The Company provides retail financial services to customers of its dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.

The Company offers wholesale financing to its dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles, related parts and accessories and apparel to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.

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


	March 31, 2024		December 31, 2023		March 31, 2023
Retail finance receivables	$	6,799,510	$	6,818,699	$	6,708,103
Wholesale finance receivables	1,486,873		1,061,532		1,224,051
	8,286,383		7,880,231		7,932,154
Allowance for credit losses	(380,361)		(381,966)		(358,431)
	$	7,906,022	$	7,498,265	$	7,573,723

The Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The Company's allowance for credit losses reflects expected lifetime credit losses on its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.

The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Each quarter, the Company's outlook on economic conditions impacts the Company's retail and wholesale estimates for expected credit losses. At the end of the first quarter of 2024, the Company's probability weighting of its economic forecast scenarios was weighted towards more pessimistic scenarios given continued challenging macro-economic conditions including a persistently high interest rate environment, ongoing elevated inflation levels and muted consumer confidence.

Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and changes in other portfolio-specific loan characteristics. During the first quarter of 2024, the Company experienced increased retail credit losses driven by several factors connected to the macro-economic environment and related customer and industry dynamics, including the impact of higher motorcycle payments and general inflationary pressures on customers. Additionally, the Company experienced downward pressure on recovery values at auction during the first quarter of 2024.

Due to the use of projections and assumptions in estimating the losses, the amount of losses incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the Company’s expectations surrounding the economic forecasts. The Company will continue to monitor future economic trends and conditions. Expectations surrounding the Company's economic forecasts may change in future periods as additional information becomes available.


	Three months ended March 31, 2024
	Retail		Wholesale		Total
Balance, beginning of period	$	367,037	$	14,929	$	381,966
Provision for credit losses	60,989		21		61,010
Charge-offs	(81,368)		—		(81,368)
Recoveries	18,753		—		18,753
Balance, end of period	$	365,411	$	14,950	$	380,361
	Three months ended March 31, 2023
	Retail		Wholesale		Total
Balance, beginning of period	$	345,275	$	13,436	$	358,711
Provision for credit losses	50,969		1,395		52,364
Charge-offs	(68,008)		—		(68,008)
Recoveries	15,364		—		15,364
Balance, end of period	$	343,600	$	14,831	$	358,431

The Company manages retail credit risk through its credit approval process and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.

As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

The amortized cost along with period gross charge-offs of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):


	March 31, 2024
	2024		2023		2022		2021		2020		2019 & Prior		Total
U.S. Retail:
Super prime	$	311,848	$	963,226	$	651,375	$	328,904	$	126,727	$	73,138	$	2,455,218
Prime	294,135		1,087,821		900,078		522,250		226,247		173,807		3,204,338
Sub-prime	87,446		305,352		246,904		168,542		88,980		88,826		986,050
	693,429		2,356,399		1,798,357		1,019,696		441,954		335,771		6,645,606
Canadian Retail:
Super prime	11,736		43,504		27,785		15,068		7,456		4,063		109,612
Prime	2,566		12,375		10,180		6,336		3,779		3,526		38,762
Sub-prime	456		1,760		1,355		601		744		614		5,530
	14,758		57,639		39,320		22,005		11,979		8,203		153,904
	$	708,187	$	2,414,038	$	1,837,677	$	1,041,701	$	453,933	$	343,974	$	6,799,510
Gross charge-offs for the three months ended March 31, 2024:
US Retail	$	—	$	21,760	$	28,748	$	16,286	$	7,111	$	6,363	$	80,268
Canadian Retail	—		245		335		212		145		163		1,100
	$	—	$	22,005	$	29,083	$	16,498	$	7,256	$	6,526	$	81,368


	December 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
U.S. Retail:
Super prime	$	1,066,321	$	729,339	$	376,474	$	151,004	$	70,627	$	27,013	$	2,420,778
Prime	1,173,463		993,417		584,305		259,995		139,011		78,880		3,229,071
Sub-prime	333,099		275,964		189,688		101,437		63,393		44,568		1,008,149
	2,572,883		1,998,720		1,150,467		512,436		273,031		150,461		6,657,998
Canadian Retail:
Super prime	48,705		31,733		17,744		9,241		4,521		1,524		113,468
Prime	13,764		11,434		7,336		4,390		2,728		1,838		41,490
Sub-prime	1,846		1,546		739		817		525		270		5,743
	64,315		44,713		25,819		14,448		7,774		3,632		160,701
	$	2,637,198	$	2,043,433	$	1,176,286	$	526,884	$	280,805	$	154,093	$	6,818,699
Gross charge-offs for the year ended December 31, 2023:
US Retail	$	20,047	$	102,387	$	74,212	$	30,896	$	18,088	$	14,655	$	260,285
Canadian Retail	527		1,004		866		472		278		483		3,630
	$	20,574	$	103,391	$	75,078	$	31,368	$	18,366	$	15,138	$	263,915


