Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

Note 3. Finance Receivables, Credit Quality Information, and Allowance for Credit Losses

Net finance receivables for the periods indicated consisted of the following:

Dollars in thousands	March 31, 2023		December 31, 2022
Small loans	$	456,313	$	481,605
Large loans		1,211,836		1,208,185
Retail loans		8,081		9,603
Net finance receivables	$	1,676,230	$	1,699,393

Net finance receivables included net deferred origination fees and costs of $14.5 million and $16.0 million as of March 31, 2023 and December 31, 2022, respectively.

The credit quality of the Company’s finance receivable portfolio is dependent on the Company’s ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio, and respond to changing economic conditions as it grows its portfolio. The allowance for credit losses uses FICO scores and delinquency as key data points in estimating the allowance. The Company uses six FICO band categories to assess FICO scores. The first three FICO band categories include subprime FICO scores below 620. The fourth and fifth FICO band categories include near-prime FICO scores ranging from 620 to 659. The sixth FICO band category includes prime FICO scores of 660 or higher.

Net finance receivables by product, FICO band at origination, and origination year as of March 31, 2023 are as follows:

	Net Finance Receivables by Origination Year
Dollars in thousands	2023 (1)		2022		2021		2020		2019		Prior		Total Net Finance Receivables
Small Loans:
FICO Band
1	$	25,427	$	45,683	$	7,203	$	859	$	168	$	41	$	79,381
2		9,447		29,996		4,131		397		32		12		44,015
3		13,113		38,952		4,409		286		26		1		56,787
4		14,303		46,107		5,019		311		20		8		65,768
5		16,770		54,149		6,000		263		12		3		77,197
6		29,848		91,324		11,495		478		18		2		133,165
Total small loans	$	108,908	$	306,211	$	38,257	$	2,594	$	276	$	67	$	456,313
Current period credit losses (2)	$	14	$	11,463	$	4,599	$	285	$	17	$	2	$	16,380
Large Loans:
FICO Band
1	$	20,579	$	53,571	$	18,258	$	5,773	$	2,529	$	997	$	101,707
2		10,843		35,941		12,410		3,038		951		177		63,360
3		21,404		96,791		34,620		6,468		1,770		202		161,255
4		29,658		130,747		46,263		9,216		2,697		148		218,729
5		30,643		132,220		48,096		10,220		2,499		116		223,794
6		71,624		256,380		91,388		19,109		4,326		164		442,991
Total large loans	$	184,751	$	705,650	$	251,035	$	53,824	$	14,772	$	1,804	$	1,211,836
Current period credit losses (2)	$	8	$	13,653	$	12,142	$	1,696	$	529	$	69	$	28,097
Retail Loans:
FICO Band
1	$	4	$	5	$	5	$	14	$	5	$	6	$	39
2		—		422		77		4		4		—		507
3		—		1,185		482		45		8		4		1,724
4		—		1,219		799		178		10		5		2,211
5		—		973		643		149		11		6		1,782
6		—		989		655		159		14		1		1,818
Total retail loans	$	4	$	4,793	$	2,661	$	549	$	52	$	22	$	8,081
Current period credit losses (2)	$	—	$	44	$	62	$	15	$	8	$	3	$	132
Total Loans:
FICO Band
1	$	46,010	$	99,259	$	25,466	$	6,646	$	2,702	$	1,044	$	181,127
2		20,290		66,359		16,618		3,439		987		189		107,882
3		34,517		136,928		39,511		6,799		1,804		207		219,766
4		43,961		178,073		52,081		9,705		2,727		161		286,708
5		47,413		187,342		54,739		10,632		2,522		125		302,773
6		101,472		348,693		103,538		19,746		4,358		167		577,974
Total loans	$	293,663	$	1,016,654	$	291,953	$	56,967	$	15,100	$	1,893	$	1,676,230
Current period credit losses (2)	$	22	$	25,160	$	16,803	$	1,996	$	554	$	74	$	44,609

(1)Includes loans originated during the three months ended March 31, 2023.

(2)Represents credit losses for the three months ended March 31, 2023.

