FINANCING RECEIVABLES

6 Months Ended

Apr. 30, 2023

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:

	April 30, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	6,718	$	10,947	$	6,435	$	3,155	$	1,305	$	619	$	3,621	$	32,800
30-59 days past due		10		55		55		31		18		9		16		194
60-89 days past due		2		15		24		19		4		2		8		74
90+ days past due				1		1										2
Non-performing		5		51		51		36		25		29		25		222
Construction and forestry
Current		1,442		2,434		1,490		557		169		56		106		6,254
30-59 days past due		7		35		29		25		21		10		4		131
60-89 days past due		1		8		16		12		14		12		2		65
90+ days past due				7		1		1		2						11
Non-performing		5		71		61		33		12		6		1		189
Total	$	8,190	$	13,624	$	8,163	$	3,869	$	1,570	$	743	$	3,783	$	39,942

	October 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	13,500	$	7,984	$	4,091	$	1,875	$	785	$	200	$	4,111	$	32,546
30-59 days past due		46		63		36		17		7		3		19		191
60-89 days past due		14		25		13		6		2		1		5		66
90+ days past due		1														1
Non-performing		27		60		44		28		18		19		8		204
Construction and forestry
Current		2,964		1,974		842		292		73		12		108		6,265
30-59 days past due		53		52		23		9		2		1		3		143
60-89 days past due		19		16		7		3		1				1		47
90+ days past due		1		4		1		3				1				10
Non-performing		25		61		34		19		7		3				149
Total	$	16,650	$	10,239	$	5,091	$	2,252	$	895	$	240	$	4,255	$	39,622

	May 1, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	5,540	$	10,141	$	5,318	$	2,684	$	1,286	$	723	$	3,381	$	29,073
30-59 days past due		20		75		36		20		9		5		12		177
60-89 days past due		4		29		14		9		5		2		4		67
90+ days past due						1										1
Non-performing		3		40		44		41		25		31		14		198
Construction and forestry
Current		1,506		2,404		1,211		577		234		105		91		6,128
30-59 days past due		20		52		33		17		6		2		3		133
60-89 days past due		7		25		15		6		1		1		1		56
90+ days past due				1		1		1		1		5				9
Non-performing		3		46		50		29		12		5		1		146
Total	$	7,103	$	12,813	$	6,723	$	3,384	$	1,579	$	879	$	3,507	$	35,988

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

	April 30, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	265	$	198	$	36	$	15	$	2	$	1	$	3,653	$	4,170
30+ days past due
Non-performing										1						1
Construction and forestry
Current		10		6		24		1				1		638		680
30+ days past due
Non-performing
Total	$	275	$	204	$	60	$	16	$	3	$	2	$	4,291	$	4,851

	October 30, 2022
	2022		2021		2020		2019		2018	Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	387	$	64	$	27	$	4		$	2	$	2,371	$	2,855
30+ days past due
Non-performing								1							1
Construction and forestry
Current		7		29		2		1			1		377		417
30+ days past due
Non-performing
Total	$	394	$	93	$	29	$	6		$	3	$	2,748	$	3,273

	May 1, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	224	$	155	$	43	$	8	$	1	$	2	$	1,605	$	2,038
30+ days past due
Non-performing								5								5
Construction and forestry
Current		6		35		4		2				1		268		316
30+ days past due												1				1
Non-performing
Total	$	230	$	190	$	47	$	15	$	1	$	4	$	1,873	$	2,360

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 April 30, 2023
Allowance:
Beginning of period balance	$	140	$	16	$	4	$	160
Provision		30		8				38
Write-offs		(19)		(11)				(30)
Recoveries		6		6				12
End of period balance	$	157	$	19	$	4	$	180
Six Months Ended April 30, 2023
Allowance:
Beginning of period balance	$	299	$	22	$	4	$	325
Provision		45		4				49
Provision transferred to held for sale		(142)						(142)
Provision (credit) subtotal		(97)		4				(93)
Write-offs		(37)		(18)				(55)
Recoveries		10		11				21
Translation adjustments		(18)						(18)
End of period balance	$	157	$	19	$	4	$	180
Financing receivables:
End of period balance	$	36,159	$	3,783	$	4,851	$	44,793

	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
Three Months Ended May 1, 2022
Allowance:
Beginning of period balance	$	138	$	15	$	5	$	158
Provision		39		3				42
Write-offs		(18)		(8)				(26)
Recoveries		5		7				12
Translation adjustments		4						4
End of period balance	$	168	$	17	$	5	$	190
Six Months Ended May 1, 2022
Allowance:
Beginning of period balance	$	138	$	21	$	7	$	166
Provision (credit)		52		(7)		(2)		43
Write-offs		(35)		(12)				(47)
Recoveries		9		15				24
Translation adjustments		4						4
End of period balance	$	168	$	17	$	5	$	190
Financing receivables:
End of period balance	$	32,481	$	3,507	$	2,360	$	38,348

In the first quarter of 2023, the Company determined that the financial services business in Russia met the held for sale criteria. The financing receivables in Russia were reclassified to “Other assets” and the associated allowance for credit losses was reversed in the first quarter of 2023. These operations were sold in the second quarter of 2023 (see Note 20).

Excluding the portfolio in Russia, the allowance for credit losses increased in the second quarter and the first six months of 2023 mainly due to higher portfolio balances and higher expected losses on turf and construction financing receivables. As part of the allowance setting process, the Company continues to monitor the economy, including potential impacts of inflation and interest rates, among other factors, on portfolio performance and adjustments to the allowance are incorporated, as necessary.