6. Commercial Loans Receivable and Allowance for Loan Loss

The Company’s commercial loans receivable balance consists of two classes: (i) direct financing arrangements for the home product needs of our independent retailers, communities and developers; and (ii) amounts loaned by the Company under participation financing programs.

Under the terms of the direct programs, the Company provides funds for the independent retailers, communities and developers’ financed home purchases. The notes are secured by the home as collateral and, in some instances, other security depending on the circumstances. The other terms of direct arrangements vary depending on the needs of the borrower and the opportunity for the Company.

Under the terms of the participation programs, the Company provides loans to independent floor plan lenders, representing a significant portion of the funds that such financiers then lend to retailers to finance their inventory purchases. The participation commercial loan receivables are unsecured general obligations of the independent floor plan lenders.

Commercial loans receivable, net, consist of the following by class of financing notes receivable (in thousands):



	March 28, 2015			March 29, 2014
Direct loans receivable	$	15,802		$	19,879
Participation loans receivable	2,352			1,568
Allowance for loan loss	(73		)	(139		)
	$	18,081		$	21,308

The commercial loans receivable balance has the following characteristics:



	March 28, 2015		March 29, 2014
Weighted average contractual interest rate	6.5	%	8.0	%
Weighted average months to maturity	6		8

The Company evaluates the potential for loss from its participation loan programs based on the independent lender’s overall financial stability, as well as historical experience, and has determined that an applicable allowance for loan loss was not needed at either March 28, 2015 or March 29, 2014.

With respect to direct programs with communities and developers, borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default. For direct programs with independent retailers, the risk of loss is spread over numerous borrowers. Borrower activity is monitored in conjunction with third-party service providers, where applicable, to estimate the potential for loss on the related loans receivable, considering potential exposures including repossession costs, remarketing expenses, impairment of value and the risk of collateral loss. The Company has historically been able to resell repossessed unused homes, thereby mitigating loss experience. If a default occurs and collateral is lost, the Company is exposed to loss of the full value of the home loan. If the Company determines that it is probable that a borrower will default, a specific reserve is determined and recorded within the estimated allowance for loan loss. The Company recorded an allowance for loan loss of $73,000 and $139,000 at March 28, 2015 and March 29, 2014, respectively. The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan loss applicable to the direct programs (in thousands):



	Year Ended
	March 28, 2015			March 29, 2014
Balance at beginning of period	$	139		$	350
Provision for commercial loan credit losses	(83		)	(224		)
Loans charged off, net of recoveries	17			13
Balance at end of period	$	73		$	139

The following table disaggregates commercial loans receivable and the estimated allowance for loan loss for each class of financing receivable by evaluation methodology (in thousands):



	Direct Commercial Loans						Participation Commercial Loans
	March 28, 2015			March 29, 2014			March 28, 2015		March 29, 2014
Commercial loans receivable:
Collectively evaluated for impairment	$	7,229		$	12,202		$	—	$	—
Individually evaluated for impairment	8,573			7,677			2,352		1,568
	$	15,802		$	19,879		$	2,352	$	1,568
Allowance for loan loss:
Collectively evaluated for impairment	$	(73	)	$	(126	)	$	—	$	—
Individually evaluated for impairment	—			(13		)	—		—
	$	(73	)	$	(139	)	$	—	$	—

Loans are subject to regular review and are given management’s attention whenever a problem situation appears to be developing. Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny. Nonperforming status includes loans accounted for on a non-accrual basis and accruing loans with principal payments past due 90 days or more. The Company’s policy is to place loans on nonaccrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower has the inability or unwillingness to meet payments as they become due. The Company will resume accrual of interest once these factors have been remedied. At March 28, 2015, there are no commercial loans that are 90 days or more past due that are still accruing interest. Payments received on nonaccrual loans are recorded on a cash basis, first to interest and then to principal. At March 28, 2015, the Company was not aware of any potential problem loans that would have a material effect on the commercial receivables balance. Charge-offs occur when it becomes probable that outstanding amounts will not be recovered.

The following table disaggregates the Company’s commercial loans receivable by class and credit quality indicator (in thousands):



	Direct Commercial Loans				Participation Commercial Loans
	March 28, 2015		March 29, 2014		March 28, 2015		March 29, 2014
Risk profile based on payment activity:
Performing	$	15,728	$	19,477	$	2,352	$	1,568
Watch list	—		—		—		—
Nonperforming	74		402		—		—
	$	15,802	$	19,879	$	2,352	$	1,568

The Company has concentrations of commercial loans receivable related to factory-built homes located in the following states, measured as a percentage of commercial loans receivables principal balance outstanding:



	March 28, 2015		March 29, 2014
Texas	42.4	%	14.9	%
Arizona	10.4	%	10.3	%
Florida	0.9	%	24.4	%
Colorado	—	%	22.0	%

The risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan losses. The Company did not have concentrations in excess of 10% of the principal balance of commercial loans receivable in any other states as of March 28, 2015 or March 29, 2014, respectively. As of March 28, 2015, the Company did not have concentrations in excess of 10% of the principal balance of commercial loans receivable with any one borrower. As of March 29, 2014, the Company had concentrations of commercial loans receivable with one independent third-party and its affiliates that equaled 33.4% of the principal balance outstanding, all of which was secured.