ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY OF RECEIVABLES

12 Months Ended

Oct. 27, 2024

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY OF RECEIVABLES

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY OF RECEIVABLES

NOTE 4. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY OF RECEIVABLES

Credit Quality

We monitor the credit quality of Receivables based on delinquency status, defined as follows:

● Past due balances represent Receivables still accruing finance income with any payments 30 days or more past the contractual payment due date.

● Non-performing Receivables represent Receivables for which we have stopped accruing finance income, which generally occurs when Customer Receivables are 90 days delinquent and when interest-bearing wholesale receivables become 60 days delinquent. Accrued finance income and lease revenue previously recognized on non-performing Receivables is reversed and subsequently recognized on a cash basis. Accrual of finance income and lease revenue is resumed when the receivable becomes contractually current, and collections are reasonably assured.  

Accrued finance income and lease revenue reversed on non-performing Receivables, and finance income and lease revenue recognized from cash payments on non-performing Receivables were as follows:

	2024		2023		2022
Accrued finance income and lease revenue reversed	$	43.1	$	17.1	$	11.3
Finance income and lease revenue recognized on cash payments		37.1		18.4		15.4

Total Receivable balances represent principal plus accrued interest. Receivable balances are written off to the allowance for credit losses when, in the judgment of management, they are considered uncollectible. Write-offs generally occur when Customer Receivables are 120 days delinquent, and on a case-by-case basis when wholesale receivables are 60 days delinquent. In these situations, collateral is repossessed (for collateral-dependent Receivables) or the account is designated for litigation, and the estimated uncollectible amount is written off to the allowance for credit losses.

The credit quality analysis of Customer Receivables by year of origination was as follows:

	October 27, 2024
	2024		2023		2022		2021		2020		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	12,957.7	$	7,528.9	$	4,715.5	$	2,633.1	$	915.6	$	232.8	$	4,351.5	$	33,335.1
30-59 days past due		39.5		93.3		49.2		25.2		10.6		3.6		39.2		260.6
60-89 days past due		18.4		43.7		16.7		8.8		7.0		1.9		12.3		108.8
90+ days past due		.4		.9		.3		2.2		.2						4.0
Non-performing		22.2		84.9		69.9		40.4		18.4		11.7		13.9		261.4
Construction and forestry
Current		2,636.0		1,564.0		893.1		380.1		83.2		41.9		114.2		5,712.5
30-59 days past due		49.4		41.3		23.2		9.8		2.5		1.5		4.0		131.7
60-89 days past due		20.0		23.5		8.2		5.8		1.5		.3		1.8		61.1
90+ days past due		.4		.5		.1		.2		.2						1.4
Non-performing		38.2		89.4		64.5		30.6		8.5		3.8		1.9		236.9
Total Customer Receivables	$	15,782.2	$	9,470.4	$	5,840.7	$	3,136.2	$	1,047.7	$	297.5	$	4,538.8	$	40,113.5

	October 29, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	12,998.3	$	7,208.2	$	4,459.1	$	1,970.4	$	666.3	$	179.3	$	4,424.8	$	31,906.4
30-59 days past due		46.8		66.6		34.6		18.7		8.2		2.9		28.1		205.9
60-89 days past due		15.8		22.0		14.8		7.8		3.3		1.3		8.6		73.6
90+ days past due		1.4		.8		2.7		2.9		.1		.1				8.0
Non-performing		25.9		63.7		44.5		25.0		12.9		12.0		7.2		191.2
Construction and forestry
Current		2,343.4		1,586.2		859.0		279.2		65.3		27.3		118.6		5,279.0
30-59 days past due		44.4		28.1		24.8		8.6		3.4		.4		4.1		113.8
60-89 days past due		17.8		11.4		11.8		4.5		1.0		.2		1.8		48.5
90+ days past due		.1		1.2		.1		.1								1.5
Non-performing		34.1		67.5		51.2		20.7		7.5		4.0		1.2		186.2
Total Customer Receivables	$	15,528.0	$	9,055.7	$	5,502.6	$	2,337.9	$	768.0	$	227.5	$	4,594.4	$	38,014.1

The credit quality analysis of wholesale receivables by year of origination was as follows:

