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Finance Receivables
 3 Months Ended
Mar. 31, 2023
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)March 31,
2023		December 31,
2022
Retail loans, net(1)
$15,013 $14,973 
Retail leases, net6,826 6,965 
Caterpillar purchased receivables, net4,731 4,297 
Wholesale loans, net(1)
759 545 
Wholesale leases, net7 7 
Total finance receivables27,336 26,787 
Less: Allowance for credit losses(348)(346)
Total finance receivables, net$26,988 $26,441 
(1) Includes failed sale leasebacks.

Finance leases
Revenues from finance leases were $104 million and $112 million for the three months ended March 31, 2023 and 2022, 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. We also provide financing for power generation facilities that, in most cases, incorporate Caterpillar products. The average original term of our customer finance receivable portfolio was approximately 51 months with an average remaining term of approximately 28 months as of March 31, 2023.

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 months ended March 31, 2023, our forecasts for the markets in which we operate reflected a continuation of the trend of relatively low unemployment rates and delinquencies. However, delinquencies show an increasing trend as persistently high inflation rates and consequent central bank actions 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 months ended March 31, 2023.

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 months ended March 31, 2023.

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.
•Power Finance - Finance receivables originated worldwide related to 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 March 31, 2023Three Months Ended March 31, 2022
Allowance for Credit Losses:CustomerDealerCaterpillar
Purchased
Receivables		TotalCustomerDealerCaterpillar
Purchased
Receivables		Total
Beginning Balance$277 $65 $4 $346 $251 $82 $4 $337 
Write-offs(20)— — (20)(20)— — (20)
Recoveries10 — — 10 12 — — 12 
Provision for credit losses(1)
10 — 1 11 26 (1)1 26 
Other1 — — 1 2 — — 2 
Ending Balance$278 $65 $5 $348 $271 $81 $5 $357 
Finance Receivables$20,117 $2,488 $4,731 $27,336 $20,953 $2,112 $4,647 $27,712 
(1) Excludes provision for credit losses on unfunded commitments and other miscellaneous receivables.
Gross write-offs by origination year for the Customer portfolio segment were as follows:
(Millions of Dollars)Three Months Ended March 31, 2023
20232022202120202019PriorRevolving Finance ReceivablesTotal
North America$— $3 $3 $— $— $— $4 $10 
EAME— 1 — 1 — — — 2 
Asia/Pacific— — 2 1 1 — — 4 
Latin America— — 1 2 1 — — 4 
Total$— $4 $6 $4 $2 $— $4 $20 

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)March 31, 2023
20232022202120202019PriorRevolving
Finance
Receivables		Total
Finance
Receivables
North America
Current$886 $3,585 $2,931 $1,308 $525 $168 $255 $9,658 
31-60 days past due3 29 30 18 8 2 3 93 
61-90 days past due— 11 8 5 2 1 2 29 
91+ days past due— 12 19 12 5 5 3 56 
EAME
Current310 1,198 864 423 234 189 — 3,218 
31-60 days past due2 15 12 4 2 1 — 36 
61-90 days past due— 7 5 3 2 — — 17 
91+ days past due— 8 23 14 3 2 — 50 
Asia/Pacific
Current282 1,028 676 300 93 30 46 2,455 
31-60 days past due— 9 12 9 2 — — 32 
61-90 days past due— 4 4 3 1 — — 12 
91+ days past due— 4 6 5 3 1 — 19 
Mining
Current319 848 550 192 158 99 56 2,222 
31-60 days past due— 5 — 4 1 — — 10 
61-90 days past due— — — — — — — — 
91+ days past due— — 1 — — — — 1 
Latin America
Current182 716 339 124 51 28 — 1,440 
31-60 days past due— 17 32 4 9 9 — 71 
61-90 days past due— 4 4 1 — 3 — 12 
91+ days past due— 5 14 8 2 1 — 30 
Power Finance
Current12 80 80 140 49 159 133 653 
31-60 days past due— — — — — 2 — 2 
61-90 days past due— — — — — 1 — 1 
91+ days past due— — — — — — — — 
Totals by Aging Category
Current1,991 7,455 5,440 2,487 1,110 673 490 19,646 
31-60 days past due5 75 86 39 22 14 3 244 
61-90 days past due— 26 21 12 5 5 2 71 
91+ days past due— 29 63 39 13 9 3 156 
Total$1,996 $7,585 $5,610 $2,577 $1,150 $701 $498 $20,117 
(Millions of dollars)December 31, 2022
20222021202020192018PriorRevolving
Finance
Receivables		Total
Finance
Receivables
North America
Current$3,915 $3,276 $1,525 $653 $206 $34 $240 $9,849 
31-60 days past due25 26 18 12 4 1 4 90 
61-90 days past due9 15 7 3 1 — 3 38 
91+ days past due11 16 12 6 4 3 4 56 
EAME
Current1,270 953 477 280 155 68 — 3,203 
31-60 days past due10 12 7 1 1 — — 31 
61-90 days past due8 4 3 1 — — — 16 
91+ days past due6 25 16 4 1 1 — 53 
Asia/Pacific
Current1,174 805 393 124 37 5 40 2,578 
31-60 days past due10 12 8 1 1 — — 32 
61-90 days past due2 5 4 2 — — — 13 
91+ days past due2 6 6 4 — — — 18 
Mining
Current875 627 227 193 94 108 80 2,204 
31-60 days past due— 1 — — — — — 1 
61-90 days past due— — — — — — — — 
91+ days past due— — — — — 1 — 1 
Latin America
Current770 400 150 69 26 20 — 1,435 
31-60 days past due7 8 4 2 — 1 — 22 
61-90 days past due2 5 1 1 — — — 9 
91+ days past due2 13 11 2 1 — — 29 
Power Finance
Current82 87 146 51 18 161 125 670 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — — — — 
91+ days past due— — — — — 5 — 5 
Totals by Aging Category
Current8,086 6,148 2,918 1,370 536 396 485 19,939 
31-60 days past due52 59 37 16 6 2 4 176 
61-90 days past due21 29 15 7 1 — 3 76 
91+ days past due21 60 45 16 6 10 4 162 
Total$8,180 $6,296 $3,015 $1,409 $549 $408 $496 $20,353 

