Note 2 - Allowance For Loan Losses

6 Months Ended

Jun. 30, 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, Management classifies the account as being 60-89 days past due; when four or more installments are past due, Management classifies 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 60 days or more past due and still accruing interest at June 30, 2015 or December 31, 2014.  The Company’s principal balances on non-accrual loans by loan class as of June 30, 2015 and December 31, 2014 are as follows:

Loan Class	June 30, 2015	December 31, 2014
Consumer Loans	$ 23,928,998	$ 23,124,540
Real Estate Loans	963,760	919,600
Sales Finance Contracts	783,368	739,009
Total	$ 25,676,126	$ 24,783,149

An age analysis of principal balances on past due loans, segregated by loan class, as of June 30, 2015 and December 31, 2014 follows:

June 30, 2015	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 14,847,883	$ 7,998,909	$ 13,652,696	$ 36,499,488
Real Estate Loans	509,243	183,045	570,913	1,263,201
Sales Finance Contracts	426,038	257,829	436,932	1,120,799
Total	$ 15,783,164	$ 8,439,783	$ 14,660,541	$ 38,883,488

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	$ 31,909,400
Real Estate Loans	441,721	180,756	504,384	1,136,925
Sales Finance Contracts	374,821	209,845	463,957	999,001
Total	$ 12,736,005	$ 7,608,389	$ 15,251,051	$ 34,045,326

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 June 30, 2015 and December 31, 2014 was 2.68% 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). 

June 30, 2015	Principal Balance	% Portfolio	6 Months Net Charge Off (Recoveries)	% Net Charge Offs
Consumer Loans	$ 442,293,400	90.1 %	$ 12,470,695	97.8
Real Estate Loans	21,268,492	4.3	(2,747)	-
Sales Finance Contracts	27,592,288	5.6	283,081	2.2
Total	$ 491,154,180	100.0 %	$ 12,751,029	100.0 %

June 30, 2014	Principal Balance	% Portfolio	6 Months Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 421,921,432	90.8 %	$ 11,532,011	97.2
Real Estate Loans	19,546,601	4.2	4,820	-
Sales Finance Contracts	23,000,434	5.0	333,025	2.8
Total .........................	$ 464,468,467	100.0 %	$ 11,869,856	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% and 95% of the Company’s loan portfolio at June 30, 2015 and 2014, respectively.  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		Six Months Ended
	June 30, 2015	June 30, 2014	June 30, 2015	June 30, 2014
Allowance for Credit Losses:
Beginning Balance	$ 28,620,000	$ 24,680,789	$ 28,620,000	$ 24,680,789
Provision for Loan Losses	6,528,953	7,171,635	12,751,029	13,065,867
Charge-offs	(8,940,284)	(8,300,168)	(17,800,005)	(16,743,300)
Recoveries	2,411,331	2,324,544	5,048,976	4,873,444
Ending Balance	$ 28,620,000	$ 25,876,800	$ 28,620,000	$ 25,876,800
Ending balance; collectively     evaluated for impairment	$ 28,620,000	$ 25,876,800	$ 28,620,000	$ 25,876,800
	Three Months Ended		Six Months Ended
	June 30, 2015	June 30, 2014	June 30, 2015	June 30, 2014
Finance receivables:
Ending balance	$ 491,154,180	$ 464,468,467	$ 491,154,180	$ 464,468,467
Ending balance; collectively     evaluated for impairment	$ 491,154,180	$ 464,468,467	$ 491,154,180	$ 464,468,467

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 June 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,031	$ 4,362,336	$ 4,111,093
Real Estate Loans	12	101,501	95,640
Sales Finance Contracts	67	123,912	112,384
Total	2,110	$ 4,587,749	$ 4,319,117

The following table presents a summary of loans that were restructured during the three months ended June 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	972	$ 3,149,774	$ 2,895,294
Real Estate Loans	25	209,797	209,742
Sales Finance Contracts	39	106,204	101,096
Total	1,036	$ 3,465,775	$ 3,206,132

The following table presents a summary of loans that were restructured during the six months ended June 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	3,055	$ 7,022,140	$ 6,628,457
Real Estate Loans	21	177,574	171,663
Sales Finance Contracts	114	217,208	202,764
Total	3,190	$ 7,416,922	$ 7,002,884

The following table presents a summary of loans that were restructured during the six months ended June 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	1,770	$ 5,645,802	$ 5,207,480
Real Estate Loans	38	299,528	299,472
Sales Finance Contracts	78	203,935	195,202
Total	1,886	$ 6,149,265	$ 5,702,154

TDRs that occurred during the previous twelve months and subsequently defaulted during the three months ended June 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	560	$ 798,237
Real Estate Loans	-	-
Sales Finance Contracts	25	28,184
Total	585	$ 826,421

TDRs that occurred during the twelve months ended June 30, 2014 and subsequently defaulted during the three months ended June 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans.	215	$ 387,551
Real Estate Loans	1	3,526
Sales Finance Contracts	7	6,947
Total	223	$ 398,024

TDRs that occurred during the previous twelve months and subsequently defaulted during the six months ended June 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	728	$ 1,089,968
Real Estate Loans	1	1,000
Sales Finance Contracts	31	33,522
Total	760	$ 1,124,490

TDRs that occurred during the twelve months ended June 30, 2014 and subsequently defaulted during the six months ended June 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	368	$ 675,801
Real Estate Loans	1	3,526
Sales Finance Contracts	13	13,232
Total	382	$ 692,559

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