	October 27, 2024
	2024		2023		2022		2021		2020		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	640.7	$	161.6	$	29.5	$	6.2	$	1.0	$	.3	$	9,599.8	$	10,439.1
30-59 days past due		.2												4.3		4.5
60-89 days past due														4.2		4.2
90+ days past due		.1												10.1		10.2
Non-performing														35.3		35.3
Construction and forestry
Current		21.0		8.6		1.5		11.7		.1				3,557.0		3,599.9
30-59 days past due														8.1		8.1
60-89 days past due														5.1		5.1
90+ days past due														7.7		7.7
Non-performing
Total wholesale receivables	$	662.0	$	170.2	$	31.0	$	17.9	$	1.1	$	.3	$	13,231.6	$	14,114.1

	October 29, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	609.5	$	92.6	$	20.0	$	3.9	$	.7	$	159.9	$	9,270.1	$	10,156.7
30-59 days past due														18.5		18.5
60-89 days past due														21.8		21.8
90+ days past due														5.5		5.5
Non-performing														5.7		5.7
Construction and forestry
Current		19.4		2.5		19.9		.2		.1		75.2		2,987.6		3,104.9
30-59 days past due														4.3		4.3
60-89 days past due														5.5		5.5
90+ days past due														7.2		7.2
Non-performing
Total wholesale receivables	$	628.9	$	95.1	$	39.9	$	4.1	$	.8	$	235.1	$	12,326.2	$	13,330.1

An analysis of the allowance for credit losses and investment in Receivables at October 27, 2024, October 29, 2023, and October 30, 2022 was as follows:

	Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables
2024
Allowance:
Beginning of year balance	$	114.9	$	20.4	$	11.1	$	146.4
Provision for credit losses*		228.8		51.6		18.2		298.6
Write-offs		(162.5)		(93.8)				(256.3)
Recoveries		11.6		29.4		.2		41.2
Translation adjustments		(.4)				(2.0)		(2.4)
End of year balance	$	192.4	$	7.6	$	27.5	$	227.5
Receivables:
End of year balance	$	35,574.7	$	4,538.8	$	14,114.1	$	54,227.6

2023
Allowance:
Beginning of year balance	$	95.4	$	21.9	$	11.1	$	128.4
Provision (credit) for credit losses*		67.6		21.2		(.2)		88.6
Write-offs		(60.8)		(44.4)		(.2)		(105.4)
Recoveries		12.9		21.8		.6		35.3
Translation adjustments		(.2)		(.1)		(.2)		(.5)
End of year balance	$	114.9	$	20.4	$	11.1	$	146.4
Receivables:
End of year balance	$	33,419.7	$	4,594.4	$	13,330.1	$	51,344.2

2022
Allowance:
Beginning of year balance	$	96.5	$	20.8	$	11.7	$	129.0
Provision (credit) for credit losses*		26.1		(1.8)		.1		24.4
Write-offs		(40.7)		(26.8)		(.3)		(67.8)
Recoveries		14.4		29.7		.1		44.2
Translation adjustments		(.9)				(.5)		(1.4)
End of year balance	$	95.4	$	21.9	$	11.1	$	128.4
Receivables:
End of year balance	$	29,871.3	$	4,165.8	$	8,404.5	$	42,441.6

* Excludes provision (credit) for credit losses on unfunded commitments of $2.3, $(.1), and $(.9) for the years ended October 27, 2024, October 29, 2023, and October 30, 2022, respectively. The estimated credit losses related to unfunded commitments are recorded in “Accounts payable and accrued expenses.”

The allowance for credit losses increased in 2024 compared to 2023, primarily due to higher expected losses on retail notes and financing leases as a result of elevated delinquencies and a decline in market conditions impacting the agriculture receivable portfolio. The allowance for wholesale receivables also increased due to a specific provision for a dealer experiencing financial difficulties. These increases were partially offset by a decrease in the allowance on revolving charge accounts, driven by write-offs of seasonal financing program accounts and recoveries expected on those accounts in the future. We monitor the economy as part of the allowance setting process, including potential impacts of the agricultural industry cycle and interest rates, among other factors, and qualitative adjustments to the allowance are incorporated, as necessary.

