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Loans Receivable
3 Months Ended
Mar. 31, 2013
Loans Receivable [Abstract]  
Loans Receivable

5.           LOANS RECEIVABLE

 

Loans receivable consists of the following: 

 

 

 

 

 

 

 

 

 

 

(In millions)

As of March 31, 2013

 

 

Dealer Loans

 

Purchased Loans

 

Total

 

Loans receivable

$

1,973.1

 

$

237.2

 

$

2,210.3

 

Allowance for credit losses

 

(172.9

)

 

(8.8

)

 

(181.7

)

Loans receivable, net

$

1,800.2

 

$

228.4

 

$

2,028.6

 

   

 

 

 

 

 

 

 

 

 

(In millions)

As of December 31, 2012

 

 

Dealer Loans

 

Purchased Loans

 

Total

 

Loans receivable

$

1,869.4

 

$

240.5

 

$

2,109.9

 

Allowance for credit losses

 

(167.4

)

 

(9.0

)

 

(176.4

)

Loans receivable, net

$

1,702.0

 

$

231.5

 

$

1,933.5

 

 

A summary of changes in Loans receivable is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

For the Three Months Ended March 31, 2013

   

   

Dealer Loans

   

Purchased Loans

   

Total

   

Balance, beginning of period

   

$

1,869.4

   

   

$

240.5

   

   

$

2,109.9

   

New Consumer Loan assignments (1)

   

   

378.6

   

   

   

27.9

   

   

   

406.5

   

Principal collected on Loans receivable

   

   

(309.3

)

   

   

(36.2

)

   

   

(345.5

)

Accelerated Dealer Holdback payments

   

   

9.5

   

   

   

   

   

   

9.5

   

Dealer Holdback payments

   

   

30.0

   

   

   

   

   

   

30.0

   

Transfers (2)

   

   

(5.0

)

   

   

5.0

   

   

   

   

Write-offs

   

   

(1.1

)

   

   

 

   

   

(1.1

)

Recoveries (3)

   

   

0.6

   

   

   

   

   

   

0.6

   

Net change in other loans

   

   

0.4

 

   

   

   

   

   

0.4

 

Balance, end of period

   

$

1,973.1

   

   

$

237.2

   

   

$

2,210.3

   

   

   

   

   

   

   

   

   

   

   

   

   

   

 (In millions)

For the Three Months Ended March 31, 2012

   

   

Dealer Loans

   

Purchased Loans

   

Total

   

Balance, beginning of period

   

$

1,506.5

   

   

$

246.4

   

   

$

1,752.9

   

New Consumer Loan assignments (1)

   

   

374.4

   

   

   

34.8

   

   

   

409.2

   

Principal collected on Loans receivable

   

   

(269.7

)

   

   

(41.2

)

   

   

(310.9

)

Accelerated Dealer Holdback payments

   

   

12.9

   

   

   

   

   

   

12.9

   

Dealer Holdback payments

   

   

33.2

   

   

   

   

   

   

33.2

   

Transfers (2)

   

   

(5.2

)

   

   

5.2

   

   

   

   

Write-offs

   

   

(0.6

)

   

   

(0.1

)

   

   

(0.7

)

Recoveries (3)

   

   

0.6

   

   

   

   

   

   

0.6

   

Balance, end of period

   

$

1,652.1

   

   

$

245.1

   

   

$

1,897.2

   

 

(1)  The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.  The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

(2)  Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.  We transfer the Dealer’s outstanding Dealer Loan balance to Purchased Loans in the period this forfeiture occurs.

(3)  Represents collections received on previously written off Loans.

 

Contractual net cash flows are comprised of the contractual repayments of the underlying Consumer Loans for Dealer and Purchased Loans, less the related Dealer Holdback payments for Dealer Loans.  The difference between the contractual net cash flows and the expected net cash flows is referred to as the nonaccretable difference.  This difference is neither accreted into income nor recorded in our balance sheets.  We do not believe that the contractual net cash flows of our Loan portfolio are relevant in assessing our financial position.  We are contractually owed repayments on many Consumer Loans, primarily those older than 120 months, where we are not forecasting any future net cash flows.