Net finance receivables by product, FICO band at origination, and origination year as of December 31, 2022 are as follows:

	Net Finance Receivables by Origination Year
Dollars in thousands	2022		2021		2020		2019		2018		Prior		Total Net Finance Receivables
Small Loans:
FICO Band
1	$	63,362	$	10,842	$	1,388	$	246	$	47	$	7	$	75,892
2		41,683		6,785		664		56		26		2		49,216
3		53,444		7,659		520		39		—		1		61,663
4		62,609		8,980		544		33		—		1		72,167
5		71,448		10,650		505		22		—		—		82,625
6		119,199		19,886		929		28		—		—		140,042
Total small loans	$	411,745	$	64,802	$	4,550	$	424	$	73	$	11	$	481,605
Large Loans:
FICO Band
1	$	60,836	$	20,653	$	7,219	$	3,286	$	826	$	539	$	93,359
2		41,174		15,955		4,044		1,409		111		121		62,814
3		112,336		44,805		8,637		2,811		172		137		168,898
4		150,559		57,913		12,063		3,931		152		67		224,685
5		150,793		59,154		13,060		3,735		172		37		226,951
6		290,648		109,931		24,038		6,552		263		46		431,478
Total large loans	$	806,346	$	308,411	$	69,061	$	21,724	$	1,696	$	947	$	1,208,185
Retail Loans:
FICO Band
1	$	8	$	7	$	28	$	12	$	4	$	3	$	62
2		475		92		9		10		—		—		586
3		1,310		599		71		14		1		3		1,998
4		1,389		979		263		28		2		4		2,665
5		1,083		775		218		27		3		5		2,111
6		1,123		802		224		31		—		1		2,181
Total retail loans	$	5,388	$	3,254	$	813	$	122	$	10	$	16	$	9,603
Total Loans:
FICO Band
1	$	124,206	$	31,502	$	8,635	$	3,544	$	877	$	549	$	169,313
2		83,332		22,832		4,717		1,475		137		123		112,616
3		167,090		53,063		9,228		2,864		173		141		232,559
4		214,557		67,872		12,870		3,992		154		72		299,517
5		223,324		70,579		13,783		3,784		175		42		311,687
6		410,970		130,619		25,191		6,611		263		47		573,701
Total loans	$	1,223,479	$	376,467	$	74,424	$	22,270	$	1,779	$	974	$	1,699,393

The contractual delinquency of the net finance receivables portfolio by product and aging for the periods indicated are as follows:

	March 31, 2023
	Small					Large					Retail					Total
Dollars in thousands	$		%			$		%			$		%			$		%
Current	$	374,823		82.1	%	$	1,057,248		87.2	%	$	6,283		77.8	%	$	1,438,354		85.8	%
1 to 29 days past due		35,890		7.9	%		79,982		6.6	%		851		10.5	%		116,723		7.0	%
Delinquent accounts
30 to 59 days		9,406		2.1	%		17,822		1.6	%		200		2.4	%		27,428		1.6	%
60 to 89 days		9,165		2.0	%		15,847		1.3	%		166		2.1	%		25,178		1.5	%
90 to 119 days		9,218		2.0	%		13,768		1.1	%		162		2.0	%		23,148		1.4	%
120 to 149 days		8,550		1.9	%		13,497		1.1	%		216		2.7	%		22,263		1.3	%
150 to 179 days		9,261		2.0	%		13,672		1.1	%		203		2.5	%		23,136		1.4	%
Total delinquency	$	45,600		10.0	%	$	74,606		6.2	%	$	947		11.7	%	$	121,153		7.2	%
Total net finance receivables	$	456,313		100.0	%	$	1,211,836		100.0	%	$	8,081		100.0	%	$	1,676,230		100.0	%
Net finance receivables in nonaccrual status	$	27,983		6.1	%	$	43,045		3.6	%	$	603		7.5	%	$	71,631		4.3	%

