Consumer Loans Receivable

The following table summarizes consumer loans receivable (in thousands):



	December 29, 2018			March 31, 2018
Loans held for investment (at Acquisition Date)	$	46,177		$	51,798
Loans held for investment (originated after Acquisition Date)	21,315			21,183
Loans held for sale	14,192			12,830
Construction advances	11,844			11,088
Consumer loans receivable	93,528			96,899
Deferred financing fees and other, net	(1,832		)	(1,551		)
Allowance for loan losses	(386		)	(397		)
	$	91,310		$	94,951

The allowance for loan losses is developed at the loan level and allocated to specific individual loans or to impaired loans. A range of probable losses is calculated after giving consideration to, among other things, the loan characteristics, and historical loss experience. The Company then makes a determination of the best estimate within the range of loan losses. The allowance for loan losses reflects the Company's judgment of the probable loss exposure on its loans held for investment portfolio.

As of the date of the Palm Harbor acquisition ("Acquisition Date"), the Company determined the excess of the loan pool's scheduled contractual principal and interest payments over all cash flows expected as an amount that includes interest that cannot be accreted into interest income (the non-accretable difference). The cash flow expected to be collected in excess of the carrying value of the acquired loans includes interest that 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.



	December 29, 2018			March 31, 2018
	(in thousands)
Consumer loans receivable held for investment – contractual amount	$	105,677		$	120,096
Purchase discount
Accretable	(38,657		)	(44,481		)
Non-accretable	(20,672		)	(23,711		)
Less consumer loans receivable reclassified as other assets	(171		)	(106		)
Total acquired consumer loans receivable held for investment, net	$	46,177		$	51,798

Over the life of the acquired loans, the Company estimates cash flows expected to be collected to determine if an allowance for loan loss related to loans acquired subsequent to the Acquisition Date is required. The weighted averages of assumptions used in the calculation of expected cash flows to be collected were as follows:



	December 29, 2018		March 31, 2018
Prepayment rate	16.8	%	16.0	%
Default rate	1.1	%	1.2	%

Assuming there was a 1% unfavorable variation from the expected level, for each key assumption, the expected cash flows for the life of the portfolio, as of December 29, 2018, would decrease by approximately $1.0 million and $2.9 million for the expected prepayment rate and expected default rate, respectively.

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 29, 2018			December 30, 2017			December 29, 2018			December 30, 2017
Balance at the beginning of the period	$	40,937		$	51,180		$	44,481		$	56,686
Accretion	(1,904		)	(2,068		)	(5,771		)	(6,441		)
Reclassifications to non-accretable discount	(376		)	(844		)	(53		)	(1,977		)
Balance at the end of the period	$	38,657		$	48,268		$	38,657		$	48,268

Consumer loans held for investment had the following characteristics:



	December 29, 2018		March 31, 2018
Weighted average contractual interest rate	8.49	%	8.57	%
Weighted average effective interest rate	9.19	%	9.34	%
Weighted average months to maturity	163		168

The following table disaggregates the Company's gross consumer loans receivable for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):



	December 29, 2018
	Consumer Loans Held for Investment
	Securitized 2005		Securitized 2007		Unsecuritized		Construction Advances		Consumer Loans Held For Sale		Total
Asset Class
Credit Quality Indicator (FICO® score)
Chattel loans
0-619	$	414	$	255	$	290	$	—	$	—	$	959
620-719	8,775		6,374		9,207		—		281		24,637
720+	9,493		5,607		10,180		—		726		26,006
Other	48		—		403		—		—		451
Subtotal	18,730		12,236		20,080		—		1,007		52,053
Conforming mortgages
0-619	—		—		153		63		—		216
620-719	—		—		2,260		8,387		8,015		18,662
720+	—		—		660		3,394		4,974		9,028
Other	—		—		—		—		196		196
Subtotal	—		—		3,073		11,844		13,185		28,102
Non-conforming mortgages
0-619	79		350		1,006		—		—		1,435
620-719	1,035		4,057		2,835		—		—		7,927
720+	1,251		2,160		373		—		—		3,784
Other	—		—		217		—		—		217
Subtotal	2,365		6,567		4,431		—		—		13,363
Other loans	—		—		10		—		—		10
	$	21,095	$	18,803	$	27,594	$	11,844	$	14,192	$	93,528



	March 31, 2018
	Consumer Loans Held for Investment
	Securitized 2005		Securitized 2007		Unsecuritized		Construction Advances		Consumer Loans Held For Sale		Total
Asset Class
Credit Quality Indicator (FICO® score)
Chattel loans
0-619	$	465	$	354	$	330	$	—	$	—	$	1,149
620-719	10,102		7,107		8,587		—		245		26,041
720+	10,594		6,410		11,285		—		155		28,444
Other	49		—		403		—		—		452
Subtotal	21,210		13,871		20,605		—		400		56,086
Conforming mortgages
0-619	—		—		156		141		179		476
620-719	—		—		2,137		6,428		6,479		15,044
720+	—		—		199		4,519		5,663		10,381
Other	—		—		116		—		109		225
Subtotal	—		—		2,608		11,088		12,430		26,126
Non-conforming mortgages
0-619	82		405		1,047		—		—		1,534
620-719	1,120		4,378		3,093		—		—		8,591
720+	1,348		2,526		395		—		—		4,269
Other	—		—		282		—		—		282
Subtotal	2,550		7,309		4,817		—		—		14,676
Other loans	—		—		11		—		—		11
	$	23,760	$	21,180	$	28,041	$	11,088	$	12,830	$	96,899

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. As of December 29, 2018, 43.7% of the outstanding principal balance of the consumer loans receivable portfolio is concentrated in Texas and 11.2% is concentrated in Florida. As of March 31, 2018, 44.2% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 11.0% was concentrated in Florida. Other than Texas and Florida, no other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of December 29, 2018 or March 31, 2018.

Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is computed based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is recorded to allowance for loan losses. On a monthly basis, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes totaled approximately $2.3 million and $1.5 million as of December 29, 2018 and March 31, 2018, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheet. Foreclosure or similar proceedings in progress totaled approximately $1.8 million and $1.1 million as of December 29, 2018 and March 31, 2018, respectively.