	March 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
U.S. Retail:
Super prime	$	284,656	$	1,007,543	$	547,008	$	240,495	$	133,205	$	72,247	$	2,285,154
Prime	314,959		1,317,733		799,814		378,539		224,682		170,944		3,206,671
Sub-prime	86,541		379,206		264,358		145,132		94,898		85,829		1,055,964
	686,156		2,704,482		1,611,180		764,166		452,785		329,020		6,547,789
Canadian Retail:
Super prime	10,428		44,213		26,550		15,250		9,921		4,668		111,030
Prime	3,650		14,850		9,711		6,482		4,439		3,917		43,049
Sub-prime	579		2,013		1,237		1,033		754		619		6,235
	14,657		61,076		37,498		22,765		15,114		9,204		160,314
	$	700,813	$	2,765,558	$	1,648,678	$	786,931	$	467,899	$	338,224	$	6,708,103
Gross charge-offs for the three months ended March 31, 2023:
US Retail	$	—	$	23,440	$	22,535	$	10,215	$	5,818	$	5,100	$	67,108
Canadian Retail	—		300		245		150		33		172		900
	$	—	$	23,740	$	22,780	$	10,365	$	5,851	$	5,272	$	68,008

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated by the Company on a quarterly basis.

The amortized cost of the Company's wholesale finance receivables, by vintage and credit quality indicator, was as follows (in thousands):


	March 31, 2024
	2024		2023		2022		2021		2020		2019 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	1,612		1,783		216		—		—		10		3,621
Substandard	10,570		10,989		436		—		—		8		22,003
Special Mention	2,332		1,954		183		—		—		317		4,786
Medium Risk	1,051		938		—		—		—		—		1,989
Low Risk	861,075		521,155		54,703		4,110		4,646		8,785		1,454,474
	$	876,640	$	536,819	$	55,538	$	4,110	$	4,646	$	9,120	$	1,486,873


	December 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	10,934		258		—		—		5		—		11,197
Special Mention	641		30		—		—		—		—		671
Medium Risk	2,905		—		—		—		—		—		2,905
Low Risk	961,519		66,757		5,107		4,962		7,786		628		1,046,759
	$	975,999	$	67,045	$	5,107	$	4,962	$	7,791	$	628	$	1,061,532


	March 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	857,152		335,247		9,123		6,191		11,130		5,208		1,224,051
	$	857,152	$	335,247	$	9,123	$	6,191	$	11,130	$	5,208	$	1,224,051

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company reverses accrued interest related to charged-off accounts against Financial Services interest income when the account is charged-off. The Company reversed $9.5 million and $7.2 million of accrued interest against Financial Services interest income during the three months ended March 31, 2024 and March 31, 2023, respectively. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses to exclude accrued interest from its allowance for credit losses. Accordingly, as of March 31, 2024, December 31, 2023, and March 31, 2023, all retail finance receivables were accounted for as interest-earning receivables.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio.

There were no charged-off accounts during the three months ended March 31, 2024 or March 31, 2023. As such, the Company did not reverse any wholesale accrued interest in those periods. There were no dealers on non-accrual status at March 31, 2024, December 31, 2023, or March 31, 2023.

The aging analysis of the Company's finance receivables was as follows (in thousands):


	March 31, 2024
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,569,714	$	131,720	$	47,672	$	50,404	$	229,796	$	6,799,510
Wholesale finance receivables	1,486,224		240		219		190		649		1,486,873
	$	8,055,938	$	131,960	$	47,891	$	50,594	$	230,445	$	8,286,383

	December 31, 2023
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,516,342	$	168,027	$	67,033	$	67,297	$	302,357	$	6,818,699
Wholesale finance receivables	1,060,561		763		25		183		971		1,061,532
	$	7,576,903	$	168,790	$	67,058	$	67,480	$	303,328	$	7,880,231

	March 31, 2023
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,488,892	$	125,327	$	44,748	$	49,136	$	219,211	$	6,708,103
Wholesale finance receivables	1,223,752		298		—		1		299		1,224,051
	$	7,712,644	$	125,625	$	44,748	$	49,137	$	219,510	$	7,932,154