	December 31, 2022
	Small					Large					Retail					Total
Dollars in thousands	$		%			$		%			$		%			$		%
Current	$	388,978		80.7	%	$	1,034,981		85.7	%	$	7,543		78.6	%	$	1,431,502		84.2	%
1 to 29 days past due		48,924		10.2	%		97,855		8.1	%		1,269		13.2	%		148,048		8.7	%
Delinquent accounts
30 to 59 days		13,144		2.8	%		22,712		1.8	%		352		3.7	%		36,208		2.2	%
60 to 89 days		12,251		2.5	%		18,828		1.6	%		273		2.8	%		31,352		1.8	%
90 to 119 days		8,714		1.8	%		15,427		1.3	%		152		1.6	%		24,293		1.4	%
120 to 149 days		5,572		1.2	%		10,675		0.9	%		10		0.1	%		16,257		1.0	%
150 to 179 days		4,022		0.8	%		7,707		0.6	%		4		0.0	%		11,733		0.7	%
Total delinquency	$	43,703		9.1	%	$	75,349		6.2	%	$	791		8.2	%	$	119,843		7.1	%
Total net finance receivables	$	481,605		100.0	%	$	1,208,185		100.0	%	$	9,603		100.0	%	$	1,699,393		100.0	%
Net finance receivables in nonaccrual status	$	20,810		4.3	%	$	39,039		3.2	%	$	212		2.2	%	$	60,061		3.5	%

The accrual of interest income on finance receivables is suspended when an account becomes 90 days delinquent. If a loan is charged off, the accrued interest is reversed as a reduction of interest and fee income. During the three months ended March 31, 2023 and 2022, the Company reversed $4.7 million and $3.7 million of accrued interest as reductions of interest and fee income, respectively.

The following is a reconciliation of the allowance for credit losses by product for the three months ended March 31, 2023 and 2022:

Dollars in thousands	Small			Large			Retail			Total
Beginning balance at January 1, 2023	$	57,915		$	119,592		$	1,293		$	178,800
Provision for credit losses		19,819			27,709			140			47,668
Credit losses		(16,380	)		(28,097	)		(132	)		(44,609	)
Recoveries		758			1,178			5			1,941
Ending balance at March 31, 2023	$	62,112		$	120,382		$	1,306		$	183,800
Net finance receivables at March 31, 2023	$	456,313		$	1,211,836		$	8,081		$	1,676,230
Allowance as percentage of net finance receivables at March 31, 2023		13.6	%		9.9	%		16.2	%		11.0	%

Dollars in thousands	Small			Large			Retail			Total
Beginning balance at January 1, 2022	$	61,294		$	96,494		$	1,512		$	159,300
Provision for credit losses		12,646			17,952			260			30,858
Credit losses		(16,255	)		(16,260	)		(265	)		(32,780	)
Recoveries		645			747			30			1,422
Ending balance at March 31, 2022	$	58,330		$	98,933		$	1,537		$	158,800
Net finance receivables at March 31, 2022	$	438,153		$	997,226		$	10,692		$	1,446,071
Allowance as percentage of net finance receivables at March 31, 2022		13.3	%		9.9	%		14.4	%		11.0	%

The Company uses certain loan modification programs for borrowers experiencing financial difficulties as a loss mitigation strategy to improve collectability of the loans and assist customers through financial setbacks. Programs consist of offering payment deferrals, refinancing, and, in limited instances, settlements. Customers may also pursue financial assistance through external sources, such as filing for bankruptcy protection. Modification programs available to our customers are described in more detail below:

•Customers are generally limited to two deferrals of their monthly payment in a rolling twelve-month period unless it is determined that an exception is warranted (e.g. due to a natural disaster or pandemic). Since the COVID-19 pandemic, customers have been temporarily allowed up to three deferrals in a rolling twelve-month period.

•Customers with delinquent loans who have made recent payments and have verified current employment are allowed to refinance their loan with a reduced interest rate and/or term extension, making the monthly payments more affordable.

•The Company may also agree to settle a past-due loan by accepting less than the full principal balance owed in certain limited cases once it is determined that collection of the entire outstanding balance is unlikely.

•Customers who receive bankruptcy protection may receive principal forgiveness, interest rate reductions, and/or term extensions.
 

