Consumer Loans Receivable

The Company acquired consumer loans receivable during the first quarter of fiscal 2012 as part of the Palm Harbor transaction. Acquired consumer loans receivable held for investment were acquired at fair value and subsequently are accounted for in a manner similar to Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). Consumer loans receivable held for sale are carried at the lower of cost or market and construction advances are carried at the amount advanced less a valuation allowance. The following table summarizes consumer loans receivable (in thousands):



	December 28, 2013			March 30, 2013
Loans held for investment (acquired as part of the Palm Harbor transaction)	$	90,350		$	99,854
Loans held for investment (originated after the Palm Harbor transaction)	1,687			606
Loans held for sale	7,391			7,410
Construction advances, net	2,759			3,597
Consumer loans receivable	102,187			111,467
Deferred financing fees and other, net	(198		)	(477		)
Consumer loans receivable, net	$	101,989		$	110,990

As of the date of the Palm Harbor acquisition, management evaluated consumer loans receivable held for investment by CountryPlace to determine whether there was evidence of deterioration of credit quality and if it was probable that CountryPlace would be unable to collect all amounts due according to the loans’ contractual terms. The Company also considered expected prepayments and estimated the amount and timing of undiscounted expected principal, interest and other cash flows. The Company determined the excess of the loan pool’s scheduled contractual principal and contractual interest payments over all cash flows expected as of the date of the Palm Harbor transaction as an amount that cannot be accreted into interest income (the non-accretable difference). The cash flows expected to be collected in excess of the carrying value of the acquired loans are accreted into interest income over the remaining life of the loans (referred to as accretable yield). The portion of the cash flows expected Interest income on consumer loans receivable is recognized as net revenue.



	December 28, 2013			March 30, 2013
	(In thousands)
Consumer loans receivable held for investment – contractual amount	$	231,912		$	263,038
Purchase discount
Accretable yield	(80,803		)	(91,291		)
Non-accretable difference	(60,206		)	(71,451		)
Less consumer loans receivable reclassified as other assets	(553		)	(442		)
Total acquired consumer loans receivable held for investment, net	$	90,350		$	99,854

Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected by CountryPlace. At the balance sheet date, the Company evaluates whether the present value of expected cash flows, determined using the effective interest rate, has decreased and, if so, recognizes an allowance for loan loss subsequent to the date of the Palm Harbor transaction. The present value of any subsequent increase in the loan pool’s actual cash flows expected to be collected is used first to reverse any existing allowance for loan loss. Any remaining increase in cash flows expected to be collected adjusts the amount of accretable yield recognized on a prospective basis over the loan pool’s remaining life.

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



	Three Months Ended						Nine Months Ended
	December 28, 2013			December 29, 2012			December 28, 2013			December 29, 2012
Balance at the beginning of the period	$	83,817		$	102,314		$	91,291		$	106,949
Accretion	(2,980		)	(3,307		)	(9,143		)	(10,402		)
Net transfers between accretable yield and non-accretable difference	(34		)	374			(1,345		)	2,834
Balance at the end of the period	$	80,803		$	99,381		$	80,803		$	99,381

CountryPlace’s consumer loans receivable consists of fixed-rate, fixed-term and fully-amortizing single-family home loans. These loans are either secured by a manufactured home, excluding the land upon which the home is located (chattel property loans and retail installment sale contracts), or by a combination of the home and the land upon which the home is located (real property mortgage loans). The real property mortgage loans are primarily for manufactured homes. Combined land and home loans are further disaggregated by the type of loan documentation: those conforming to the requirements of Government-Sponsored Enterprises (“GSEs”), and those that are non-conforming. In most instances, CountryPlace’s loans are secured by a first-lien position and are provided for the consumer purchase of a home. In rare instances, CountryPlace may provide other types of loans in second-lien or unsecured positions. Accordingly, CountryPlace classifies its loans receivable as follows: chattel loans, conforming mortgages, non-conforming mortgages, and other loans.

In measuring credit quality within each segment and class, CountryPlace uses commercially available credit scores (“FICO”). At the time of each loan’s origination, CountryPlace obtains credit scores from each of the three primary credit bureaus, if available. To evaluate credit quality of individual loans, CountryPlace uses the mid-point of the available credit scores or, if only two scores are available, the Company uses the lower of the two. CountryPlace does not update credit bureau scores after the time of origination.

The following table disaggregates CountryPlace’s gross consumer loans receivable as of December 28, 2013, for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):



	Consumer Loans Held for Investment								Consumer
	Securitized 2005		Securitized 2007		Unsecuritized		Construction Advances		Loans Held For Sale		Total
Asset Class
Credit Quality Indicator
Chattel loans
0-619	$	1,142	$	668	$	821	$	—	$	—	$	2,631
620-719	17,449		11,617		987		—		—		30,053
720+	19,594		13,321		593		—		—		33,508
Subtotal	38,185		25,606		2,401		—		—		66,192
Conforming mortgages
0-619	—		—		274				128		402
620-719	—		—		2,308		1,552		4,604		8,464
720+	—		—		287		1,207		2,659		4,153
Subtotal	—		—		2,869		2,759		7,391		13,019
Non-conforming mortgages
0-619	94		817		2,051		—		—		2,962
620-719	1,646		6,399		4,082		—		—		12,127
720+	1,945		4,496		1,429		—		—		7,870
Subtotal	3,685		11,712		7,562		—		—		22,959
Other loans
Subtotal	—		—		17		—		—		17
	$	41,870	$	37,318	$	12,849	$	2,759	$	7,391	$	102,187

Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. Consumer loans receivable are located in the key states shown below with the corresponding percentage of loans aged 61 days or more:



	December 28, 2013			March 30, 2013
		Aging 61 days or more			Aging 61 days or more
	Portfolio	Percent of state’s	Percent of total	Portfolio	Percent of state’s	Percent of total
State	concentration	loan balance	loan balance	concentration	loan balance	loan balance
Texas	41.4%	1.29%	0.53%	41.9%	1.77%	0.74%
Florida	7.9%	1.62%	0.13%	6.7%	2.26%	0.15%
New Mexico	6.9%	1.05%	0.07%	6.6%	2.44%	0.16%
Arizona	5.6%	6.31%	0.35%	6.2%	3.05%	0.19%
All others	38.2%	3.17%	1.21%	38.6%	3.08%	1.19%
	100.0%		2.29%	100.0%		2.43%

The states of Florida and Arizona have experienced volatility in the housing market from economic circumstances. The risks created by these concentrations have been considered by management in the determination of the accretable yield and the adequacy of any allowance for loan losses. Other than Texas, no other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of December 28, 2013 or March 30, 2013.