5. Consumer Loans Receivable

The Company acquired consumer loans receivable during the first quarter of fiscal year 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 ASC 310-30. Consumer loans receivable held for sale and construction advances are carried at the lower of cost or market value. The following table summarizes consumer loans receivable (in thousands):



	March 29, 2014			March 30, 2013
Loans held for investment (acquired on Palm Harbor Acquisition Date)	$	87,596		$	99,854
Loans held for investment (originated after Palm Harbor Acquisition Date)	1,885			606
Loans held for sale	6,741			7,410
Construction advances	2,403			3,597
Consumer loans receivable	98,625			111,467
Deferred financing fees and other, net	(341		)	(477		)
Consumer loans receivable, net	$	98,284		$	110,990

As of the Palm Harbor Acquisition Date, 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 Palm Harbor Acquisition Date as an amount that cannot be accreted into interest income (the non-accretable difference). The remaining difference is accreted into interest income over the remaining life of the loans (referred to as accretable yield). Interest income on consumer loans receivable is recognized as net revenue.



	March 29, 2014			March 30, 2013
	(in thousands)
Consumer loans receivable held for investment – contractual amount	$	223,388		$	263,038
Purchase Discount
Accretable	(77,737		)	(91,291		)
Non-accretable	(57,672		)	(71,451		)
Less consumer loans receivable reclassified as other assets	(383		)	(442		)
Total acquired consumer loans receivable held for investment, net	$	87,596		$	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 Palm Harbor Acquisition Date. 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):



	Year Ended
	March 29, 2014			March 30, 2013
Balance at the beginning of the period	$	91,291		$	106,949
Additions	—			—
Accretion	(11,973		)	(13,554		)
Reclassifications (to) from nonaccretable discount	(1,581		)	(2,104		)
Balance at the end of the period	$	77,737		$	91,291

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 (such as 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 March 29, 2014, for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):



	Consumer Loans Held for Investment
	Securitized 2005		Securitized 2007		Unsecuritized		Construction Advances		Consumer Loans Held For Sale		Total
Asset Class
Credit Quality Indicator
Chattel loans
0-619	$	1,120	$	655	$	758	$	—	$	—	$	2,533
620-719	16,907		11,303		976		—		123		29,309
720+	18,843		12,739		608		—		58		32,248
Subtotal	36,870		24,697		2,342		—		181		64,090
Conforming mortgages
0-619	—		—		271		89		209		569
620-719	—		—		2,052		1,429		4,351		7,832
720+	—		—		354		885		2,000		3,239
Subtotal	—		—		2,677		2,403		6,560		11,640
Non-conforming mortgages
0-619	93		806		1,967		—		—		2,866
620-719	1,562		6,299		4,471		—		—		12,332
720+	1,908		4,355		1,418		—		—		7,681
Subtotal	3,563		11,460		7,856		—		—		22,879
Other loans
Subtotal	—		—		16		—		—		16
	$	40,433	$	36,157	$	12,891	$	2,403	$	6,741	$	98,625

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. Forty-two percent of the outstanding principal balance of CountryPlace’s consumer loans receivable portfolio is concentrated in Texas. Other than Texas, no other state had concentrations in excess of 10%, as of March 29, 2014.