Consumer Loans Receivable

9 Months Ended

Dec. 28, 2019

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



	December 28, 2019			March 30, 2019
Loans held for investment (at Acquisition Date, defined below)	$	39,403		$	44,375
Loans held for investment (originated after Acquisition Date)	20,839			20,580
Loans held for sale	19,839			11,288
Construction advances	12,626			12,883
Consumer loans receivable	92,707			89,126
Deferred financing fees and other, net	(2,284		)	(1,926		)
Allowance for loan losses	(431		)	(415		)
	$	89,992		$	86,785

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.

The Company acquired consumer loans receivable as part of its acquisition of Palm Harbor Homes, Inc. ("Palm Harbor") in April 2011 ("Acquisition Date"). As of the 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 consists of 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 consists of interest that is accreted into interest income over the remaining life of the loans (accretable yield). Interest income on consumer loans receivable is recognized as Net revenue.



	December 28, 2019			March 30, 2019
	(in thousands)
Loans held for investment (at Acquisition Date) – contractual amount	$	87,543		$	100,595
Purchase discount:
Accretable	(32,068		)	(36,672		)
Non-accretable	(16,026		)	(19,502		)
Less loans reclassified as other assets	(46		)	(46		)
Total loans held for investment (at Acquisition Date), net	$	39,403		$	44,375

Over the life of the consumer loans held for investment (at Acquisition Date), the Company estimates cash flows expected to be collected to determine if an allowance for loan loss 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 28, 2019		March 30, 2019
Prepayment rate	16.6	%	17.1	%
Default rate	1.3	%	1.1	%

Assuming there was a 1% (100 basis point) unfavorable variation from the expected level, for each key assumption, the expected cash flows over the life of the portfolio, as of December 28, 2019, would decrease by approximately $817,000 and $2.3 million for the expected prepayment rate and expected default rate, respectively.

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



	Three Months Ended						Nine Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Balance at the beginning of the period	$	34,108		$	40,937		$	36,672		$	44,481
Accretion	(1,606		)	(1,904		)	(5,086		)	(5,771		)
Reclassifications (from) to non-accretable discount	(434		)	(376		)	482			(53		)
Balance at the end of the period	$	32,068		$	38,657		$	32,068		$	38,657

Total consumer loans held for investment had the following characteristics:



	December 28, 2019		March 30, 2019
Weighted average contractual interest rate	8.42	%	8.49	%
Weighted average effective interest rate	9.18	%	9.11	%
Weighted average months to maturity	163		163

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



	December 28, 2019
	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)
Home-only loans
0-619	$	362	$	219	$	245	$	—	$	—	$	826
620-719	7,319		5,467		10,873		—		—		23,659
720+	7,933		4,660		7,392		—		538		20,523
Other	46		—		339		—		—		385
Subtotal	15,660		10,346		18,849		—		538		45,393
Conforming mortgages
0-619	—		—		83		—		—		83
620-719	—		—		2,402		8,321		12,173		22,896
720+	—		—		1,061		4,305		7,128		12,494
Subtotal	—		—		3,546		12,626		19,301		35,473
Non-conforming mortgages
0-619	76		277		828		—		—		1,181
620-719	764		3,820		2,528		—		—		7,112
720+	1,115		1,992		230		—		—		3,337
Other	—		—		181		—		—		181
Subtotal	1,955		6,089		3,767		—		—		11,811
Other loans	—		—		30		—		—		30
	$	17,615	$	16,435	$	26,192	$	12,626	$	19,839	$	92,707



	March 30, 2019
	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)
Home-only loans
0-619	$	401	$	245	$	266	$	—	$	—	$	912
620-719	8,448		5,996		10,266		—		—		24,710
720+	9,090		5,419		8,436		—		617		23,562
Other	47		—		390		—		—		437
Subtotal	17,986		11,660		19,358		—		617		49,621
Conforming mortgages
0-619	—		—		83		—		460		543
620-719	—		—		2,202		8,061		6,885		17,148
720+	—		—		684		4,822		3,326		8,832
Subtotal	—		—		2,969		12,883		10,671		26,523
Non-conforming mortgages
0-619	78		344		991		—		—		1,413
620-719	994		4,008		2,687		—		—		7,689
720+	1,238		2,053		369		—		—		3,660
Other	—		—		214		—		—		214
Subtotal	2,310		6,405		4,261		—		—		12,976
Other loans	—		—		6		—		—		6
	$	20,296	$	18,065	$	26,594	$	12,883	$	11,288	$	89,126

Loan contracts secured by geographically concentrated collateral could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. As of December 28, 2019, 41% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 14% was concentrated in Florida. As of March 30, 2019, 44% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 12% was concentrated in Florida. Other than Texas and Florida, no state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of December 28, 2019 or March 30, 2019.

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 determined based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is recorded to the 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 $1.1 million and $1.5 million as of December 28, 2019 and March 30, 2019, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $1.0 million and $1.5 million as of December 28, 2019 and March 30, 2019, respectively.