Note 2 - Allowance For Loan Losses

3 Months Ended

Mar. 31, 2015

Notes

Note 2 - Allowance For Loan Losses

Note 2 – Allowance for Loan Losses

The allowance for loan losses is based on Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio.  Management’s approach to estimating and evaluating the allowance for loan losses is on a total portfolio level based on historical loss trends, bankruptcy trends, the level of receivables at the balance sheet date, payment patterns and economic conditions primarily including, but not limited to, unemployment levels and gasoline prices.  Historical loss trends are tracked on an on going basis.  The trend analysis includes statistical analysis of the correlation between loan date and charge off date, charge off statistics by the total loan portfolio, and charge off statistics by branch, division and state.  Delinquency and bankruptcy filing trends are also tracked.  If trends indicate an adjustment to the allowance for loan losses is warranted, Management will make what it considers to be appropriate adjustments.  The level of receivables at the balance sheet date is reviewed and adjustments to the allowance for loan losses are made if Management determines increases or decreases in the level of receivables warrants an adjustment.  The Company uses monthly unemployment statistics, and various other monthly or periodic economic statistics, published by departments of the U.S. government and other economic statistics providers to determine the economic component of the allowance for loan losses.  Such allowance is, in the opinion of Management, sufficiently adequate for probable losses in the current loan portfolio.  As the estimates used in determining the loan loss reserve are influenced by outside factors, such as consumer payment patterns and general economic conditions, there is uncertainty inherent in these estimates.  Actual results could vary based on future changes in significant assumptions.

Management does not disaggregate the Company’s loan portfolio by loan class when evaluating loan performance.  The total portfolio is evaluated for credit losses based on contractual delinquency and other economic conditions. The Company classifies delinquent accounts at the end of each month according to the number of installments past due at that time, based on the then-existing terms of the contract.  Accounts are classified in delinquency categories based on the number of days past due.  When three installments are past due, we classify the account as being 60-89 days past due; when four or more installments are past due, we classify the account as being 90 days or more past due.  When a loan becomes five installments past due, it is charged off unless Management directs that it be retained as an active loan. In making this charge off evaluation, Management considers factors such as pending insurance, bankruptcy status and other indicators of collectability. In addition, no installment is counted as being past due if at least 80% of the contractual payment has been paid. In connection with any bankruptcy court-initiated repayment plan and as allowed by state regulatory authorities, the Company effectively resets the delinquency rating of each account to coincide with the court initiated repayment plan. The amount charged off is the unpaid balance less the unearned finance charges and the unearned insurance premiums, if applicable.

When a loan becomes 60 days or more past due based on its original terms, it is placed in nonaccrual status.  At such time, the accrual of any additional finance charges is discontinued.  Finance charges are then only recognized to the extent there is a loan payment received or when the account qualifies for return to accrual status.  Nonaccrual loans return to accrual status when the loan becomes less than 60 days past due.

There were no loans past due 60 days or more and still accruing interest at March 31, 2015 or December 31, 2014.  The Company’s principal balances on non-accrual loans by loan class as of March 31, 2015 and December 31, 2014 are as follows:

Loan Class	March 31,  2015	December 31, 2014
Consumer Loans	$ 20,042,965	$ 23,124,540
Real Estate Loans	895,745	919,600
Sales Finance Contracts	648,328	739,009
Total	$ 21,587,039	$ 24,783,149

An age analysis of principal balances on past due loans, segregated by loan class, as of March 31, 2015 and December 31, 2014 follows:

March 31, 2015	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 12,562,051	$ 6,174,175	$ 13,173,174	$ 31,909,400
Real Estate Loans	355,269	249,442	532,214	1,136,925
Sales Finance Contracts	381,220	173,737	444,044	999,001
Total	$ 13,298,540	$ 6,597,354	$ 14,149,432	$ 34,045,326

December 31, 2014	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 11,919,463	$ 7,217,788	$ 14,282,710	$ 33,419,961
Real Estate Loans	441,721	180,756	504,384	1,126,861
Sales Finance Contracts	374,821	209,845	463,957	1,048,623
Total	$ 12,736,005	$ 7,608,389	$ 15,251,051	$ 35,595,445

In addition to the delinquency rating analysis, the ratio of bankrupt accounts to the total loan portfolio is also used as a credit quality indicator.  The ratio of bankrupt accounts outstanding to total principal loan balances outstanding at March 31, 2015 and December 31, 2014 was 2.81% and 2.48%, respectively.

