FINANCE RECEIVABLES

We manage finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables, net were as follows (in millions):



	December 31, 2017			March 31, 2018
Consumer
Retail financing, gross	$	78,467		$	79,627
Unearned interest supplements from Ford and affiliated companies	(3,280		)	(3,258		)
Consumer finance receivables	75,187			76,369

Non-Consumer
Dealer financing	39,241			43,230
Other financing	2,172			1,937
Non-Consumer finance receivables	41,413			45,167
Total recorded investment	$	116,600		$	121,536

Recorded investment in finance receivables	$	116,600		$	121,536
Allowance for credit losses	(597		)	(600		)
Finance receivables, net	$	116,003		$	120,936

Net finance receivables subject to fair value (a)	$	112,717		$	117,432
Fair value	112,133			116,785

__________


(a)	At December 31, 2017 and March 31, 2018, Finance receivables, net includes $3.3 billion and $3.5 billion, respectively, of direct financing leases that are not subject to fair value disclosure requirements. The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Excluded from finance receivables at December 31, 2017 and March 31, 2018 was $241 million and $244 million, respectively, of accrued uncollected interest, which we report in Other assets on our balance sheet.

Included in recorded investment in finance receivables at December 31, 2017 and March 31, 2018, were consumer receivables of $38.9 billion and $39.3 billion, respectively, and non-consumer receivables of $24.5 billion and $26.6 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Note 7 for additional information).

NOTE 4. FINANCE RECEIVABLES (Continued)

Aging

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $24 million and $23 million at December 31, 2017 and March 31, 2018, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was $1 million and de minimus at December 31, 2017 and March 31, 2018, respectively.

The aging analysis of finance receivables balances was as follows (in millions):



	December 31, 2017		March 31, 2018
Consumer
31-60 days past due	$	748	$	667
61-90 days past due	113		85
91-120 days past due	36		33
Greater than 120 days past due	37		41
Total past due	934		826
Current	74,253		75,543
Consumer finance receivables	75,187		76,369

Non-Consumer
Total past due	122		95
Current	41,291		45,072
Non-Consumer finance receivables	41,413		45,167
Total recorded investment	$	116,600	$	121,536

Credit Quality

Consumer Portfolio.

Credit quality ratings for consumer receivables are based on our aging analysis. Refer to the aging table above.

Consumer receivables credit quality ratings are as follows:


•	Pass – current to 60 days past due;


•	Special Mention – 61 to 120 days past due and in intensified collection status; and


•	Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

Non-Consumer Portfolio.

Dealers are assigned to one of four groups according to risk ratings as follows:


•	Group I – strong to superior financial metrics;


•	Group II – fair to favorable financial metrics;


•	Group III – marginal to weak financial metrics; and


•	Group IV – poor financial metrics, including dealers classified as uncollectible.

NOTE 4. FINANCE RECEIVABLES (Continued)

The credit quality analysis of our dealer financing receivables was as follows (in millions):



	December 31, 2017		March 31, 2018
Dealer financing
Group I	$	31,551	$	34,584
Group II	5,912		6,694
Group III	1,640		1,844
Group IV	138		108
Total recorded investment	$	39,241	$	43,230

Impaired Receivables

Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be Troubled Debt Restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at December 31, 2017 and March 31, 2018 was $386 million, or 0.5% of consumer receivables, and $380 million, or 0.5% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at December 31, 2017 and March 31, 2018 was $138 million, or 0.3% of non-consumer receivables, and $108 million, or 0.2% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on the principal balance of our receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven. Finance receivables involved in TDRs are specifically assessed for impairment.