Note 2. Finance Receivables, Credit Quality Information and Allowance for Loan Losses

Finance receivables represent amounts due from customers for advances at December 31, 2019 and December 31, 2018 consisted of the following:


	December 31,		December 31,
	2019		2018
Short-term consumer loans:
Secured	$	8,774	$	6,908
Unsecured		53,199		46,871
Total short-term consumer loans		61,973		53,779
Medium-term consumer loans
Secured		5,612		4,936
Unsecured		30,745		31,093
Total medium-term consumer loans		36,357		36,029
Total gross receivables		98,330		89,808
Unearned advance fees, net of deferred loan origination costs		(2,507)		(1,970)
Finance receivables before allowance for loan losses		95,823		87,838
Allowance for loan losses		(13,828)		(3,474)
Finance receivables, net	$	81,995	$	84,364

Finance receivables, net
Current portion	$	79,692	$	81,093
Non-current portion		2,303		3,271
Total finance receivables, net	$	81,995	$	84,364

Changes in the allowance for loan losses by product type for the Successor year ended December 31, 2019, are as follows:


													Allowance as
	Balance								Balance		Receivables		a percentage
	1/1/2019		Provision		Charge-Offs		Recoveries		12/31/2019		12/31/2019		of receivable
Short-term consumer loans	$	2,018	$	38,987	$	(72,550)	$	34,199	$	2,654	$	61,973	4.28	%
Medium-term consumer loans		1,456		30,492		(24,517)		3,743		11,174		36,357	30.73	%
	$	3,474	$	69,479	$	(97,067)	$	37,942	$	13,828	$	98,330	14.06	%

The provision for loan losses for the Successor year ended December 31, 2019, also includes losses from returned items from check cashing of $5,227.

The provision for short-term consumer loans of $38,987 is net of debt sales of $1,238 for the Successor year ended December 31, 2019.

The provision for medium-term consumer loans of $30,492 is net of debt sales of $979 for the Successor year ended December 31, 2019.

The Company evaluates all short-term and medium-term consumer loans collectively for impairment, except for individually evaluating certain unsecured medium-term loans that have been modified and classified as troubled debt restructurings. In certain markets, the Company reduced interest rates and favorably changed payment terms for certain unsecured medium-term consumer loans to assist borrowers in avoiding default and to mitigate risk of loss. The provision and subsequent charge off related to these loans totaled $52 and is included in the provision for medium-term consumer loans for the Successor year ended December 31, 2019. For these loans evaluated for impairment, there were $92 of payment defaults during the Successor year ended December 31, 2019. The troubled debt restructurings during the Successor year ended December 31, 2019, are subject to an allowance of $15 with a net carrying value of $28 at December 31, 2019.

Changes in the allowance for the loan losses by product type for the Successor period ended December 31, 2018 are as follows:


													Allowance as
	Balance								Balance		Receivables		a percentage
	12/13/2018		Provision		Charge-Offs		Recoveries		12/31/2018		12/31/2018		of receivables
Short-term consumer loans	$	—	$	1,180	$	(1,038)	$	1,876	$	2,018	$	53,779	3.75	%
Medium-term consumer loans		—		799		—		657		1,456		36,029	4.04	%
	$	—	$	1,979	$	(1,038)	$	2,533	$	3,474	$	89,808	3.87	%

The provision for loan losses for the Successor period ended December 31, 2018 also includes losses from returned items from check cashing of $187.

The provision and subsequent charge off related to troubled debt restructurings totaled $3 and is included in the provision for medium‑term consumer loans for the Successor period ended December 31, 2018. For these loans evaluated for impairment, there were $1 of payment defaults during the Successor period ended December 31, 2018. The troubled debt restructurings during the Successor period ended December 31, 2018 are subject to an allowance of $1 with a net carrying value of $3 at December 31, 2018.

Changes in the allowance for the loan losses by product type for the Predecessor period ended December 12, 2018 are as follows:


													Allowance as
	Balance								Balance		Receivables		a percentage
	1/1/2018		Provision		Charge-Offs		Recoveries		12/12/2018		12/12/2018		of receivables
Short-term consumer loans	$	2,697	$	38,012	$	(69,716)	$	31,825	$	2,818	$	60,780	4.64	%
Medium-term consumer loans		13,630		29,815		(33,911)		4,027		13,561		40,600	33.40	%
	$	16,327	$	67,827	$	(103,627)	$	35,852	$	16,379	$	101,380	16.16	%

The provision for loan losses for the Predecessor period ended December 12, 2018 also includes losses from returned items from check cashing of $5,013.