The information relating to modifications made to borrowers experiencing financial difficulty for the periods indicated are as follows:

	As of and for the Three Months Ended March 31, 2023
	Principal Forgiveness				Deferrals					Interest Rate Reduction & Term Extension					Total
Dollars in thousands	Amortized Cost Basis		% of Net Finance Receivables		Amortized Cost Basis		% of Net Finance Receivables			Amortized Cost Basis		% of Net Finance Receivables			Amortized Cost Basis		% of Net Finance Receivables
Small loans	$	3		—	$	1,707		0.4	%	$	958		0.2	%	$	2,668		0.6	%
Large loans		24		—		3,079		0.3	%		4,636		0.4	%		7,739		0.6	%
Total	$	27		—	$	4,786		0.3	%	$	5,594		0.3	%	$	10,407		0.6	%

The financial effects of the modifications made to borrowers experiencing financial difficulty for the three months ended March 31, 2023 are as follows:

Loan Modification	Product	Financial Effect
Principal forgiveness	Small loans	Reduced the amortized cost basis of the loans by $0.1 million.
	Large loans	Reduced the amortized cost basis of the loans by $0.2 million.
Deferrals	Small loans	Provided an average of 3 monthly payment deferrals through our standard deferral program. The payment deferrals were added to the end of the original loan terms of these borrowers.
	Large loans	Provided an average of 3 monthly payment deferrals through our standard deferral program. The payment deferrals were added to the end of the original loan terms of these borrowers.
Interest rate reduction	Small loans	Reduced the weighted-average contractual interest rate from 35.5% to 22.9%.
	Large loans	Reduced weighted-average contractual interest rate from 30.3% to 18.0%.
Term extension	Small loans	Added a weighted-average 1.2 years to the life of loans.
	Large loans	Added a weighted-average 1.3 years to the life of loans.

The following table provides the amortized cost basis for modifications made to borrowers experiencing financial difficulty on or after January 1, 2023 that subsequently defaulted. The Company defines payment default as 90 days past due for this disclosure. The respective amounts for each modification for the periods indicated are as follows:

	March 31, 2023
Dollars in thousands	Principal Forgiveness		Deferrals		Interest Rate Reduction & Term Extension		Total
Small loans	$	—	$	33	$	—	$	33
Large loans		—		21		—		21
Total	$	—	$	54	$	—	$	54

The contractual delinquencies of loans that were modified to borrowers experiencing financial difficulty on or after January 1, 2023 for the periods indicated are as follows:

	March 31, 2023
Dollars in thousands	Current		30 - 89 Days Past Due		90+ Days Past Due		Total
Small loans	$	2,354	$	281	$	34	$	2,669
Large loans		7,324		393		17		7,734
Total	$	9,678	$	674	$	51	$	10,403

Prior to January 1, 2023, the Company classified a loan as a TDR finance receivable when the Company modified a loan’s contractual terms for economic or other reasons related to the borrower’s financial difficulties and granted a concession that it would not have otherwise considered.

The amount of TDR net finance receivables and the related TDR allowance for credit losses for the periods indicated are as follows:

	March 31, 2022
Dollars in thousands	TDR Net Finance Receivables		TDR Allowance for Credit Losses
Small loans	$	3,249	$	1,078
Large loans		13,295		3,782
Retail loans		58		19
Total	$	16,602	$	4,879

The following table provides the number and amount of net finance receivables modified and classified as TDRs during the periods presented:

	Three Months Ended
	March 31, 2022
Dollars in thousands	Number of Loans		TDR Net Finance Receivables (1)
Small loans		766	$	1,464
Large loans		760		4,043
Retail loans		3		5
Total		1,529	$	5,512

(1)Represents the post-modification net finance receivables balance of loans that have been modified during the period and resulted in a TDR.

The following table provides the number of accounts and amortized cost basis of finance receivables that subsequently defaulted within the periods indicated (that were modified as a TDR in the preceding 12 months). The Company defines payment default as 90 days past due for this disclosure. The respective amounts and activity for the periods indicated are as follows:

	Three Months Ended
	March 31, 2022
Dollars in thousands	Number of Loans		TDR Net Finance Receivables (1)
Small loans		254	$	478
Large loans		210		1,212
Retail loans		2		6
Total		466	$	1,696

(1)Only includes defaults occurring within 12 months of a loan being designated as a TDR. Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.