During 2024, 2023, and 2022, $54.0, $17.0, and $8.5, respectively, was recorded in other income related to recoveries from freestanding credit enhancements. The increase in 2024 was driven by higher recoveries from John Deere dealers and expected recoveries on bank guarantee contracts, which relate primarily to the wholesale allowance increase noted above. At October 27, 2024 and October 29, 2023, we had $119.3 and $129.6, respectively, of deposits withheld from John Deere dealers and merchants available as credit enhancements for retail notes and financing leases.

Modifications

We occasionally grant contractual modifications to customers experiencing financial difficulties. Before offering a modification, we evaluate the ability of the customer to meet the modified payment terms. Modifications offered include payment deferrals, term extensions, or a combination thereof. Finance charges continue to accrue during the deferral or extension period with the exception of modifications related to bankruptcy proceedings. Our allowance for credit losses incorporates historical loss information, including the effects of loan modifications with customers. Therefore, additional adjustments to the allowance are generally not recorded upon modification of a loan.

At October 27, 2024, the ending amortized cost of modified loans with borrowers experiencing financial difficulty in 2024 was as follows:

	2024
Current	$	68.0
30-59 days past due		1.3
60-89 days past due		1.4
90+ days past due		.1
Non-performing		12.7
Total	$	83.5

In 2024, these modifications represented .15 percent of our Receivable portfolio. The financial effects of payment deferrals with borrowers experiencing financial difficulty resulted in a weighted average payment deferral of 8 months, while term extensions added a weighted average of 10 months to the terms of the modified contracts. Additionally, modifications with a combination of both payment deferrals and term extensions resulted in a weighted average payment deferral of 2 months and a weighted average term extension of 8 months.

Defaults and subsequent write-offs of loans modified in the prior twelve months were not significant during 2024. In addition, at October 27, 2024, commitments to provide additional financing to these customers were $25.7.

Troubled Debt Restructuring

Prior to adopting ASU 2022-02, modifications of loans to borrowers experiencing financial difficulty were considered troubled debt restructurings when the modification resulted in a concession we would not otherwise consider.

The following table includes Receivable contracts identified as troubled debt restructurings, which were primarily retail notes:

	2023		2022
Number of receivable contracts		149		199
Pre-modification balance	$	7.2	$	7.0
Post-modification balance		6.7		5.8

In 2023 and 2022, we had no significant troubled debt restructurings that subsequently defaulted and were written off.

Write-offs

Write-offs by year of origination were as follows:

	October 27, 2024
	2024		2023		2022		2021		2020		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf	$	4.0	$	29.2	$	23.5	$	10.3	$	9.9	$	3.1	$	86.0	$	166.0
Construction and forestry		8.2		33.4		23.4		10.3		4.7		2.5		7.8		90.3
Total	$	12.2	$	62.6	$	46.9	$	20.6	$	14.6	$	5.6	$	93.8	$	256.3

Total write-offs and recoveries, by product, and as a percentage of average balances held during the year, were as follows:

	2024				2023				2022
	Dollars		Percent		Dollars		Percent		Dollars		Percent
Write-offs:
Retail notes & financing leases:
Agriculture and turf	$	(80.0)	(.28)	%	$	(31.7)	(.12)	%	$	(21.4)	(.09)	%
Construction and forestry		(82.5)	(1.44)			(29.1)	(.55)			(19.3)	(.39)
Total retail notes & financing leases		(162.5)	(.48)			(60.8)	(.20)			(40.7)	(.15)
Revolving charge accounts		(93.8)	(2.40)			(44.4)	(1.17)			(26.8)	(.77)
Wholesale receivables						(.2)				(.3)
Total write-offs		(256.3)	(.48)			(105.4)	(.23)			(67.8)	(.18)
Recoveries:
Retail notes & financing leases:
Agriculture and turf		8.4	.03			8.8	.03			10.2	.05
Construction and forestry		3.2	.06			4.1	.08			4.2	.09
Total retail notes & financing leases		11.6	.03			12.9	.04			14.4	.05
Revolving charge accounts		29.4	.75			21.8	.58			29.7	.86
Wholesale receivables		.2				.6	.01			.1
Total recoveries		41.2	.08			35.3	.08			44.2	.12
Total net write-offs	$	(215.1)	(.40)	%	$	(70.1)	(.15)	%	$	(23.6)	(.06)	%