Notes Receivable

9 Months Ended

Sep. 30, 2020

4. Notes Receivable

The table below provides information relating to our notes receivable and our allowance for loan losses (dollars in thousands):



	As of
	September 30,		December 31,
	2020		2019
Notes receivable secured by VOIs:
VOI notes receivable - non-securitized	$	197,845	$	203,872
VOI notes receivable - securitized		362,073		385,326
Gross VOI notes receivable		559,918		589,198
Allowance for loan losses - non-securitized		(59,271)		(47,894)
Allowance for loan losses - securitized		(90,534)		(92,736)
Allowance for loan losses		(149,805)		(140,630)
VOI notes receivable, net	$	410,113	$	448,568
Allowance as a % of VOI notes receivable		27%		24%

The weighted-average interest rate charged on our notes receivable secured by VOIs was 14.9% as of September 30, 2020 and December 31, 2019. All of our VOI loans bear interest at fixed rates. Our VOI notes receivable are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.

Allowance for Loan Losses

The activity in our allowance for loan losses was as follows (in thousands):



	For the Nine Months Ended
	September 30,
		2020		2019
Balance, beginning of period	$	140,630	$	134,133
Provision for loan losses		44,083		39,483
Less: Write-offs of uncollectible receivables		(34,908)		(38,340)
Balance, end of period	$	149,805	$	135,276

We monitor the credit quality of our receivables on an ongoing basis. We hold large amounts of homogeneous VOI notes receivable and assess uncollectibility based on pools of receivables as we do not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, we do not use a single primary indicator of credit quality but instead evaluate our VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends and prepayment rates by origination year, as well as the FICO scores of the borrowers.

While we do not believe that the full impact of COVID- 19 is reflected in our default or delinquency rates as of September 30, 2020, we believe that the COVID-19 pandemic has had and is expected to continue to have a significant impact on our VOI notes receivable. Accordingly, in March 2020, we recorded an additional allowance for loan losses of $12.0 million, which includes our estimate of customer defaults as a result of the COVID – 19 pandemic based on our historical experience, forbearance requests received from our customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers.

Additional information about our VOI notes receivable by year of origination is as follows as of September 30, 2020 (in thousands):


	Year of Origination
	2020 ⁽³⁾		2019		2018		2017		2016		2015 and Prior		Total
By FICO score:
701+	$	49,843	$	92,561	$	61,442	$	39,863	$	29,802	$	39,607	$	313,118
601-700		30,057		47,499		36,549		26,616		24,508		38,616		203,845
<601⁽¹⁾		2,492		4,815		3,266		2,239		2,429		4,445		19,686
Other ⁽²⁾		225		3,009		4,848		4,484		3,551		7,152		23,269
Total	$	82,617	$	147,884	$	106,105	$	73,202	$	60,290	$	89,820	$	559,918

Defaults	$	610	$	8,251		9,484	$	6,559	$	4,901	$	5,103	$	34,908
Allowance for loan loss	$	22,945	$	43,188	$	29,545	$	18,070	$	17,126	$	18,931	$	149,805

Delinquency status:
Current	$	81,169	$	141,008	$	99,478	$	68,010	$	56,417	$	81,387	$	527,469
31-60 days		612		1,521		1,243		736		558		936		5,606
61-90 days		315		1,510		764		946		408		568		4,511
Over 91 days ⁽²⁾		521		3,845		4,620		3,510		2,907		6,929		22,332
Total	$	82,617	$	147,884	$	106,105	$	73,202	$	60,290	$	89,820	$	559,918

(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).

(2)Includes $15.2 million related to VOI notes receivable that, as of September 30, 2020, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of our receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.

(3)VOI originations for the nine months ended September 30, 2020.

The percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination, were as follows:


	As of
	September 30,		December 31,
	2020		2019
FICO Score
701+	59	%	59	%
601-700	37		37
<601⁽¹⁾	4		4
Total	100	%	100	%

(1)Includes VOI notes receivable attributable to borrowers without a FICO score (primarily foreign borrowers).

Our notes receivable are carried at amortized cost less an allowance for loan 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 90 days contractually past due and not resumed until such loans are less than 90 days past due. As of September 30, 2020, and December 31, 2019, $22.3 million and $19.3 million, respectively, of our VOI notes receivable were more than 90 days past due, and accordingly, consistent with our policy, were not accruing interest income. After approximately 127 days, our VOI notes receivable are generally written off against the allowance for loan loss. Accrued interest was $3.8 million and $5.3 million as of September 30, 2020 and December 31, 2019, respectively, and is included within other assets in our unaudited consolidated balance sheets herein.

The following table shows the delinquency status of our VOI notes receivable as of September 30, 2020 and December 31, 2019 (in thousands):



	As of
	September 30,		December 31,
	2020		2019
Current	$	527,469	$	557,849
31-60 days		5,606		6,794
61-90 days		4,511		5,288
Over 91 days ⁽¹⁾		22,332		19,267
Total	$	559,918	$	589,198

(1)Includes $15.2 million and $10.6 million of VOI notes receivable as of September 30, 2020 and December 31, 2019, respectively, related to VOI notes receivable that as of such date, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of our receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.