 

The excess of expected net cash flows over the carrying value of the Loans is referred to as the accretable yield and is recognized on a level-yield basis as finance charge income over the remaining lives of the Loans.  A summary of changes in the accretable yield is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

For the Three Months Ended March 31, 2013

 

   

Dealer Loans

 

Purchased Loans

 

Total

 

Balance, beginning of period

 

$

602.9

 

 

$

115.2

 

 

$

718.1

 

New Consumer Loan assignments (1)

 

 

163.6

 

 

 

11.7

 

 

 

175.3

 

Finance charge income

 

 

(124.1

)

 

 

(18.8

)

 

 

(142.9

)

Forecast changes

 

 

(0.2

)

 

 

3.0

 

 

 

2.8

 

Transfers (2)

 

 

(2.2

)

 

 

3.3

 

 

 

1.1

 

Balance, end of period

 

$

640.0

 

 

$

114.4

 

 

$

754.4

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 (In millions)

For the Three Months Ended March 31, 2012

 

   

Dealer Loans

 

Purchased Loans

 

Total

 

Balance, beginning of period

 

$

508.0

 

 

$

120.1

 

 

$

628.1

 

New Consumer Loan assignments (1)

 

 

157.7

 

 

 

16.1

 

 

 

173.8

 

Finance charge income

 

 

(105.7

)

 

 

(20.4

)

 

 

(126.1

)

Forecast changes

 

 

3.5

 

 

 

0.7

 

 

 

4.2

 

Transfers (2)

 

 

(2.4

)

 

 

3.9

 

 

 

1.5

 

Balance, end of period

 

$

561.1

 

 

$

120.4

 

 

$

681.5

 

 

(1)  The Dealer Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related advances paid to Dealers.  The Purchased Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Purchase Program, less the related one-time payments made to Dealers.

(2)  Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback.  We transfer the Dealer’s outstanding Dealer Loan balance and related expected future net cash flows to Purchased Loans in the period this forfeiture occurs.

 

Additional information related to new Consumer Loan assignments is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

For the Three Months Ended March 31, 2013

 

   

Dealer Loans

 

Purchased Loans

 

Total

 

 Contractual net cash flows at the time of assignment (1)

 

$

578.6 

 

 

$

54.8 

 

 

$

633.4 

 

 Expected net cash flows at the time of assignment (2)

 

 

542.1 

 

 

 

39.7 

 

 

 

581.8 

 

 Fair value at the time of assignment (3)

 

 

378.6 

 

 

 

27.9 

 

 

 

406.5 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 (In millions)

For the Three Months Ended March 31, 2012

 

   

Dealer Loans

 

Purchased Loans

 

Total

 

 Contractual net cash flows at the time of assignment (1)

 

$

576.0 

 

 

$

71.2 

 

 

$

647.2 

 

 Expected net cash flows at the time of assignment (2)

 

 

532.0 

 

 

 

50.9 

 

 

 

582.9 

 

 Fair value at the time of assignment (3)

 

 

374.4 

 

 

 

34.8 

 

 

 

409.2 

 

 

(1)  The Dealer Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments.  The Purchased Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Purchase Program.

(2)  The Dealer Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make.  The Purchased Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Purchase Program.

(3)  The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.  The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program. 

 

Credit Quality

 

We monitor and evaluate the credit quality of Consumer Loans assigned under our Portfolio and Purchase Programs on a monthly basis by comparing our current forecasted collection rates to our initial expectations.  For additional information regarding credit quality, see Note 3 to the consolidated financial statements.  The following table compares our forecast of Consumer Loan collection rates as of March 31, 2013, with the forecasts as of December 31, 2012, and at the time of assignment, segmented by year of assignment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

Forecasted Collection Percentage as of (1)

 

 

Variance in Forecasted Collection Percentage from

 

Consumer Loan

Assignment Year

 

March 31,

2013

 

 

December 31,

2012

 

 

Initial

Forecast

 

 

December 31,

2012

 

 

Initial

Forecast

 

2004

 

73.1 

%

 

73.0 

%

 

73.0 

%

 

0.1 

%

 

0.1 

%

2005

 

73.6 

%

 

73.6 

%

 

74.0 

%

 

0.0 

%

 

-0.4

%

2006

 

69.9 

%

 

