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Finance Receivables
 6 Months Ended
Jun. 30, 2022
Receivables [Abstract]  
Finance Receivables Finance Receivables
A summary of finance receivables included in the Consolidated Statements of Financial Position was as follows:
(Millions of dollars)June 30,
2022		December 31,
2021
Retail loans, net(1)
$14,927 $14,817 
Retail leases, net7,321 7,818 
Caterpillar purchased receivables, net3,979 4,462 
Wholesale loans, net(1)
504 406 
Wholesale leases, net8 11 
Total finance receivables26,739 27,514 
Less: Allowance for credit losses(376)(337)
Total finance receivables, net$26,363 $27,177 
(1) Includes failed sale leasebacks.

Finance leases
Revenues from finance leases were $109 million and $123 million for the three months ended June 30, 2022 and 2021, respectively, and $221 million and $245 million for the six months ended June 30, 2022 and 2021, 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.

Allowance for credit losses 

Portfolio segments
A portfolio segment is the level at which we develop a systematic methodology for determining our allowance for credit losses. Our portfolio segments and related methods for estimating expected credit losses are as follows:

Customer
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 49 months with an average remaining term of approximately 26 months as of June 30, 2022.

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 economic factors.

During the three and six months ended June 30, 2022, our forecasts for the markets in which we operate reflected a continuation of the trend of relatively low unemployment rates and delinquencies. However, high inflation rates and commodity prices are weakening global economic growth. We believe the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

Dealer
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 a variety of secured and unsecured loans to Caterpillar dealers.
    
We estimate the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, our Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions 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 six months ended June 30, 2022.

Caterpillar Purchased Receivables
We purchase receivables from Caterpillar, primarily related to the sale of equipment and parts to dealers. Caterpillar purchased receivables are non-interest-bearing short-term trade receivables that are purchased at a discount.

We estimate the allowance for credit losses for Caterpillar purchased receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, our Caterpillar Purchased Receivables portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions 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 six months ended June 30, 2022.

Classes of finance receivables
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. Our classes, which align with management reporting for credit losses, are as follows:

•North America - Finance receivables originated in the United States and Canada.
•EAME - Finance receivables originated in Europe, Africa, the Middle East and the Commonwealth of Independent States.
•Asia/Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.
•Mining - Finance receivables related to large mining customers worldwide.
•Latin America - Finance receivables originated in Mexico and Central and South American countries.
•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.
An analysis of the allowance for credit losses was as follows:
(Millions of dollars)Three Months Ended June 30, 2022Three Months Ended June 30, 2021
Allowance for Credit Losses:CustomerDealerCaterpillar
Purchased
Receivables		TotalCustomerDealerCaterpillar
Purchased
Receivables		Total
Beginning Balance$271 $81 $5 $357 $393 $44 $4 $441 
Write-offs(18)— — (18)(68)— — (68)
Recoveries18 — — 18 14 — — 14 
Provision for credit losses(1) (2)
22 1 (1)22 13 — — 13 
Other(3)— — (3)2 — — 2 
Ending Balance$290 $82 $4 $376 $354 $44 $4 $402 
Six Months Ended June 30, 2022Six Months Ended June 30, 2021
Allowance for Credit Losses:CustomerDealerCaterpillar
Purchased
Receivables		TotalCustomerDealerCaterpillar
Purchased
Receivables		Total
Beginning Balance$251 $82 $4 $337 $431 $44 $4 $479 
Write-offs(38)— — (38)(102)— — (102)
Recoveries30 — — 30 24 — — 24 
Provision for credit losses(1)(2)
48 — — 48 3 — — 3 
Other(1)— — (1)(2)— — (2)
Ending Balance$290 $82 $4 $376 $354 $44 $4 $402 
Finance Receivables$20,483 $2,277 $3,979 $26,739 $20,563 $3,117 $3,858 $27,538 
(1) The three and six months ended June 30, 2022 included higher reserves for the Russia and Ukraine portfolios.
(2) Excludes provision for credit losses on unfunded commitments and other miscellaneous receivables.