The provision for short‑term consumer loans of $38,012 is net of debt sales of $1,188 and the provision for medium‑term consumer loans of $29,815 is net of debt sales of $1,196.

The provision and subsequent charge off related to troubled debt restructurings totaled $111 and is included in the provision for medium‑term consumer loans for the Predecessor period ended December 12, 2018. For these loans evaluated for impairment, there were $210 of payment defaults during the Predecessor period ended December 12, 2018. The troubled debt restructurings during the Predecessor period ended December 12, 2018 are subject to an allowance of $41 with a net carrying value of $64 at December 12, 2018.

Changes in the allowance for the loan losses by product type for the Predecessor year ended December 31, 2017 are as follows:


													Allowance as
	Balance								Balance		Receivables		a percentage
	1/1/2017		Provision		Charge-Offs		Recoveries		12/31/2017		12/31/2017		of receivable
Short-term consumer loans	$	2,223	$	46,240	$	(91,072)	$	45,306	$	2,697	$	66,465	4.06	%
Medium-term consumer loans		13,996		51,329		(57,263)		5,568		13,630		46,903	29.06	%
	$	16,219	$	97,569	$	(148,335)	$	50,874	$	16,327	$	113,368	14.40	%

The provision for loan losses for the Predecessor year ended December 31, 2017 also includes losses from returned items from check cashing of $5,966.

The provision for short-term consumer loans of $46,240 is net of debt sales of $1,199 and the provision for medium-term consumer loans of $51,329 is net of debt sales of $1,555.

The provision and subsequent charge off related to troubled debt restructurings totaled $256 and is included in the provision for medium-term consumer loans for the Predecessor year ended December 31, 2017. For these loans evaluated for impairment, there were $432 of payment defaults during the Predecessor year ended December 31, 2017. The troubled debt restructurings during the Predecessor year ended December 31, 2017 are subject to an allowance of $80 with a net carrying value of $146 at December 31, 2017.

The Company has subsidiaries that facilitate third party lender loans under the CSO model. Changes in the accrual for third‑party lender losses for the Successor year ended December 31, 2019, the Successor period ended December 31, 2018, the Predecessor period ended December 12, 2018, and the Predecessor year ended December 31, 2017 were as follows:


	December 31,		December 31,		December 12,		December 31,
	2019		2018		2018		2017
	Successor		Successor		Predecessor		Predecessor

Short-term balance, beginning of period	$	4,454	$	4,379	$	4,571	$	2,907
Provision for loan losses		9,278		947		24,045		32,277
Charge-offs, net		(12,428)		(872)		(24,237)		(30,613)
Short-term balance, end of period	$	1,304	$	4,454	$	4,379	$	4,571

Medium-term balance, beginning of period	$	59	$	62	$	247	$	192
Provision for loan losses		7,648		-		213		389
Charge-offs, net		(6,441)		(3)		(398)		(334)
Medium-term balance, end of period	$	1,266	$	59	$	62	$	247

Total balance, beginning of period	$	4,513	$	4,441	$	4,818	$	3,099
Provision for loan losses		16,926		947		24,258		32,666
Charge-offs, net		(18,869)		(875)		(24,635)		(30,947)
Total balance, end of period	$	2,570	$	4,513	$	4,441	$	4,818

A subsidiary of the Company offers a CSO product in Texas, and another subsidiary offered a CSO product in Ohio until April 2019, to assist consumers in obtaining credit with unaffiliated third-party lenders. Ohio House Bill 123 (“HB123”) prohibited CSO transactions in Ohio on or after April 28, 2019, at which time, the Ohio CSO product was no longer offered. Total gross finance receivables for which the Company has recorded an accrual for third‑party lender losses totaled $12,096 and $34,144 at December 31, 2019 and 2018, respectively, and the corresponding guaranteed consumer loans are disclosed as an off‑balance sheet arrangement. The total gross finance receivables for the Ohio CSO product consist of $-0- and $30,490 in short‑term and $7,143 and $303 in installment loans at December 31, 2019 and 2018, respectively. The total gross finance receivables for the Texas CSO product consist of $4,953 and $3,351 in short‑term loans at December 31, 2019 and 2018, respectively. The provision for third‑party lender losses of $16,926 for the Successor year ended December 31, 2019 is net of debt sales of $375. The provision for third‑party lender losses of $24,258 and $32,666 for the Predecessor period ended December 12, 2018 and the Predecessor year ended December 31, 2017 is net of debt sales, $934 and $988, respectively.

