Finance Assets

Finance Receivables

Finance receivables are comprised of sales-type lease receivables and unsecured revolving loan receivables. Sales-type lease receivables are generally due in monthly, quarterly or semi-annual installments over periods ranging from three to five years. Loan receivables arise primarily from financing services offered to our customers for postage and related supplies. Loan receivables are generally due each month; however, customers may rollover outstanding balances.

Finance receivables at December 31, 2012 and 2011 consisted of the following:



	December 31, 2012									December 31, 2011
	North America			International			Total			North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,581,711		$	461,510		$	2,043,221		$	1,727,653		$	460,101		$	2,187,754
Unguaranteed residual values	148,664			21,025			169,689			185,450			20,443			205,893
Unearned income	(316,030		)	(104,258		)	(420,288		)	(348,286		)	(102,618		)	(450,904		)
Allowance for credit losses	(16,979		)	(8,662		)	(25,641		)	(28,661		)	(12,039		)	(40,700		)
Net investment in sales-type lease receivables	1,397,366			369,615			1,766,981			1,536,156			365,887			1,902,043
Loan receivables
Loan receivables	414,960			47,293			462,253			436,631			40,937			477,568
Allowance for credit losses	(12,322		)	(2,131		)	(14,453		)	(20,272		)	(2,458		)	(22,730		)
Net investment in loan receivables	402,638			45,162			447,800			416,359			38,479			454,838
Net investment in finance receivables	$	1,800,004		$	414,777		$	2,214,781		$	1,952,515		$	404,366		$	2,356,881

Loan receivables are due in less than one year. Maturities of gross sales-type lease finance receivables at December 31, 2012 were as follows:



	Sales-type Lease Receivables
	North America		International		Total
2013	$	661,770	$	142,134	$	803,904
2014	443,284		127,040		570,324
2015	274,680		95,268		369,948
2016	146,113		63,029		209,142
2017	47,937		30,273		78,210
Thereafter	7,927		3,766		11,693
Total	$	1,581,711	$	461,510	$	2,043,221

Allowance for Credit Losses

Activity in the allowance for credit losses for finance receivables for the years ended December 31, 2012, 2011 and 2010 was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at December 31, 2009	$	31,005		$	13,077		$	25,839		$	2,237		$	72,158
Amounts charged to expense	13,211			6,719			20,046			2,024			42,000
Accounts written off	(16,424		)	(6,478		)	(19,677		)	(2,149		)	(44,728		)
Balance at December 31, 2010	27,792			13,318			26,208			2,112			69,430
Amounts charged to expense	13,726			5,087			7,631			1,610			28,054
Accounts written off	(12,857		)	(6,366		)	(13,567		)	(1,264		)	(34,054		)
Balance at December 31, 2011	28,661			12,039			20,272			2,458			63,430
Amounts charged to expense	2,276			994			3,278			903			7,451
Accounts written off	(13,958		)	(4,371		)	(11,228		)	(1,230		)	(30,787		)
Balance at December 31, 2012	$	16,979		$	8,662		$	12,322		$	2,131		$	40,094

Aging of Receivables

The aging of finance receivables at December 31, 2012 and 2011 was as follows:



	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
December 31, 2012
< 31 days	$	1,497,797	$	435,780	$	392,108	$	45,324	$	2,371,009
> 30 days and < 61 days	37,348		9,994		12,666		1,368		61,376
> 60 days and < 91 days	24,059		5,198		4,577		285		34,119
> 90 days and < 121 days	6,665		3,327		2,319		179		12,490
> 120 days	15,842		7,211		3,290		137		26,480
Total	$	1,581,711	$	461,510	$	414,960	$	47,293	$	2,505,474
Past due amounts > 90 days
Still accruing interest	$	6,665	$	3,327	$	—	$	—	$	9,992
Not accruing interest	15,842		7,211		5,609		316		28,978
Total	$	22,507	$	10,538	$	5,609	$	316	$	38,970



