Commercial Loans Receivable and Allowance for Loan Losses

The Company's commercial loans receivable balance consists of two classes: (i) direct financing arrangements for the home product needs of our independent distributors, communities and developers; and (ii) amounts loaned by the Company under participation financing programs.

Under the terms of the direct programs, the Company provides funds for the independent distributors, communities and developers' financed home purchases. The notes are secured by the home as collateral and, in some instances, other security. The other terms of direct arrangements vary depending on the needs of the borrower and the opportunity for the Company.

Under the terms of the participation programs, the Company provides loans to independent floor plan lenders, representing a significant portion of the funds that such financiers then lend to distributors to finance their inventory purchases. The participation commercial loan receivables are unsecured general obligations of the independent floor plan lenders.

Commercial loans receivable, net, consist of the following by class of financing notes receivable (in thousands):



	March 30, 2019			March 31, 2018
Direct loans receivable	$	42,899		$	16,368
Participation loans receivable	495			275
Allowance for loan losses	(180		)	(42		)
Deferred financing fees, net	(208		)	—
	$	43,006		$	16,601

The commercial loans receivable balance has the following characteristics:



	March 30, 2019		March 31, 2018
Weighted average contractual interest rate	5.7	%	4.6	%
Weighted average months to maturity	7		6

The Company evaluates the potential for loss from its participation loan programs based on the independent lender's overall financial stability, as well as historical experience, and has determined that an applicable allowance for loan losses was not needed at either March 30, 2019 or March 31, 2018.

With respect to direct programs with communities and developers, borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default. For direct programs with independent distributors, the risk of loss is spread over numerous borrowers. Borrower activity is monitored in conjunction with third-party service providers, where applicable, to estimate the potential for loss on the related loans receivable, considering potential exposures including repossession costs, remarketing expenses, impairment of value and the risk of collateral loss. The Company has historically been able to resell repossessed homes, thereby mitigating loss exposure. If a default occurs and collateral is lost, the Company is exposed to loss of the full value of the home loan. If the Company determines that it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, a specific reserve is determined and recorded within the estimated allowance for loan losses. The Company recorded an allowance for loan losses of $180,000 and $42,000 at March 30, 2019 and March 31, 2018, respectively.

The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses applicable to the direct programs (in thousands):



	Year Ended
	March 30, 2019		March 31, 2018
Balance at beginning of period	$	42	$	210
Provision for commercial loan credit losses	138		(168		)
Loans charged off, net of recoveries	—		—
Balance at end of period	$	180	$	42

The following table disaggregates commercial loans receivable and the estimated allowance for loan losses for each class of financing receivable by evaluation methodology (in thousands):



	Direct Commercial Loans						Participation Commercial Loans
	March 30, 2019			March 31, 2018			March 30, 2019		March 31, 2018
Commercial loans receivable:
Collectively evaluated for impairment	$	18,018		$	4,193		$	—	$	—
Individually evaluated for impairment	24,881			12,175			495		275
	$	42,899		$	16,368		$	495	$	275
Allowance for loan losses:
Collectively evaluated for impairment	$	(180	)	$	(42	)	$	—	$	—
Individually evaluated for impairment	—			—			—		—
	$	(180	)	$	(42	)	$	—	$	—

Loans are subject to regular review and are given management's attention whenever a problem situation appears to be developing. Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny. Nonperforming status includes loans accounted for on a non-accrual basis and accruing loans with principal payments past due 90 days or more. The Company's policy is to place loans on nonaccrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower has the inability or unwillingness to meet payments as they become due. The Company will resume accrual of interest once these factors have been remedied. At March 30, 2019, there are no commercial loans that are 90 days or more past due that are still accruing interest. Payments received on nonaccrual loans are recorded on a cash basis, first to interest and then to principal. At March 30, 2019, the Company was not aware of any potential problem loans that would have a material effect on the commercial receivables balance. Charge-offs occur when it becomes probable that outstanding amounts will not be recovered.

The following table disaggregates the Company's commercial loans receivable by class and credit quality indicator (in thousands):



	Direct Commercial Loans				Participation Commercial Loans
	March 30, 2019		March 31, 2018		March 30, 2019		March 31, 2018
Risk profile based on payment activity:
Performing	$	42,899	$	16,368	$	495	$	275
Watch list	—		—		—		—
Nonperforming	—		—		—		—
	$	42,899	$	16,368	$	495	$	275

The Company has concentrations of commercial loans receivable related to factory-built homes located in the following states, measured as a percentage of commercial loans receivables principal balance outstanding:



	March 30, 2019		March 31, 2018
California	21.1	%	14.4	%
Arizona	16.3	%	16.7	%
Oregon	10.4	%	14.7	%

The risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan losses. The Company did not have concentrations in excess of 10% of the principal balance of commercial loans receivable in any other states as of March 30, 2019.

The Company had concentrations of commercial loans receivable with one independent third-party and its affiliates that equaled 22.0% and 37.4% of the principal balance outstanding, all of which was secured, as of March 30, 2019 and March 31, 2018, respectively.