Credit quality of finance receivables
At origination, we evaluate credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit 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.
Customer
The tables below summarize the aging category of our amortized cost of finance receivables in the Customer portfolio segment by origination year.
(Millions of dollars)June 30, 2022
20222021202020192018PriorRevolving
Finance
Receivables		Total
Finance
Receivables
North America
Current$2,316 $3,996 $2,021 $991 $382 $103 $218 $10,027 
31-60 days past due13 31 23 14 6 2 5 94 
61-90 days past due4 10 6 4 2 2 3 31 
91+ days past due2 17 13 9 10 5 3 59 
EAME
Current642 1,204 624 397 232 104 — 3,203 
31-60 days past due4 11 9 5 — 1 — 30 
61-90 days past due1 8 5 1 1 — — 16 
91+ days past due1 19 15 6 2 1 — 44 
Asia/Pacific
Current696 1,077 614 218 63 17 37 2,722 
31-60 days past due3 16 14 7 1 — — 41 
61-90 days past due— 6 7 3 1 — — 17 
91+ days past due1 3 6 6 1 — — 17 
Mining
Current391 776 278 262 135 156 31 2,029 
31-60 days past due— — — 1 4 — — 5 
61-90 days past due— — — — — — — — 
91+ days past due— — 1 6 11 4 — 22 
Latin America
Current422 513 214 108 33 19 — 1,309 
31-60 days past due1 8 5 2 5 — — 21 
61-90 days past due1 2 2 2 — 1 — 8 
91+ days past due— 12 15 7 14 18 — 66 
Caterpillar Power Finance
Current17 99 151 100 32 177 111 687 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — 5 — 5 
91+ days past due— 1 — — — 29 — 30 
Totals by Aging Category
Current4,484 7,665 3,902 2,076 877 576 397 19,977 
31-60 days past due21 66 51 29 16 3 5 191 
61-90 days past due6 26 20 10 4 8 3 77 
91+ days past due4 52 50 34 38 57 3 238 
Total$4,515 $7,809 $4,023 $2,149 $935 $644 $408 $20,483 
(Millions of dollars)December 31, 2021
20212020201920182017PriorRevolving
Finance
Receivables		Total
Finance
Receivables
North America
Current$4,792 $2,596 $1,426 $630 $182 $32 $182 $9,840 
31-60 days past due27 32 20 12 4 1 5 101 
61-90 days past due7 8 5 3 1 1 5 30 
91+ days past due9 17 12 13 5 4 5 65 
EAME
Current1,499 836 577 352 140 26 — 3,430 
31-60 days past due5 4 3 1 1 — — 14 
61-90 days past due3 3 3 1 — — — 10 
91+ days past due3 11 2 2 — 2 — 20 
Asia/Pacific
Current1,456 943 420 119 40 3 36 3,017 
31-60 days past due10 14 10 2 — — — 36 
61-90 days past due3 7 4 1 — — — 15 
91+ days past due2 10 10 3 — — — 25 
Mining
Current944 356 332 194 36 161 36 2,059 
31-60 days past due6 — — — — — — 6 
61-90 days past due1 — — — 4 — — 5 
91+ days past due— 1 8 9 3 1 — 22 
Latin America
Current617 299 160 70 17 18 — 1,181 
31-60 days past due4 7 3 3 1 — — 18 
61-90 days past due3 3 1 1 — — — 8 
91+ days past due4 9 9 7 7 14 — 50 
Caterpillar Power Finance
Current120 152 119 70 180 104 101 846 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — — — — 
91+ days past due— — — — — 44 — 44 
Totals by Aging Category
Current9,428 5,182 3,034 1,435 595 344 355 20,373 
31-60 days past due52 57 36 18 6 1 5 175 
61-90 days past due17 21 13 6 5 1 5 68 
91+ days past due18 48 41 34 15 65 5 226 
Total$9,515 $5,308 $3,124 $1,493 $621 $411 $370 $20,842 

Finance receivables in the Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other equipment. 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 equipment.
Dealer
As of June 30, 2022 and December 31, 2021, our total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $78 million, that was 91+ days past due in Latin America, all of which was originated in 2017.

