Bluegreen Vacations Holding Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Notes Receivable

Notes Receivable

9 Months Ended

Sep. 30, 2020

3. Notes Receivable

The table below sets forth information relating to Bluegreen’s notes receivable and related allowance for loan losses (dollars in thousands):



	September 30,		December 31,
	2020		2019
Notes receivable secured by VOIs:
VOI notes receivable - non-securitized	$	197,845		203,872
VOI notes receivable - securitized		362,073		385,326
Gross VOI notes receivable		559,918		589,198
Allowance for loan losses - non-securitized		(59,271)		(47,894)
Allowance for loan losses - securitized		(90,534)		(92,736)
Allowance for loan losses		(149,805)		(140,630)
VOI notes receivable, net	$	410,113		448,568
Allowance as a % of gross VOI notes receivable		27%		24%

The weighted-average interest rate charged on Bluegreen’s notes receivable secured by VOIs was 14.9% as of September 30, 2020 and December 31, 2019. Bluegreen’s VOI notes receivable bear interest at fixed rates and are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.

Credit Quality of Notes Receivable and the Allowance for Loan Losses

Bluegreen monitors the credit quality of its receivables on an ongoing basis. Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables as Bluegreen does not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, Bluegreen does not use a single primary indicator of credit quality but instead evaluates its 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 Bluegreen does not believe the full impact of COVID-19 is reflected in its default or delinquency rates, Bluegreen believes that COVID-19 pandemic has had and is expected to continue to have a significant impact on its VOI notes receivable. Accordingly, in March 2020, Bluegreen recorded an additional allowance for loan losses of $12.0 million, which includes its estimate of customer defaults as a result of the COVID-19 pandemic based on Bluegreen’s historical experience, forbearance requests received from its customers, and other factors, including, but not limited to, the seasoning of the notes receivable and FICO scores of the customers.

The activity in Bluegreen’s allowance for loan losses on VOI notes receivable was as follows (in thousands):



	For the Nine Months Ended
	September 30,
	2020		2019
Balance, beginning of period	$	140,630		134,133
Provision for loan losses		44,083		39,483
Write-offs of uncollectible receivables		(34,908)		(38,340)
Balance, end of period	$	149,805		135,276

The table below sets forth information relating to Bluegreen’s VOI notes receivable by year of origination, including the FICO score of the borrower at the time of origination and delinquency status, as of September 30, 2020 (in thousands):



	Year of Origination
	2020 ⁽³⁾		2019		2018		2017		2016		2015 and Prior		Total
By FICO score:
701+	$	49,843	$	92,561	$	61,442	$	39,863	$	29,802	$	39,607	$	313,118
601-700		30,057		47,499		36,549		26,616		24,508		38,616		203,845
<601⁽¹⁾		2,492		4,815		3,266		2,239		2,429		4,445		19,686
Other ⁽²⁾		225		3,009		4,848		4,484		3,551		7,152		23,269
Total	$	82,617	$	147,884	$	106,105	$	73,202	$	60,290	$	89,820	$	559,918

Defaults	$	610	$	8,251	$	9,484	$	6,559	$	4,901	$	5,103	$	34,908
Allowance for loan loss	$	22,945	$	43,188	$	29,545	$	18,070	$	17,126	$	18,931	$	149,805

Delinquency status:
Current	$	81,169	$	141,008	$	99,478	$	68,010	$	56,417	$	81,387	$	527,469
31-60 days		612		1,521		1,243		736		558		936		5,606
61-90 days		315		1,510		764		946		408		568		4,511
Over 91 days ⁽²⁾		521		3,845		4,620		3,510		2,907		6,929		22,332
Total	$	82,617	$	147,884	$	106,105	$	73,202	$	60,290	$	89,820	$	559,918

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

(2)Includes $15.2 million related to VOI notes receivable that, as of September 30, 2020, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.

(3)VOI originations for the nine months ended September 30, 2020.

The table below sets forth information regarding the percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination:



	September 30,		December 31,
FICO Score	2020		2019
700+	59.00	%	59.00	%
600-699	37.00		37.00
<601⁽¹⁾	4.00		4.00
Total	100.00	%	100.00	%

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

Bluegreen’s notes receivable are carried at amortized cost less an allowance for loan losses. Generally, interest income is suspended, and previously accrued but unpaid interest income is reversed on 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 September 30, 2020 and December 31, 2019, $22.3 million and $19.3 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income. After approximately 127 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for loan loss. Accrued interest was $3.8 million and $5.3 million as of September 30, 2020 and December 31, 2019, respectively, and is included within other assets in the Company’s condensed consolidated statements of financial condition herein.

The table below sets forth information regarding the delinquency status of Bluegreen’s VOI notes receivable (in thousands):



	September 30,		December 31,
	2020		2019
Current	$	527,469		557,849
31-60 days		5,606		6,794
61-90 days		4,511		5,288
> 91 days ⁽¹⁾		22,332		19,267
Total	$	559,918		589,198

(1)Includes $15.2 million and $10.6 million of VOI notes receivable as of September 30, 2020 and December 31, 2019, respectively, that, as of such dates, had defaulted but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s receivable-backed notes payable transactions. These VOI notes receivable have been included in the allowance for loan losses.