For the Ohio CSO program, the Company was required to purchase $12,469, $2,082, and $46,368 of short‑term and $9,260, $17, and $669 of installment loans during the Successor year ended December 31, 2019, the Successor period ended December 31, 2018, and the Predecessor period ended December 12, 2018, respectively. As these loans were in default when purchased, they met the Company’s policy and were fully charged‑off at acquisition. The Company recognized recoveries of $9,702, $1,216, and $29,912 of short‑term and $2,806, $19, and $270 of installment collections on these loans during the Successor year ended December 31, 2019, the Successor period ended December 31, 2018, and the Predecessor period ended December 12, 2018, respectively.

For the Texas CSO program, the Company was required to purchase $15,334, $485, and $11,293 of short‑term loans during the Successor year ended December 31, 2019, the Successor period ended December 31, 2018, and the Predecessor period ended December 12, 2018, respectively. As these loans were in default when purchased, they met the Company’s policy and were fully charged‑off at acquisition. The Company recognized recoveries of $5,644, $270, and $4,123 of short‑term collections on these loans during the Successor year ended December 31, 2019, the Successor period ended December 31, 2018, and the Predecessor period ended December 12, 2018, respectively.

Additionally, certain of our subsidiaries entered into a debt buying agreement with other third parties whereby that subsidiary will purchase certain delinquent loans. Total gross finance receivables for which the Company recorded a debt buyer liability were $28,444 and the amount reserved for the debt buyer liability was $3,474 as of December 31, 2019. The purchase price for any delinquent loan is equal to an agreed upon percentage of the unpaid principal balance and accrued interest and fees. The Company records these at fair value and the difference between the purchase price and expected recoverability is charged through the provision for loan losses. The Company has determined the fair value at repurchase based on a historical review of collections on defaulted or delinquent loans. The Company will sell to a third-party or will charge-off the remaining balance after a certain time period of collections activity.

Under the debt buying agreement, the Company’s subsidiary purchased $9,095 of loans during the Successor year ended December 31, 2019. The Company recognized recoveries of $1,996 of collections on these loans during the Successor year ended December 31, 2019.

Change in the accrual for the debt buyer liability for the year ended December 31, 2019, was as follows:


	Year Ended
	December 31,
	2019
Balance, beginning of period	$	-
Provision for loan losses		10,573
Charge-offs, net		(7,099)
Balance, end of period	$	3,474

The Company considers the near-term repayment performance of finance receivables as its primary credit quality indicator. The Company performs credit checks through consumer reporting agencies on certain borrowers. If a third-party lender provides the advance, the applicable third-party lender decides whether to approve the loan and establishes all of the underwriting criteria and terms, conditions, and features of the customer’s loan agreement.

The aging of receivables at December 31, 2019 and 2018 are as follows:


	December 31, 2019				December 31, 2018
Current finance receivables	$	86,935	88.4	%	$	81,097	90.3	%
Past due finance receivables (1 - 30 days)
Secured short-term consumer loans		1,513	1.5	%		629	0.7	%
Unsecured short-term consumer loans		1,132	1.2	%		449	0.5	%
Short-term consumer loans		2,645	2.7	%		1,078	1.2	%
Secured medium-term consumer loans		1,321	1.3	%		898	1.0	%
Unsecured medium-term consumer loans		4,241	4.3	%		3,772	4.2	%
Medium-term consumer loans		5,562	5.7	%		4,670	5.2	%
Total past due finance receivables (1 - 30 days)		8,207	8.4	%		5,748	6.4	%
Past due finance receivables (31 - 60 days)
Secured medium-term consumer loans		461	0.5	%		269	0.3	%
Unsecured medium-term consumer loans		2,373	2.4	%		2,425	2.7	%
Medium-term consumer loans		2,834	2.9	%		2,694	3.0	%
Total past due finance receivables (31 - 60 days)		2,834	2.9	%		2,694	3.0	%
Past due finance receivables (61 + days)
Secured medium-term consumer loans		10	-	%		18	-	%
Unsecured medium-term consumer loans		344	0.3	%		251	0.3	%
Medium-term consumer loans		354	0.3	%		269	0.3	%
Total past due finance receivables (61 + days)		354	0.3	%		269	0.3	%
Total delinquent		11,395	11.6	%		8,711	9.7	%
Total finance receivables	$	98,330	100.0	%	$	89,808	100.0	%
Finance receivables in non-accrual status	$	1,560	1.6	%	$	1,598	1.8	%