Quarterly report pursuant to Section 13 or 15(d)

Notes Receivable

v3.20.1
Notes Receivable
3 Months Ended
Mar. 31, 2020
Notes Receivable [Abstract]  
Notes Receivable 4. Notes Receivable

The table below provides information relating to our notes receivable and our allowance for loan losses (dollars in thousands):

As of

March 31,

December 31,

2020

2019

Notes receivable secured by VOIs:

VOI notes receivable - non-securitized

$

190,051

$

203,872

VOI notes receivable - securitized

395,108

385,326

Gross VOI notes receivable

585,159

589,198

Allowance for loan losses - non-securitized

(48,493)

(47,894)

Allowance for loan losses - securitized

(106,673)

(92,736)

Allowance for loan losses

(155,166)

(140,630)

VOI notes receivable, net

$

429,993

$

448,568

Allowance as a % of Gross VOI notes receivable

27%

24%

The weighted-average interest rate charged on our notes receivable secured by VOIs was 14.8% and 14.9% at March 31, 2020 and December 31, 2019, respectively. All of our VOI loans bear interest at fixed rates. Our VOI notes receivable are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.

Allowance for Loan Losses

The activity in our allowance for loan losses was as follows (in thousands):

For the Three Months Ended

March 31,

2020

2019

Balance, beginning of period

$

140,630

$

134,133

Provision for loan losses

30,353

11,153

Less: Write-offs of uncollectible receivables

(15,817)

(8,460)

Balance, end of period

$

155,166

$

136,826

We monitor the credit quality of our receivables on an ongoing basis. We hold large amounts of homogeneous VOI notes receivable and assess uncollectibility based on pools of receivables as we do not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, we do not use a single primary indicator of credit quality but instead evaluate our VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends and prepayment rates by origination year, as well as the FICO scores of the borrowers.

While the impact of COVID- 19 pandemic on our borrowers had not yet been reflected in our default or delinquency rates as of March 31, 2020, we believe that the COVID-19 pandemic will have a significant impact on our VOI notes receivable. Accordingly, as of March 31, 2020, we recorded an additional allowance for loan losses of $12.0 million, which includes our estimate of customer defaults as a result of the COVID – 19 pandemic based on our historical experience, forbearance requests received from our customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers.


Additional information about our VOI notes receivable by year of origination is as follows as of March 31, 2020 (in thousands):

Year of Origination

2020

2019

2018

2017

2016

2015 and Prior

Total

701+

$

29,174

$

107,298

$

70,649

$

46,077

$

34,472

$

47,243

$

334,913

601-700

13,575

53,165

42,097

30,816

28,094

45,316

213,063

<601 (1)

1,124

5,300

3,747

2,482

2,934

5,258

20,845

Other (2)

1,161

3,603

3,289

2,831

5,454

16,338

Total by FICO score

$

43,873

$

166,924

$

120,096

$

82,664

$

68,331

$

103,271

$

585,159

Defaults

$

$

2,703

4,174

$

2,773

$

2,269

$

3,898

$

15,817

Allowance for loan loss

$

9,674

$

48,428

$

34,740

$

21,760

$

19,057

$

21,507

$

155,166

Delinquency status:

Current

$

43,810

$

162,227

$

113,764

$

77,586

$

64,054

$

95,334

$

556,775

31-60 days

63

1,196

1,190

1,073

708

1,192

5,422

61-90 days

1,333

1,319

852

541

905

4,950

Over 91 days (2)

2,168

3,823

3,153

3,028

5,840

18,012

Total

$

43,873

$

166,924

$

120,096

$

82,664

$

68,331

$

103,271

$

585,159

(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).

(2)Includes $10.3 million related to VOI notes receivable that, as of March 31, 2020, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of our receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.

The percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination were as follows:

As of

March 31,

December 31,

2020

2019

FICO Score

701+

59

%

59

%

601-700

37

37

<601

3

3

Other (1)

1

1

Total

100

%

100

%

(1)VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).

Our notes receivable are carried at amortized cost less an allowance for loan losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than 90 days contractually past due and not resumed until such loans are less than 90 days past due. As of March 31, 2020 and December 31, 2019, $18.0 million and $19.3 million, respectively, of our VOI notes receivable were more than 90 days past due, and accordingly, consistent with our policy, were not accruing interest income. After approximately 127 days, our VOI notes receivable are generally written off against the allowance for loan loss. Accrued interest was $5.2 million and $5.3 million as of March 31, 2020 and December 31, 2019, respectively, and is included within other assets in our unaudited consolidated balance sheets herein.

The following table shows the delinquency status of our VOI notes receivable as of March 31, 2020 and December 31, 2019 (in thousands):

As of

March 31,

December 31,

2020

2019

Current

$

556,775

$

557,849

31-60 days

5,422

6,794

61-90 days

4,950

5,288

Over 91 days (1)

18,012

19,267

Total

$

585,159

$

589,198

(1)Includes $10.3 million and $10.6 million as of March 31, 2020 and December 31, 2019, respectively, related to VOI notes receivable that, as of such date, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of our receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.