FINANCING RECEIVABLES

9 Months Ended

Jul. 31, 2022

FINANCING RECEIVABLES

FINANCING RECEIVABLES

(8)  Financing Receivables

The Company monitors the credit quality of financing receivables based on delinquency status. Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent receivables for which the Company has ceased accruing finance income. The Company ceases accruing finance income when these receivables are generally 90 days delinquent. Generally, when receivables are 120 days delinquent the estimated uncollectible amount from the customer is written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer receivables) by year of origination was as follows in millions of dollars:

	July 31, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	9,161	$	9,169	$	4,713	$	2,234	$	935	$	378	$	3,962	$	30,552
30-59 days past due		40		70		38		23		8		4		18		201
60-89 days past due		15		24		15		7		3		1		5		70
90+ days past due
Non-performing		17		62		48		37		19		27		7		217
Construction and forestry
Current		2,336		2,249		1,004		382		106		20		102		6,199
30-59 days past due		47		54		26		12		4		1		3		147
60-89 days past due		14		14		12		4		1				1		46
90+ days past due				11		3		1				3				18
Non-performing		13		63		49		25		9		4		1		164
Total retail customer receivables	$	11,643	$	11,716	$	5,908	$	2,725	$	1,085	$	438	$	4,099	$	37,614

	October 31, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	12,877	$	6,676	$	3,463	$	1,738	$	728	$	211	$	3,704	$	29,397
30-59 days past due		43		53		29		16		7		3		14		165
60-89 days past due		16		23		12		6		3		1		4		65
90+ days past due				1												1
Non-performing		23		57		53		32		17		23		7		212
Construction and forestry
Current		3,122		1,575		754		273		57		7		92		5,880
30-59 days past due		50		40		27		7		4		1		3		132
60-89 days past due		15		11		9		6		1				1		43
90+ days past due		1		2		3		3		4		2				15
Non-performing		26		56		39		17		7		3				148
Total retail customer receivables	$	16,173	$	8,494	$	4,389	$	2,098	$	828	$	251	$	3,825	$	36,058

	August 1, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	9,159	$	7,516	$	3,938	$	2,053	$	910	$	317	$	3,658	$	27,551
30-59 days past due		38		54		35		19		7		3		13		169
60-89 days past due		14		28		15		6		3		1		4		71
90+ days past due				1												1
Non-performing		12		58		63		42		22		30		6		233
Construction and forestry
Current		2,327		1,845		938		357		84		13		86		5,650
30-59 days past due		35		44		26		9		4		1		3		122
60-89 days past due		13		19		10		5		1		1		1		50
90+ days past due		4		2		9		5		6		2				28
Non-performing		12		47		41		19		8		4		1		132
Total retail customer receivables	$	11,614	$	9,614	$	5,075	$	2,515	$	1,045	$	372	$	3,772	$	34,007

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

	July 31, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	289	$	99	$	34	$	6	$	1	$	1	$	2,022	$	2,452
30+ days past due
Non-performing								1								1
Construction and forestry
Current		11		32		3		1				1		283		331
30+ days past due												1				1
Non-performing
Total wholesale receivables	$	300	$	131	$	37	$	8	$	1	$	3	$	2,305	$	2,785

	October 31, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	346	$	80	$	22	$	9	$	3			$	1,696	$	2,156
30+ days past due
Non-performing						12										12
Construction and forestry
Current		41		7		7				1	$	1		340		397
30+ days past due												1				1
Non-performing
Total wholesale receivables	$	387	$	87	$	41	$	9	$	4	$	2	$	2,036	$	2,566

	August 1, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	263	$	110	$	38	$	13	$	3	$	1	$	2,256	$	2,684
30+ days past due
Non-performing						18										18
Construction and forestry
Current		8		8		8		1		1		1		287		314
30+ days past due												1				1
Non-performing
Total wholesale receivables	$	271	$	118	$	64	$	14	$	4	$	3	$	2,543	$	3,017

An analysis of the allowance for credit losses and investment in financing receivables in millions of dollars during the periods follows:

	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
Three Months Ended July 31, 2022
Allowance:
Beginning of period balance	$	168	$	17	$	5	$	190
Provision (credit)		14		3		(1)		16
Write-offs		(12)		(10)				(22)
Recoveries		8		7				15
Translation adjustments		3						3
End of period balance	$	181	$	17	$	4	$	202
Nine Months Ended July 31, 2022
Allowance:
Beginning of period balance	$	138	$	21	$	7	$	166
Provision (credit)		66		(4)		(3)		59
Write-offs		(47)		(22)				(69)
Recoveries		17		22				39
Translation adjustments		7						7
End of period balance	$	181	$	17	$	4	$	202
Financing receivables:
End of period balance	$	33,515	$	4,099	$	2,785	$	40,399

	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
Three Months Ended August 1, 2021
Allowance:
Beginning of period balance	$	152	$	19	$	7	$	178
Provision		3						3
Write-offs		(14)		(9)				(23)
Recoveries		8		8				16
End of period balance	$	149	$	18	$	7	$	174
Nine Months Ended August 1, 2021
Allowance:
Beginning of period balance	$	133	$	43	$	8	$	184
ASU No. 2016-13 adoption		44		(13)				31
Provision (credit)		(9)		(16)		(1)		(26)
Write-offs		(38)		(23)				(61)
Recoveries		17		27				44
Translation adjustments		2						2
End of period balance	$	149	$	18	$	7	$	174
Financing receivables:
End of period balance	$	30,235	$	3,772	$	3,017	$	37,024

The allowance for credit losses increased in the third quarter and the first nine months of 2022 mainly due to higher reserves related to the events in Russia / Ukraine and higher portfolio balances. As part of the allowance setting process, the Company continues to monitor the economy, including potential impacts of inflation, commodity prices, and interest rates on portfolio performance and adjustments to the allowance are incorporated, as necessary.

A troubled debt restructuring is the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity date, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first nine months of 2022, the Company identified 230 receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $10 million pre-modification and $9 million post-modification. During the first nine months of 2021, the Company identified 304 receivable contracts, primarily retail notes, as troubled debt

restructurings with aggregate balances of $12 million pre-modification and $10 million post-modification. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At July 31, 2022, the Company had no commitments to lend to borrowers whose accounts were modified in troubled debt restructurings.