Caterpillar Purchased Receivables
The tables below summarize the aging category of our amortized cost of finance receivables in the Caterpillar Purchased Receivables portfolio segment.
(Millions of dollars)      
 June 30, 2022
 31-60
Days
Past Due		61-90
Days
Past Due		91+
Days
Past Due		Total
Past Due		Current
Total Finance
Receivables
North America$12 $5 $8 $25 $2,272 $2,297 
EAME1 1 2 4 665 669 
Asia/Pacific4 — — 4 554 558 
Mining— — — — — — 
Latin America4 2 2 8 441 449 
Caterpillar Power Finance— 1 — 1 5 6 
Total$21 $9 $12 $42 $3,937 $3,979 

(Millions of dollars)      
 December 31, 2021
 31-60
Days
Past Due		61-90
Days
Past Due		91+
Days
Past Due		Total
Past Due		Current
Total Finance
Receivables
North America$8 $6 $5 $19 $2,499 $2,518 
EAME1 — 1 2 844 846 
Asia/Pacific— — 1 1 620 621 
Mining— — — — — — 
Latin America1 1 — 2 472 474 
Caterpillar Power Finance— — — — 3 3 
Total$10 $7 $7 $24 $4,438 $4,462 

Non-accrual finance receivables
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 TDR. Recognition is resumed and previously suspended income is recognized when collection 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.
In our Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:
(Millions of dollars)June 30, 2022December 31, 2021
Amortized CostAmortized Cost
Non-accrual
With an
Allowance		Non-accrual
Without an
Allowance		91+ Still
Accruing		Non-accrual
With an
Allowance		Non-accrual
Without an
Allowance		91+ Still
Accruing
North America$39 $6 $15 $47 $9 $12 
EAME49 1 20 18 1 2 
Asia/Pacific12 — 7 19 — 7 
Mining23 2 — 8 1 14 
Latin America70 — 1 52 4 1 
Caterpillar Power Finance20 12 — 40 11 — 
Total$213 $21 $43 $184 $26 $36 
    
There was $1 million of interest income recognized during the three months ended June 30, 2022 and 2021 for customer finance receivables on non-accrual status. There was $5 million and $6 million of interest income recognized during the six months ended June 30, 2022 and 2021, respectively, for customer finance receivables on non-accrual status.

There were $78 million in finance receivables in our Dealer portfolio segment on non-accrual status as of June 30, 2022 and December 31, 2021, 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 June 30, 2022 and December 31, 2021 and no interest income was recognized on dealer finance receivables on non-accrual status during the three and six months ended June 30, 2022 and 2021.

Troubled debt restructurings
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. We individually evaluate TDR contracts and establish an allowance based on the present value of expected future cash flows discounted at the receivable’s effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable.
There were no finance receivables modified as TDRs during the three and six months ended June 30, 2022 and 2021 for the Dealer or Caterpillar Purchased Receivables portfolio segments. Finance receivables in the Customer portfolio segment modified as TDRs were as follows:
(Millions of dollars)Three Months Ended
June 30, 2022		Three Months Ended
June 30, 2021
 Pre-TDR
Amortized
Cost		Post-TDR
Amortized
Cost		Pre-TDR
Amortized
Cost		Post-TDR
Amortized
Cost
North America$1 $1 $4 $4 
Latin America— — 6 6 
Caterpillar Power Finance3 2 16 16 
Total$4 $3 $26 $26 
 Six Months Ended
June 30, 2022		Six Months Ended
June 30, 2021
 Pre-TDR
Amortized
Cost		Post-TDR
Amortized
Cost		Pre-TDR
Amortized
Cost		Post-TDR
Amortized
Cost
North America$1 $1 $4 $4 
EAME1 1 — — 
Mining— — 11 5 
Latin America— — 6 6 
Caterpillar Power Finance9 8 16 16 
Total$11 $10 $37 $31 

The Post-TDR amortized cost of TDRs in the Customer portfolio segment with a payment default (defined as 91+ days past due) which had been modified within twelve months prior to the default date, was as follows:
(Millions of dollars)Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
North America$— $— $— $1 
Asia/Pacific— 2 — 6 
Mining— — 5 — 
Latin America— 15 — 15 
Caterpillar Power Finance— — — 5 
Total$— $17 $5 $27