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Cat Financial Financing Activities
 6 Months Ended
Jun. 30, 2021
Receivables [Abstract]  
Cat Financial Financing Activities Cat Financial financing activities
 
Allowance for credit losses

Portfolio segments
A portfolio segment is the level at which Cat Financial develops a systematic methodology for determining its allowance for credit losses. Cat Financial's portfolio segments and related methods for estimating expected credit losses are as follows:

Customer
Cat Financial provides loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use, the majority of which operate in construction-related industries. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. The average original term of Cat Financial's customer finance receivable portfolio was approximately 48 months with an average remaining term of approximately 26 months as of June 30, 2021.

Cat Financial typically maintains a security interest in financed equipment and requires physical damage insurance coverage on the financed equipment, both of which provide Cat Financial with certain rights and protections. If Cat Financial's collection efforts fail to bring a defaulted account current, Cat Financial generally can repossess the financed equipment, after satisfying local legal requirements, and sell it within the Caterpillar dealer network or through third-party auctions.

Cat Financial estimates the allowance for credit losses related to its customer finance receivables based on loss forecast models utilizing probabilities of default and the estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.

During the three and six months ended June 30, 2021, Cat Financial's forecasts for the markets in which it operates reflected an overall rebound in economic conditions, which had deteriorated due to the COVID-19 pandemic, resulting from a growing economy, improved unemployment rates and a decrease in delinquencies. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

Dealer
Cat Financial provides financing to Caterpillar dealers in the form of wholesale financing plans. Cat Financial's wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, Cat Financial provides a variety of secured and unsecured loans to Caterpillar dealers.
    
Cat Financial estimates the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, Cat Financial's Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to its close working relationships with the dealers and their financial strength. Therefore, Cat Financial made no adjustments to historical loss rates during the three and six months ended June 30, 2021.

Classes of finance receivables
Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. Typically, Cat Financial's finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk. Cat Financial's classes, which align with management reporting for credit losses, are as follows:

•North America - Finance receivables originated in the United States and Canada.
•EAME - Finance receivables originated in Europe, Africa, the Middle East and the Commonwealth of Independent States.
•Asia/Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.
•Mining - Finance receivables related to large mining customers worldwide.
•Latin America - Finance receivables originated in Mexico and Central and South American countries.
•Caterpillar Power Finance - Finance receivables originated worldwide related to marine vessels with Caterpillar engines and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.

Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). The amount of the write-off is determined by comparing the fair value of the collateral, less cost to sell, to the amortized cost. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.
An analysis of the allowance for credit losses was as follows:
   
 (Millions of dollars)Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Allowance for Credit Losses:CustomerDealerTotalCustomerDealerTotal
Beginning balance$393 $44 $437 $408 $45 $453 
Write-offs(68)— (68)(36)— (36)
Recoveries14 — 14 6 — 6 
Provision for credit losses13 — 13 86 — 86 
Other2 — 2 3 — 3 
Ending balance$354 $44 $398 $467 $45 $512 
   
Six Months Ended June 30, 2021Six Months Ended June 30, 2020
Allowance for Credit Losses:CustomerDealerTotalCustomerDealerTotal
Beginning balance$431 $44 $475 $375 $45 $420 
Adjustment to adopt new accounting guidance 1
— — — 12 — 12 
Write-offs(102)— (102)(73)— (73)
Recoveries24 — 24 13 — 13 
Provision for credit losses3 — 3 146 — 146 
Other(2)— (2)(6)— (6)
Ending balance$354 $44 $398 $467 $45 $512 
Individually evaluated$183 $39 $222 $184 $39 $223 
Collectively evaluated171 5 176 283 6 289 
Ending Balance$354 $44 $398 $467 $45 $512 
Finance Receivables:   
Individually evaluated$492 $78 $570 $601 $78 $679 
Collectively evaluated19,356 2,585 21,941 17,869 3,305 21,174 
Ending Balance$19,848 $2,663 $22,511 $18,470 $3,383 $21,853 
1 Adjustment to adopt new accounting guidance related to credit losses.

Credit quality of finance receivables

At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, Cat Financial monitors credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, Cat Financial considers the entire finance receivable past due when any installment is over 30 days past due.
Customer
The tables below summarize the aging category of Cat Financial's amortized cost of finance receivables in the Customer portfolio segment by origination year:
      
 (Millions of dollars)June 30, 2021
20212020201920182017PriorRevolving
Finance
Receivables 		Total Finance Receivables
North America      
Current$2,469 $3,224 $1,931 $957 $325 $111 $117 $9,134 
31-60 days past due12 37 25 19 8 3 — 104 
61-90 days past due4 7 5 5 2 2 — 25 
91+ days past due2 17 27 15 10 6 2 79 
EAME
Current952 1,275 669 329 126 38 — 3,389 
31-60 days past due6 10 15 2 1 1 — 35 
61-90 days past due— 7 4 2 — — — 13 
91+ days past due3 11 7 6 3 61 — 91 
Asia/Pacific
Current857 1,088 498 151 33 6 — 2,633 
31-60 days past due4 22 17 8 1 — — 52 
61-90 days past due— 8 9 4 — — — 21 
91+ days past due— 12 8 8 1 — — 29 
Mining
Current433 420 478 272 89 191 71 1,954 
31-60 days past due— 3 — — — — — 3 
61-90 days past due— — — — — — — — 
91+ days past due— 1 2 4 2 — — 9 
Latin America
Current315 452 233 93 30 19 — 1,142 
31-60 days past due1 14 6 3 1 — — 25 
61-90 days past due— 3 2 1 — — — 6 
91+ days past due— 18 11 11 6 8 — 54 
Caterpillar Power Finance
Current27 215 132 82 209 180 109 954 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — 2 — 2 
91+ days past due— 2 — 20 3 69 — 94 
Total Customer$5,085 $6,846 $4,079 $1,992 $850 $697 $299 $19,848 
      