	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
December 31, 2011
< 31 days	$	1,641,706	$	434,811	$	414,434	$	38,841	$	2,529,792
> 30 days and < 61 days	41,018		10,152		12,399		1,066		64,635
> 60 days and < 91 days	24,309		5,666		4,362		425		34,762
> 90 days and < 121 days	4,912		3,207		2,328		186		10,633
> 120 days	15,708		6,265		3,108		419		25,500
Total	$	1,727,653	$	460,101	$	436,631	$	40,937	$	2,665,322
Past due amounts > 90 days
Still accruing interest	$	4,912	$	3,207	$	—	$	—	$	8,119
Not accruing interest	15,708		6,265		5,436		605		28,014
Total	$	20,620	$	9,472	$	5,436	$	605	$	36,133

Credit Quality

The extension of credit and management of credit lines to new and existing clients uses a combination of an automated credit score, where available, and a detailed manual review of the client’s financial condition and, when applicable, payment history. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes. The portfolio management processes ensure that our global strategy is executed, collection resources are allocated appropriately and enhanced tools and processes are implemented as needed.

We use a third party to score the majority of the North America portfolio on a quarterly basis using a commercial credit score. We do not use a third party to score our International portfolio because the cost to do so is prohibitive, it is a localized process and there is no single credit score model that covers all countries.

The table below shows the North America portfolio at December 31, 2012 and 2011 by relative risk class (low, medium, high) based on the relative scores of the accounts within each class. The relative scores are determined based on a number of factors, including the company type, ownership structure, payment history and financial information. A fourth class is shown for accounts that are not scored. Absence of a score is not indicative of the credit quality of the account. The degree of risk, as defined by the third party, refers to the relative risk that an account in the next 12 month period may become delinquent.


•	Low risk accounts are companies with very good credit scores and are considered to approximate the top 30% of all commercial borrowers.


•	Medium risk accounts are companies with average to good credit scores and are considered to approximate the middle 40% of all commercial borrowers.


•	High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent and are considered to approximate the bottom 30% of all commercial borrowers.



	December 31,
	2012		2011
Sales-type lease receivables
Risk Level
Low	$	1,016,413	$	1,096,676
Medium	450,432		473,394
High	43,658		58,177
Not Scored	71,208		99,406
Total	$	1,581,711	$	1,727,653
Loan receivables
Risk Level
Low	$	254,567	$	269,547
Medium	136,069		115,490
High	14,624		21,081
Not Scored	9,700		30,513
Total	$	414,960	$	436,631

Troubled Debt

We maintain a program for U.S. clients in our North America loan portfolio who are experiencing financial difficulties, but are able to make reduced payments over an extended period of time. Upon acceptance into the program, the client’s credit line is closed and interest accrual is suspended. There is generally no forgiveness of debt or reduction of balances owed. The balance of loans in this program, related loan loss allowance and write-offs are insignificant to the overall portfolio.

Leveraged Leases

Our investment in leveraged lease assets consisted of the following:



	December 31,
	2012			2011
Rental receivables	$	83,254		$	810,306
Unguaranteed residual values	14,177			13,784
Principal and interest on non-recourse loans	(55,092		)	(606,708		)
Unearned income	(7,793		)	(79,111		)
Investment in leveraged leases	34,546			138,271
Less: deferred taxes related to leveraged leases	(19,372		)	(101,255		)
Net investment in leveraged leases	$	15,174		$	37,016

During 2012 and 2011, we sold certain non-U.S. leveraged lease assets for cash. The investment in each of the leveraged leases at the time of sale was $109 million. The leveraged lease assets sold in 2012 resulted in after-tax gain of $13 million and the leveraged lease assets sold in 2011 resulted in an after-tax gain of $27 million.

Pitney Bowes Bank

The Pitney Bowes Bank (the Bank) is an indirect wholly owned subsidiary whose primary business is to provide financing solutions to clients that rent or lease postage meters. The Bank's key product offering, Purchase Power, is a revolving credit solution, which enables clients to finance their postage costs when they refill their meter. The Bank also provides a deposit solution to those clients that prefer to prepay postage and earn interest on their deposits. When a client refills their postage meter, the funds are withdrawn from the savings account to pay for the postage.

The Bank's assets consist primarily of finance receivables, short and long-term investments and cash and liabilities consist primarily of deposit accounts. At December 31, 2012, the Bank had assets of $796 million and liabilities of $733 million. At December 31, 2011, the Bank had assets of $738 million and liabilities of $680 million. The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions.