Effective January 1, 2020, we implemented the new credit loss guidance using a modified retrospective approach. Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods. See Note 2 for additional information.


(Millions of dollars)	September 30, 2020		December 31, 2019
Retail loans, net(1)	$	14,808	$	15,424
Retail leases, net	7,501		7,660
Caterpillar purchased receivables, net	3,545		4,448
Wholesale loans, net(1)	593		664
Wholesale leases, net	34		60
Total finance receivables	26,481		28,256
Less: Allowance for credit losses	(460)		(424)
Total finance receivables, net	$	26,021	$	27,832

Revenues from finance leases were $124 million and $135 million for the three months ended September 30, 2020 and 2019, respectively, and $368 million and $388 million for the nine months ended September 30, 2020 and 2019, respectively, and are included in retail and wholesale finance revenue in the Consolidated Statements of Profit. The residual values for finance leases are included in Finance receivables, net in the Consolidated Statements of Financial Position. Residual value adjustments are recognized through a reduction of finance revenue over the remaining lease term.

We provide 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. We also provide financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. The average original term of our customer finance receivable portfolio was approximately 48 months with an average remaining term of approximately 23 months as of September 30, 2020.

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

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

Our forecasts for the markets in which we operate slightly improved during the three months ended September 30, 2020, but continued to reflect an overall decline in economic conditions resulting from a contracting economy, elevated unemployment rates and an increase in delinquencies due to the COVID-19 pandemic. We believe the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

We provide financing to Caterpillar dealers in the form of wholesale financing plans. Our 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, we provide unsecured loans to Caterpillar dealers for working capital.

Although our forecasts continued to indicate a decline in economic conditions, our Dealer portfolio segment has not historically experienced increased credit losses during prior economic downturns due to our close working relationships with the dealers and their financial strength. Therefore, we made no adjustments to historical loss rates during the three and nine months ended September 30, 2020.

Although our forecasts continued to indicate a decline in economic conditions, our Caterpillar Purchased Receivables portfolio segment has not historically experienced increased credit losses during prior economic downturns due to the short-term maturities of the receivables, our close working relationships with the dealers and their financial strength. Therefore, we made no adjustments to historical loss rates during the three and nine months ended September 30, 2020.

We further evaluate our 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, our finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk. Our classes, which align with management reporting for credit losses, are as follows:

•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.


(Millions of dollars)	September 30, 2020
Allowance for Credit Losses:	Customer		Dealer		Caterpillar Purchased Receivables		Total
Balance at beginning of year	$	375	$	45	$	4	$	424
Adjustment to adopt new accounting guidance(1)	12		—		—		12
Receivables written off	(212)		—		—		(212)
Recoveries on receivables previously written off	27		—		—		27
Provision for credit losses	213		—		(1)		212

Foreign currency translation adjustment	(3)		—		—		(3)
Balance at end of period	$	412	$	45	$	3	$	460

Individually evaluated	$	172	$	39	$	—	$	211
Collectively evaluated	240		6		3		249
Ending Balance	$	412	$	45	$	3	$	460

Finance Receivables:
Individually evaluated	$	612	$	78	$	—	$	690
Collectively evaluated	18,637		3,609		3,545		25,791
Ending Balance	$	19,249	$	3,687	$	3,545	$	26,481


(Millions of dollars)	December 31, 2019
Allowance for Credit Losses:	Customer		Dealer		Caterpillar Purchased Receivables		Total
Balance at beginning of year	$	486	$	21	$	4	$	511
Receivables written off	(281)		—		—		(281)
Recoveries on receivables previously written off	44		—		—		44
Provision for credit losses	138		24		—		162
Adjustment due to sale of receivables	(11)		—		—		(11)
Foreign currency translation adjustment	(1)		—		—		(1)
Balance at end of year	$	375	$	45	$	4	$	424

Individually evaluated	$	178	$	39	$	—	$	217
Collectively evaluated	197		6		4		207
Ending Balance	$	375	$	45	$	4	$	424

Finance Receivables:
Individually evaluated	$	594	$	78	$	—	$	672
Collectively evaluated	18,770		4,366		4,448		27,584
Ending Balance	$	19,364	$	4,444	$	4,448	$	28,256

At origination, we evaluate credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, we monitor 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, we consider the entire finance receivable past due when any installment is over 30 days past due.


(Millions of dollars)	September 30, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	2,697	$	2,711	$	1,588	$	660	$	288	$	59	$	89	$	8,092
31-60 days past due	41		57		39		21		9		3		1		171
61-90 days past due	12		24		21		13		4		1		—		75
91+ days past due	6		29		30		20		8		5		—		98

EAME
Current	903		1,049		684		313		92		28		—		3,069
31-60 days past due	6		9		6		3		1		—		—		25
61-90 days past due	4		4		1		—		1		1		—		11
91+ days past due	6		8		13		8		40		43		—		118

Asia/Pacific
Current	1,162		1,033		502		147		40		12		31		2,927
31-60 days past due	9		25		23		7		1		—		—		65
61-90 days past due	4		9		7		4		—		—		—		24
91+ days past due	3		21		12		2		—		—		—		38

Mining
Current	340		618		339		208		104		160		160		1,929
31-60 days past due	—		—		1		—		—		—		—		1
61-90 days past due	—		1		4		2		—		—		—		7
91+ days past due	1		11		8		24		—		—		1		45

Latin America
Current	402		393		182		64		18		38		—		1,097
31-60 days past due	—		3		3		2		—		—		—		8
61-90 days past due	1		1		1		1		—		—		—		4
91+ days past due	—		13		45		25		7		5		—		95

Caterpillar Power Finance
Current	149		260		138		274		117		132		129		1,199
31-60 days past due	—		—		18		—		—		3		—		21
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		—		3		8		29		90		—		130

Total	$	5,746	$	6,279	$	3,668	$	1,806	$	759	$	580	$	411	$	19,249

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.


(Millions of dollars)
	September 30, 2020
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables














North America	$	11	$	5	$	6	$	22	$	1,850	$	1,872
EAME	1		1		—		2		633		635
Asia/Pacific	1		—		1		2		596		598
Mining	—		—		—		—		—		—
Latin America	—		—		—		—		433		433
Caterpillar Power Finance	—		—		1		1		6		7
Total	$	13	$	6	$	8	$	27	$	3,518	$	3,545


(Millions of dollars)
	December 31, 2019
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables
Customer
North America	$	72	$	23	$	55	$	150	$	8,085	$	8,235
EAME	30		31		141		202		2,882		3,084
Asia/Pacific	40		14		29		83		2,733		2,816
Mining	5		—		19		24		2,266		2,290
Latin America	41		23		80		144		1,131		1,275
Caterpillar Power Finance	10		10		225		245		1,419		1,664
Dealer
North America	—		—		—		—		2,514		2,514
EAME	—		—		—		—		600		600
Asia/Pacific	—		—		—		—		487		487
Mining	—		—		—		—		4		4
Latin America	—		—		78		78		758		836
Caterpillar Power Finance	—		—		—		—		3		3
Caterpillar Purchased Receivables
North America	15		6		18		39		2,450		2,489
EAME	1		—		2		3		574		577
Asia/Pacific	1		—		—		1		891		892
Mining	—		—		—		—		—		—
Latin America	—		—		—		—		475		475
Caterpillar Power Finance	—		—		—		—		15		15
Total	$	215	$	107	$	647	$	969	$	27,287	$	28,256

A finance receivable is considered impaired, based on current information and events, if it is probable that we will be unable to collect all amounts due according to the contractual terms. Impaired finance receivables include finance receivables that have been restructured and are considered to be troubled debt restructures.


(Millions of dollars)
	As of December 31, 2019
Impaired Finance Receivables With No Allowance Recorded		Recorded Investment		Unpaid Principal Balance		Related Allowance
North America		$	6	$	6	$	—
EAME		—		—		—
Asia/Pacific		—		—		—
Mining		22		22		—
Latin America		8		8		—
Caterpillar Power Finance		58		58		—
Total		$	94	$	94	$	—
Impaired Finance Receivables With An Allowance Recorded
North America		$	30	$	30	$	11
EAME		61		61		29
Asia/Pacific		8		8		2
Mining		37		36		9
Latin America		58		58		20
Caterpillar Power Finance		306		319		107
Total		$	500	$	512	$	178
Total Impaired Finance Receivables
North America		$	36	$	36	$	11
EAME		61		61		29
Asia/Pacific		8		8		2
Mining		59		58		9
Latin America		66		66		20
Caterpillar Power Finance		364		377		107
Total		$	594	$	606	$	178


(Millions of dollars)
	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Impaired Finance Receivables With No Allowance Recorded		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
North America		$	10	$	—	$	10	$	—
EAME		15		—		7		—
Asia/Pacific		—		—		—		—
Mining		26		—		29		1
Latin America		22		—		22		1
Caterpillar Power Finance		57		1		53		2
Total		$	130	$	1	$	121	$	4
Impaired Finance Receivables With An Allowance Recorded
North America		$	30	$	—	$	36	$	1
EAME		80		1		88		2
Asia/Pacific		12		1		9		1
Mining		65		1		49		2
Latin America		69		1		73		4
Caterpillar Power Finance		376		1		422		8
Total		$	632	$	5	$	677	$	18
Total Impaired Finance Receivables
North America		$	40	$	—	$	46	$	1
EAME		95		1		95		2
Asia/Pacific		12		1		9		1
Mining		91		1		78		3
Latin America		91		1		95		5
Caterpillar Power Finance		433		2		475		10
Total		$	762	$	6	$	798	$	22

There were $78 million in impaired finance receivables with a related allowance of $39 million as of December 31, 2019 for the Dealer portfolio segment, all of which was in Latin America. There were no impaired finance receivables as of December 31, 2019 for the Caterpillar Purchased Receivables portfolio segment.

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 finance receivable becomes current and 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.


(Millions of dollars)	September 30, 2020
	Amortized Cost
	Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing
North America	$	82	$	1	$	28
EAME	137		—		1
Asia/Pacific	26		—		13
Mining	38		1		10
Latin America	95		2		—
Caterpillar Power Finance	207		17		—
Total	$	585	$	21	$	52

As of September 30, 2020 and December 31, 2019, there were $78 million in finance receivables on non-accrual status in our Dealer portfolio segment, all of which was in Latin America. There were no finance receivables in our Dealer portfolio segment more than 90 days past due and still accruing income as of September 30, 2020 and no interest income was recognized on dealer finance receivables on non-accrual status during the three and nine months ended September 30, 2020.

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.

There were no finance receivables modified as TDRs during the three and nine months ended September 30, 2020 and 2019 for the Dealer or Caterpillar Purchased Receivables portfolio segments. Finance receivables in the Customer portfolio segment modified as TDRs were as follows:


(Dollars in millions)	Three Months Ended September 30, 2020					Three Months Ended September 30, 2019
	Number of Contracts	Pre-TDR Amortized Cost		Post-TDR Amortized Cost		Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment
North America	3	$	1	$	1	4	$	—	$	—

Asia/Pacific	79	4		4		—	—		—
Mining	12	5		5		—	—		—
Latin America	3	16		16		—	—		—
Caterpillar Power Finance	8	50		50		4	56		55
Total	105	$	76	$	76	8	$	56	$	55

	Nine Months Ended September 30, 2020					Nine Months Ended September 30, 2019
	Number of Contracts	Pre-TDR Amortized Cost		Post-TDR Amortized Cost		Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment
North America	13	$	10	$	10	12	$	5	$	4
EAME	—	—		—		19	17		17
Asia/Pacific(1)	183	12		12		—	—		—
Mining(2)	52	22		22		1	6		6
Latin America	9	18		18		4	2		2
Caterpillar Power Finance	14	87		87		19	154		152
Total	271	$	149	$	149	55	$	184	$	181


(Dollars in millions)	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019
	Number of Contracts	Post-TDR Amortized Cost		Number of Contracts	Post-TDR Recorded Investment
North America	1	$	6	—	$	—


Mining	1	1		—	—

Caterpillar Power Finance	2	18		—	—
Total	4	$	25	—	$	—

	Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
	Number of Contracts	Post-TDR Amortized Cost		Number of Contracts	Post-TDR Recorded Investment
North America	2	$	6	—	$	—
EAME	2	10		—	—

Mining	1	1		—	—
Latin America	3	1		—	—
Caterpillar Power Finance	2	18		—	—
Total	10	$	36	—	$	—