Consumer Loans Receivable

12 Months Ended

Mar. 28, 2020

The following table summarizes consumer loans receivable (in thousands):



	March 28, 2020			March 30, 2019
Loans held for investment (at Acquisition Date, defined below)	$	37,779		$	44,375
Loans held for investment (originated after Acquisition Date)	20,140			20,580
Loans held for sale	14,671			11,288
Construction advances	13,400			12,883
Consumer loans receivable	85,990			89,126
Deferred financing fees and other, net	(1,919		)	(1,632		)
Allowance for loan losses	(1,767		)	(709		)
	$	82,304		$	86,785

The allowance for loan losses is developed at the loan level and allocated to specific individual loans or to impaired loans. A range of probable losses is calculated after giving consideration to, among other things, the loan characteristics and historical loss experience. The Company then makes a determination of the best estimate within the range of loan losses. The allowance for loan losses reflects the Company's judgment of the probable loss exposure on its loans held for investment portfolio.

The Company acquired consumer loans receivable as part of its acquisition of Palm Harbor Homes, Inc. ("Palm Harbor") in April 2011 ("Acquisition Date"). As of the Acquisition Date, the Company determined the excess of the loan pool's scheduled contractual principal and interest payments over all cash flows expected as an amount that consists of interest that cannot be accreted into interest income (the non-accretable difference). The cash flow expected to be collected in excess of the carrying value of the acquired loans consists of interest that is accreted into interest income over the remaining life of the loans (accretable yield). Interest income on consumer loans receivable is recognized as Net revenue (see further discussion in Note 1).



	March 28, 2020			March 30, 2019
	(in thousands)
Loans held for investment (at Acquisition Date) – contractual amount	$	83,548		$	100,595
Purchase discount:
Accretable	(29,094		)	(36,672		)
Non-accretable	(16,669		)	(19,502		)
Less loans reclassified as other assets	(6		)	(46		)
Total loans held for investment (at Acquisition Date), net	$	37,779		$	44,375

Over the life of the consumer loans held for investment (at Acquisition Date), the Company estimates cash flows expected to be collected to determine if an allowance for loan loss subsequent to the Acquisition Date is required (see further discussion in Note 1). The weighted averages of assumptions used in the calculation of expected cash flows to be collected are as follows:



	March 28, 2020		March 30, 2019
Prepayment rate	16.4	%	17.1	%
Default rate	1.7	%	1.1	%

Assuming there was a 1% (100 basis point) unfavorable variation from the expected level, for each key assumption, the expected cash flows over the life of the portfolio, as of March 28, 2020, would decrease by approximately $699,000 and $2.3 million for the expected prepayment rate and expected default rate, respectively.

The changes in accretable yield on consumer loans receivable held for investment (at Acquisition Date) were as follows (in thousands):



	Year Ended
	March 28, 2020			March 30, 2019
Balance at the beginning of the period	$	36,672		$	44,481
Additions	—			—
Accretion	(6,600		)	(7,588		)
Reclassifications from non-accretable discount	(978		)	(221		)
Balance at the end of the period	$	29,094		$	36,672

The consumer loans held for investment have the following characteristics:



	March 28, 2020		March 30, 2019
Weighted average contractual interest rate	8.42	%	8.49	%
Weighted average effective interest rate	9.27	%	9.11	%
Weighted average months to maturity	164		163

The following table disaggregates CountryPlace's gross consumer loans receivable for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):



	March 28, 2020
	Consumer Loans Held for Investment
	At Acquisition Date		Originated after Acquisition Date		Construction Advances		Consumer Loans Held For Sale		Total
Asset Class
Credit Quality Indicator (FICO® score)
Home-only loans
0-619	$	684	$	112	$	—	$	—	$	796
620-719	12,664		10,449		—		38		23,151
720+	12,344		5,993		—		254		18,591
Other	166		203		—		—		369
Subtotal	25,858		16,757		—		292		42,907
Conforming mortgages
0-619	82		—		35		55		172
620-719	408		1,769		9,130		9,151		20,458
720+	5		1,590		4,235		5,173		11,003
Subtotal	495		3,359		13,400		14,379		31,633
Non-conforming mortgages
0-619	1,160		—		—		—		1,160
620-719	6,828		—		—		—		6,828
720+	3,252		—		—		—		3,252
Other	178		—		—		—		178
Subtotal	11,418		—		—		—		11,418
Other Loans	8		24		—		—		32
	$	37,779	$	20,140	$	13,400	$	14,671	$	85,990



	March 30, 2019
	Consumer Loans Held for Investment
	At Acquisition Date		Originated after Acquisition Date		Construction Advances		Consumer Loans Held For Sale		Total
Asset Class
Credit Quality Indicator (FICO® score)
Home-only loans
0-619	$	796	$	117	$	—	$	—	$	913
620-719	14,984		9,725		—		—		24,709
720+	14,834		8,110		—		617		23,561
Other	176		258		—		—		434
Subtotal	30,790		18,210		—		617		49,617
Conforming mortgages
0-619	83		—		—		460		543
620-719	417		1,785		8,061		6,885		17,148
720+	98		585		4,822		3,326		8,831
Subtotal	598		2,370		12,883		10,671		26,522
Non-conforming mortgages
0-619	1,413		—		—		—		1,413
620-719	7,689		—		—		—		7,689
720+	3,661		—		—		—		3,661
Other	215		—		—		—		215
Subtotal	12,978		—		—		—		12,978
Other loans	9		—		—		—		9
	$	44,375	$	20,580	$	12,883	$	11,288	$	89,126

Loan contracts secured by geographically concentrated collateral could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. As of March 28, 2020, 36% of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 16% was concentrated in Florida. As of March 30, 2019, 44% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 12% was concentrated in Florida. Other than Texas and Florida, no state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of March 28, 2020 or March 30, 2019.

Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is determined based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is recorded to the allowance for loan losses. On a monthly basis, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes totaled approximately $1.5 million as of March 28, 2020 and March 30, 2019, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $560,000 and $1.5 million as of March 28, 2020 and March 30, 2019, respectively.