 (Millions of dollars)December 31, 2020
20202019201820172016PriorRevolving
Finance
Receivables 		Total Finance Receivables
North America      
Current$3,777 $2,423 $1,344 $522 $212 $27 $89 $8,394 
31-60 days past due52 49 33 16 7 2 — 159 
61-90 days past due22 25 16 9 2 1 — 75 
91+ days past due14 35 31 20 9 4 2 115 
EAME
Current1,605 931 501 203 60 18 — 3,318 
31-60 days past due5 15 3 2 — — — 25 
61-90 days past due1 1 2 1 — — — 5 
91+ days past due7 7 12 4 39 43 — 112 
Asia/Pacific
Current1,375 745 321 61 10 3 — 2,515 
31-60 days past due12 22 13 6 — — — 53 
61-90 days past due7 11 7 1 — — — 26 
91+ days past due4 10 9 3 — — — 26 
Mining
Current490 571 287 152 92 151 137 1,880 
31-60 days past due5 — 5 1 — — — 11 
61-90 days past due— — — — — — — — 
91+ days past due— 11 8 2 — — 1 22 
Latin America
Current561 348 151 48 13 34 — 1,155 
31-60 days past due3 6 4 3 — — — 16 
61-90 days past due1 7 6 3 2 — — 19 
91+ days past due2 14 11 24 5 4 — 60 
Caterpillar Power Finance
Current217 172 111 273 99 117 119 1,108 
31-60 days past due— — 6 — — — — 6 
61-90 days past due— — — — — 9 — 9 
91+ days past due2 — 20 3 25 79 — 129 
Total Customer$8,162 $5,403 $2,901 $1,357 $575 $492 $348 $19,238 

Finance receivables in the Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other machinery. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the machinery.

Dealer
As of June 30, 2021, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $78 million that was 91+ days past due in Latin America, all of which was originated in 2017. As of December 31, 2020, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $81 million that was 91+ days past due in Latin America. Of these past due receivables, $78 million were originated in 2017 and $3 million were originated prior to 2016.
Non-accrual finance receivables

Recognition of income is suspended and the finance receivable is placed on non-accrual status when management determines that collection of future income is not probable. Contracts on non-accrual status are generally more than 120 days past due or have been restructured in a troubled debt restructuring (TDR). Recognition is resumed and previously suspended income is recognized when the collection of remaining amounts is considered probable. Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms. Interest earned but uncollected prior to the receivable being placed on non-accrual status is written off through Provision for credit losses when, in the judgment of management, it is considered uncollectible.

In Cat Financial's Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:
   
June 30, 2021December 31, 2020
 Amortized CostAmortized Cost
 (Millions of dollars)
Non-accrual
With an
Allowance		Non-accrual
Without an
Allowance		91+ Still
Accruing		Non-accrual
With an
Allowance		Non-accrual
Without an
Allowance		91+ Still
Accruing
   
North America$62 $1 $19 $86 $1 $34 
EAME89 — 2 113 1 1 
Asia/Pacific19 1 11 13 — 13 
Mining9 1 — 21 1 — 
Latin America57 — 1 63 — 1 
Caterpillar Power Finance113 — — 170 17 — 
Total$349 $3 $33 $466 $20 $49 

There was $1 million of interest income recognized during the three months ended June 30, 2021 and 2020 for customer finance receivables on non-accrual status. There were $6 million and $5 million of interest income recognized during the six month ended June 30, 2021 and 2020, respectively, for customer finance receivables on non-accrual status.

As of June 30, 2021 and December 31, 2020, finance receivables in Cat Financial's Dealer portfolio segment on non-accrual status were $78 million and $81 million, respectively, all of which was in Latin America. There were no finance receivables in Cat Financial's Dealer portfolio segment more than 90 days past due and still accruing income as of June 30, 2021 and December 31, 2020 and no interest income was recognized on dealer finance receivables on non-accrual status during the three and six months ended June 30, 2021 and 2020.


Troubled debt restructurings

A restructuring of a finance receivable constitutes a TDR when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties. Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, payment deferrals and reduction of principal and/or accrued interest. Cat Financial individually evaluates TDR contracts and establishes an allowance based on the present value of expected future cash flows discounted at the receivable's effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable.
There were no finance receivables modified as TDRs during the three and six months ended June 30, 2021 and 2020 for the Dealer portfolio segment. Cat Financial’s finance receivables in the Customer portfolio segment modified as TDRs were as follows:
  
(Millions of dollars)Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost		Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost
Customer   
North America$4 $4 $9 $9 
Asia/Pacific— — 8 8 
Mining— — 17 17 
Latin America6 6 — — 
Caterpillar Power Finance
16 16 37 37 
Total$26 $26 $71 $71 
 Six Months Ended June 30, 2021Six Months Ended June 30, 2020
 Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost		Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost
North America$4 $4 $9 $9 
Asia/Pacific— — 8 8 
Mining11 5 17 17 
Latin America6 6 2 2 
Caterpillar Power Finance16 16 37 37 
Total 
$37 $31 $73 $73 

The Post-TDR amortization costs in the Customer portfolio segment with a payment default (defined as 91+ days past due) which had been modified within twelve months prior to the default date, were as follows:

Three Months Ended June 30Six Months Ended June 30
Customer2021202020212020
North America$— $— $1 $— 
EAME— — — 10 
Asia/Pacific2 — 6 — 
Latin America15 — 15 1 
Caterpillar Power Finance— — 5 — 
Total$17 $— $27 $11