6. Bluegreen’s Notes Receivable

The table below sets forth information relating to Bluegreen’s notes receivable and Bluegreen’s allowance for credit losses (in thousands):



		June 30,	December 31,
		2016	2015
Notes receivable:
VOI notes receivable - non-securitized	$	132,954	166,040
VOI notes receivable - securitized		397,729	357,845
Other notes receivable (1)		2,008	2,427
		532,691	526,312
Allowance for credit losses		(114,871)	(110,714)
VOI notes receivable, net	$	417,820	415,598
Allowance as a % of notes receivable		22%	21%

(1)

Other notes receivable were originated through a real estate entity in which substantially all of the assets were sold by Bluegreen in 2012.

The table above includes notes receivable deemed to have been acquired by BFC, indirectly through Woodbridge, in connection with Woodbridge’s November 2009 acquisition of approximately 7.4 million additional shares of Bluegreen’s Common Stock, which resulted in BFC, indirectly through Woodbridge, holding a controlling interest in Bluegreen. In accordance with applicable accounting guidance, “Loans and Debt Securities Acquired with Deteriorated Credit Quality”, BFC elected to recognize interest income on these notes receivable using the expected cash flows method. BFC treated expected prepayments consistently in determining cash flows expected to be collected, such that the non-accretable difference was not affected and the difference between actual prepayments and expected prepayments will not affect the non-accretable difference. The assumption for prepayment rates was derived from Bluegreen’s historical performance information for its off-balance sheet securitizations and ranges from 4% to 9%. As of June 30, 2016 and December 31, 2015, the outstanding contractual unpaid principal balance of the acquired notes was $34.9 million and $47.8 million, respectively. As of June 30, 2016 and December 31, 2015, the carrying amount of the acquired notes was $32.3 million and $43.6 million, respectively. The acquired notes are included in the amounts of notes receivable in the condensed consolidated statements of financial condition at June 30, 2016 and December 31, 2015.

The following is a reconciliation of accretable yield for the three and six months ended June 30, 2016 and 2015 (in thousands):



Accretable Yield		For the Three Months Ended June 30,		For the Six Months Ended June 30,
		2016	2015	2016	2015
Balance, beginning of period	$	7,398	15,630	9,033	17,867
Accretion		(1,395)	(2,264)	(3,008)	(4,751)
Reclassification to nonaccretable yield		(244)	(441)	(266)	(191)
Balance, end of period	$	5,759	12,925	5,759	12,925

The weighted-average interest rate on Bluegreen’s notes receivable was 15.9% as of June 30, 2016 and December 31, 2015. All of Bluegreen’s VOI notes receivable bear interest at fixed rates. The weighted-average interest rate charged on notes receivable secured by VOIs was 15.9% and 16.0% as of June 30, 2016 and December 31, 2015, respectively.

Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due. As of June 30, 2016 and December 31, 2015, $9.2 million and $10.4 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income. After 120 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for credit loss.

Credit Quality for Financed Receivables and Allowance for Credit Losses

Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables. In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a combination of factors, including a static pool analysis, the aging of the respective receivables, current default trends and prepayment rates by origination year, as well as the FICO® scores of the borrowers.

The activity in Bluegreen’s allowance for loan losses was as follows (in thousands):



		For the Six Months Ended June 30,
		2016	2015
Balance, beginning of period	$	110,714	102,566
Provision for credit losses		23,993	16,276
Write-offs of uncollectible receivables		(19,836)	(16,943)
Balance, end of period	$	114,871	101,899

The following table shows the delinquency status of Bluegreen’s VOI notes receivable as of June 30, 2016 and December 31, 2015 (in thousands):



		June 30,	December 31,
		2016	2015
Current	$	511,636	501,738
31-60 days		5,709	6,889
61-90 days		4,151	4,869
> 90 days (1)		9,187	10,389
Total	$	530,683	523,885

(1)

Includes $4.8 million and $5.2 million as of June 30, 2016 and December 31, 2015, respectively, related to VOI notes receivable that, as of such dates, had defaulted, but the related VOI notes receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen's receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for credit losses.