Nearly our entire loan portfolio consists of small homogeneous consumer loans (of the product types set forth in the table below). 

March 31, 2015	Principal Balance	% Portfolio	3 Months Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 434,968,175	90.9 %	$ 6,106,817	98.2
Real Estate Loans	19,848,975	4.1	(3,787)	(.1)
Sales Finance Contracts	23,913,586	5.0	119,046	1.9
Total	$ 478,730,736	100.0 %	$ 6,222,076	100.0 %

March 31, 2014	Principal Balance	% Portfolio	3 Months Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 410,972,676	90.8 %	$ 5,713,824	96.9
Real Estate Loans	19,619,407	4.4	(1,222)	-
Sales Finance Contracts	21,863,183	4.8	181,630	3.1
Total	$ 452,455,266	100.0 %	$ 5,894,232	100.0 %

Sales finance contracts are similar to consumer loans in nature of loan product, terms, customer base to whom these products are marketed, factors contributing to risk of loss and historical payment performance, and together with consumer loans, represented approximately 96% of the Company’s loan portfolio at March 31, 2015 and 2014.  As a result of these similarities, which have resulted in similar historical performance, consumer loans and sales finance contracts represent substantially all loan losses.  Real estate loans and related losses have historically been insignificant, and, as a result, we do not stratify the loan portfolio for purposes of determining and evaluating our loan loss allowance.  Due to the composition of the loan portfolio, the Company determines and monitors the allowance for loan losses on a collectively evaluated, single portfolio segment basis.  Therefore, a roll forward of the allowance for loan loss activity at the portfolio segment level is the same as at the total portfolio level.  We have not acquired any impaired loans with deteriorating quality during any period reported.  The following table provides additional information on our allowance for loan losses based on a collective evaluation:

	Three Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Allowance for Credit Losses:
Beginning Balance	$ 28,620,000	$ 24,680,789
Provision for Loan Losses	6,222,076	5,894,232
Charge-offs	(8,859,721)	(8,443,132)
Recoveries	2,637,645	2,548,900
Ending Balance	$ 28,620,000	$ 24,680,789
Ending Balance; collectively evaluated for impairment	$ 28,620,000	$ 24,680,789

Finance receivables:
Ending Balance	$ 478,730,736	$ 452,455,266
Ending Balance; collectively evaluated for impairment	$ 478,730,736	$ 452,455,266

Troubled Debt Restructings ("TDR's") represent loans on which the original terms of the loans have been modified as a result of the following conditions: (i) the restructuring constitutes a concession and (ii) the borrower is experiencing financial difficulties. Loan modifications by the Company involve payment alterations, interest rate concessions and/ or reductions in the amount owed by the borrower.  The following table presents a summary of loans that were restructured during the three months ended March 31, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	1,110	$ 2,968,080	$ 2,823,413
Real Estate Loans	13	108,315	108,265
Sales Finance Contracts	50	96,552	93,636
Total	1,173	$ 3,172,947	$ 3,025,314

The following table presents a summary of loans that were restructured during the three months ended March 31, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	879	$ 2,776,850	$ 2,590,986
Real Estate Loans	15	113,052	113,052
Sales Finance Contracts	43	108,299	104,674
Total	937	$ 2,998,201	$ 2,808,712

TDR's that occurred during the previous twelve months and subsequently defaulted during the three months ended March 31, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	193	$ 333,099
Real Estate Loans	1	1,000
Sales Finance Contracts	7	6,883
Total	201	$ 340,982

TDR's that occurred during the twelve months ended March 31, 2014 and subsequently defaulted during the three months ended March 31, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	184	$ 360,106
Real Estate Loans	-	-
Sales Finance Contracts	7	8,538
Total	191	$ 368,644

The level of TDR's, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance of loan losses.