period	$	2,898,145	$	434,603	$	3,332,748

(1) Initial negative allowance for expected recoveries - portfolio acquisitions

Portfolio acquisitions for the three months ended September 30, 2020 were as follows (amounts in thousands):


	For the Three Months Ended September 30, 2020
	Core		Insolvency		Total
Face value	$	1,106,910	$	91,793	$	1,198,703
Noncredit discount	(159,766)		(8,522)		(168,288)
Allowance for credit losses at acquisition	(788,075)		(64,740)		(852,815)
Purchase price	$	159,069	$	18,531	$	177,600

The initial negative allowance recorded on portfolio acquisitions for the three months ended September 30, 2020 was as follows (amounts in thousands):


	For the Three Months Ended September 30, 2020
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(788,075)	$	(64,740)	$	(852,815)
Writeoffs, net	788,075		64,740		852,815
Expected recoveries	159,069		18,531		177,600
Initial negative allowance for expected recoveries	$	159,069	$	18,531	$	177,600

(2) Recoveries applied to negative allowance

Recoveries applied to the negative allowance for the three months ended September 30, 2020 were as follows (amounts in thousands):


	For the Three Months Ended September 30, 2020
	Core		Insolvency		Total
Recoveries (a)	$	470,056	$	52,667	$	522,723
Less - amounts reclassified to portfolio income (b)	223,318		16,932		240,250
Recoveries applied to negative allowance	$	246,738	$	35,735	$	282,473

(a) Recoveries includes cash collections, buybacks and other adjustments.

(b) For more information, refer to the Company's discussion of portfolio income within finance receivables and income recognition in Note 1.

(3) Changes in expected recoveries

Changes in expected recoveries for the three months ended September 30, 2020 were as follows (amounts in thousands):


	For the Three Months Ended September 30, 2020
	Core		Insolvency		Total
Changes in expected future recoveries	$	(62,999)	$	(588)	$	(63,587)
Recoveries received in excess of forecast	86,743		2,247		88,990
Changes in expected recoveries	$	23,744	$	1,659	$	25,403

Nine Months Ended September 30, 2020

Changes in the negative allowance for expected recoveries by portfolio segment for the nine months ended September 30, 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Balance at beginning of period	$	3,051,426	$	462,739	$	3,514,165
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	537,477		77,859		615,336
Foreign currency translation adjustment	(42,065)		(3,020)		(45,085)
Recoveries applied to negative allowance (2)	(677,211)		(106,845)		(784,056)
Changes in expected recoveries (3)	28,518		3,870		32,388
Balance at end of period	$	2,898,145	$	434,603	$	3,332,748

(1) Initial negative allowance for expected recoveries - portfolio acquisitions

Portfolio acquisitions for the nine months ended September 30, 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Face value	$	4,286,296	$	366,211	$	4,652,507
Noncredit discount	(533,465)		(29,533)		(562,998)
Allowance for credit losses at acquisition	(3,215,354)		(258,819)		(3,474,173)
Purchase price	$	537,477	$	77,859	$	615,336

The initial negative allowance recorded on portfolio acquisitions for the nine months ended September 30, 2020 was as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(3,215,354)	$	(258,819)	$	(3,474,173)
Writeoffs, net	3,215,354		258,819		3,474,173
Expected recoveries	537,477		77,859		615,336
Initial negative allowance for expected recoveries	$	537,477	$	77,859	$	615,336

(2) Recoveries applied to negative allowance

Recoveries applied to the negative allowance for the nine months ended September 30, 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Recoveries (a)	$	1,371,988	$	162,624	$	1,534,612
Less - amounts reclassified to portfolio income (b)	694,777		55,779		750,556
Recoveries applied to negative allowance	$	677,211	$	106,845	$	784,056

(a) Recoveries includes cash collections, buybacks and other adjustments.

(b) For more information, refer to the Company's discussion of portfolio income within finance receivables and income recognition in Note 1.

(3) Changes in expected recoveries

Changes in expected recoveries for the nine months ended September 30, 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Changes in expected future recoveries	$	(181,433)	$	(2,478)	$	(183,911)
Recoveries received in excess of forecast	209,951		6,348		216,299
Changes in expected recoveries	$	28,518	$	3,870	$	32,388

Schedule of Changes in Finance Receivables

Changes in finance receivables, net for the three and nine months ended September 30, 2019 were as follows (amounts in thousands):


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019

Balance at beginning of period	$	3,230,949	$	3,084,777
Acquisitions of finance receivables (1)	276,918		874,812

Foreign currency translation adjustment	(59,172)		(60,213)
Cash collections	(453,217)		(1,384,662)
Income recognized on finance receivables	247,471		735,526
Net allowance charges	(4,136)		(11,427)

Balance at end of period	$	3,238,813	$	3,238,813

(1) Includes portfolio purchases adjusted for buybacks and acquisition related costs, and portfolios from the acquisition of a business in Canada made during the first quarter of 2019.

Schedule of Cash Collections Applied to Principal

At the time of acquisition and each quarter thereafter, the life of each quarterly accounting pool was estimated based on projected amounts and timing of future cash collections using the proprietary models of the Company. Based upon projections, cash collections expected to be applied to principal were estimated to be as follows for the twelve-month periods ending September 30, (amounts in thousands):


2020	$	864,692
2021	692,946
2023	507,491
2024	378,679
2025	259,808
2026	171,873
2027	110,078
2028	84,212
2029	61,656
2030	47,347
Thereafter	60,031
Total ERC expected to be applied to principal	$	3,238,813

Schedule of Changes in Accretable Yield

Changes in accretable yield for the three and nine months ended September 30, 2019 were as follows (amounts in thousands):


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Balance at beginning of period	$	3,173,013	$	3,058,445
Income recognized on finance receivables	(247,471)		(735,526)
Net allowance charges	4,136		11,427
Additions from portfolio acquisitions	228,443		693,053
Reclassifications from nonaccretable difference	59,694		191,756
Foreign currency translation adjustment	(60,944)		(62,284)
Balance at end of period	$	3,156,871	$	3,156,871

Schedule of Valuation Allowance Account

The following is a summary of activity within the Company's valuation allowance account, all of which relates to acquired finance receivables, for the three and nine months ended September 30, 2019 (amounts in thousands):


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Beginning balance	$	264,591	$	257,148
Allowance charges	8,087		21,596
Reversal of previously recorded allowance charges	(3,951)		(10,169)
Net allowance charges	4,136		11,427
Foreign currency translation adjustment	(1,192)		(1,040)
Ending balance	$	267,535	$	267,535