69.9 

%

 

71.4 

%

 

0.0 

%

 

-1.5

%

2007

 

68.0 

%

 

68.0 

%

 

70.7 

%

 

0.0 

%

 

-2.7

%

2008

 

70.4 

%

 

70.3 

%

 

69.7 

%

 

0.1 

%

 

0.7 

%

2009

 

79.5 

%

 

79.5 

%

 

71.9 

%

 

0.0 

%

 

7.6 

%

2010

 

77.4 

%

 

77.3 

%

 

73.6 

%

 

0.1 

%

 

3.8 

%

2011

 

74.2 

%

 

74.1 

%

 

72.5 

%

 

0.1 

%

 

1.7 

%

2012

 

72.7 

%

 

72.2 

%

 

71.4 

%

 

0.5 

%

 

1.3 

%

 

(1)

Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment.  Contractual repayments include both principal and interest.

 

Advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program are aggregated into pools for purposes of recognizing revenue and evaluating impairment.  As a result of this aggregation, we are not able to segment the carrying value of the majority of our Loan portfolio by year of assignment.  We are able to segment our Loan portfolio by the performance of the Loan pools.  Performance considers both the amount and timing of expected net cash flows and is measured by comparing the balance of the Loan pool to the discounted value of the expected future net cash flows of each Loan pool using the yield established at the time of assignment.  The following table segments our Loan portfolio by the performance of the Loan pools:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

As of March 31, 2013

 

   

Loan Pool Performance Meets or Exceeds Initial Estimates

 

Loan Pool Performance Less than Initial Estimates

 

 

Dealer

Loans

 

Purchased

Loans

 

Total

 

Dealer

Loans

 

Purchased

Loans

 

Total

 

Loans receivable

$

567.7

 

$

211.3

 

$

779.0

 

$

1,405.4

 

$

25.9

 

$

1,431.3

 

Allowance for credit losses

 

 

 

 

 

 

 

(172.9

)

 

(8.8

)

 

(181.7

)

Loans receivable, net

$

567.7

 

$

211.3

 

$

779.0

 

$

1,232.5

 

$

17.1

 

$

1,249.6

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

As of December 31, 2012

 

   

Loan Pool Performance Meets or Exceeds Initial Estimates

 

Loan Pool Performance Less than Initial Estimates

 

 

Dealer

Loans

 

Purchased

Loans

 

Total

 

Dealer

Loans

 

Purchased

Loans

 

Total

 

Loans receivable

$

564.1

 

$

205.8

 

$

769.9

 

$

1,305.3

 

$

34.7

 

$

1,340.0

 

Allowance for credit losses

 

 

 

 

 

 

 

(167.4

)

 

(9.0

)

 

(176.4

)

Loans receivable, net

$

564.1

 

$

205.8

 

$

769.9

 

$

1,137.9

 

$

25.7

 

$

1,163.6

 

 

A summary of changes in the allowance for credit losses is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

For the Three Months Ended March 31, 2013

 

   

 

Dealer Loans

 

 

Purchased Loans

 

 

Total

 

Balance, beginning of period

 

$

167.4

 

 

$

9.0

 

 

$

176.4

 

Provision for credit losses

 

 

6.0

 

 

 

(0.2

)

 

 

5.8

 

Write-offs

 

 

(1.1

)

 

 

 

 

 

(1.1

)

Recoveries (1)

 

 

0.6

 

 

 

 

 

 

0.6

 

Balance, end of period

 

$

172.9

 

 

$

8.8

 

 

$

181.7

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 (In millions)

 

For the Three Months Ended March 31, 2012

 

   

 

Dealer Loans

 

 

Purchased Loans

 

 

Total

 

Balance, beginning of period

 

$

141.7

 

 

$

12.6

 

 

$

154.3

 

Provision for credit losses

 

 

6.6

 

 

 

(1.4

)

 

 

5.2

 

Write-offs

 

 

(0.6

)

 

 

(0.1

)

 

 

(0.7

)

Recoveries (1)

 

 

0.6

 

 

 

 

 

 

0.6

 

Balance, end of period

 

$

148.3

 

 

$

11.1

 

 

$

159.4

 

 

(1)            Represents collections received on previously written off Loans.