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 March 31, 2023 and December 31, 2022, our total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $62 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)      
 March 31, 2023
 31-60
Days
Past Due		61-90
Days
Past Due		91+
Days
Past Due		Total
Past Due		Current
Total Finance
Receivables
North America$6 $4 $3 $13 $2,679 $2,692 
EAME— 1 2 3 883 886 
Asia/Pacific1 1 1 3 706 709 
Latin America7 2 14 23 409 432 
Power Finance3 — 1 4 8 12 
Total$17 $8 $21 $46 $4,685 $4,731 

(Millions of dollars)      
 December 31, 2022
 31-60
Days
Past Due		61-90
Days
Past Due		91+
Days
Past Due		Total
Past Due		Current
Total Finance
Receivables
North America$11 $7 $4 $22 $2,458 $2,480 
EAME1 — 2 3 812 815 
Asia/Pacific6 2 2 10 555 565 
Latin America9 2 14 25 406 431 
Power Finance1 — — 1 5 6 
Total$28 $11 $22 $61 $4,236 $4,297 

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. 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)March 31, 2023December 31, 2022
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$48 $— $12 $52 $4 $11 
EAME44 — 6 43 — 10 
Asia/Pacific12 — 7 11 — 7 
Mining2 — — — 1 — 
Latin America77 — — 45 — — 
Power Finance8 — — 5 11 — 
Total$191 $— $25 $156 $16 $28 
    
Interest income recognized for customer finance receivables on non-accrual status was not material during each of the three months ended March 31, 2023 and 2022.

There were $62 million in finance receivables in our Dealer portfolio segment on non-accrual status as of March 31, 2023 and December 31, 2022, all of which was in Latin America.

Modifications
We periodically modify loan terms in response to borrowers’ financial difficulty. Typically, the types of modifications granted are payment deferrals, interest only payment periods and/or term extensions. During the three months ended March 31, 2023, loan modifications granted to borrowers experiencing financial difficulty were not material.

The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses based on the methodologies used to estimate the allowance; therefore, a change to the allowance for credit losses is generally not recorded upon modification. On rare occasions when principal forgiveness is provided, the amount forgiven is written off against the allowance for credit losses.

Troubled debt restructurings
Prior to the adoption of ASU 2022-02, a modification constituted a TDR when the lender granted a concession it would not otherwise consider to a borrower experiencing financial difficulties. Concessions granted may have included 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 months ended March 31, 2022 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
March 31, 2022
 Pre-TDR
Amortized
Cost		Post-TDR
Amortized
Cost
EAME1 1 
Power Finance6 6 
Total$7 $7 

During the three months ended March 31, 2022, 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 $5 million, all of which was in Mining.