Finance Receivables



	March 31, 2020			December 31, 2019
Retail finance receivables
Retail finance receivables, net of fees^(a)	$	42,504		$	42,268
Less: allowance for loan losses	(1,879		)	(866		)
Total retail finance receivables, net	40,625			41,402
Commercial finance receivables
Commercial finance receivables, net of fees^(b)	12,282			12,149
Less: allowance for loan losses	(87		)	(78		)
Total commercial finance receivables, net	12,195			12,071
Total finance receivables, net	$	52,820		$	53,473
Fair value utilizing Level 2 inputs	$	12,195		$	12,071
Fair value utilizing Level 3 inputs	$	41,963		$	42,012

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(a) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $125 million and $83 million at March 31, 2020 and December 31, 2019.

(b) Net of dealer cash management balances of $1.2 billion at both March 31, 2020 and December 31, 2019.

Rollforward of Allowance for Retail Loan Losses A summary of the activity in the allowance for retail loan losses is as follows:



	Three Months Ended March 31,
	2020			2019
Allowance for retail loan losses beginning balance	$	866		$	844
Impact of adopting ASU 2016-13 (Note 1)	801			—
Provision for loan losses	456			178
Charge-offs	(340		)	(307		)
Recoveries	156			145
Foreign currency translation	(60		)	2
Allowance for retail loan losses ending balance	$	1,879		$	862

The provision for loan losses increased primarily due to increased expected charge-offs and decreased expected recoveries as a result of the economic impact of the coronavirus disease 2019 (COVID-19) pandemic.

Retail Credit Quality Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. A summary of the amortized cost of the retail finance receivables by FICO score or its equivalent, determined at origination, for each vintage of the retail finance receivables portfolio at March 31, 2020 is as follows:



	Year of Origination
	2020		2019		2018		2017		2016		2015		Prior		Total		Percent
Prime - FICO Score 680 and greater	$	4,027	$	9,990	$	6,821	$	3,200	$	1,143	$	343	$	15	$	25,539	60.1	%
Near-prime - FICO Score 620 to 679	902		2,746		1,744		942		402		178		38		6,952		16.3
Sub-prime - FICO Score less than 620	1,169		3,402		2,165		1,605		957		486		229		10,013		23.6
Retail finance receivables, net of fees	$	6,098	$	16,138	$	10,730	$	5,747	$	2,502	$	1,007	$	282	$	42,504	100.0	%

We review the ongoing credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of retail finance receivables for each vintage of the portfolio at March 31, 2020:



	Year of Origination
	2020		2019		2018		2017		2016		2015		Prior		Total		Percent
Current	$	6,078	$	15,716	$	10,312	$	5,412	$	2,277	$	877	$	214	$	40,886	96.2	%

31 - 60 days	19		302		294		241		161		93		47		1,157		2.7
Greater than 60 days	1		113		118		90		62		36		21		441		1.1
Finance receivables more than 30 days delinquent	20		415		412		331		223		129		68		1,598		3.8
In repossession	—		7		6		4		2		1		—		20		—
Finance receivables more than 30 days delinquent or in repossession	20		422		418		335		225		130		68		1,618		3.8
Retail finance receivables, net of fees	$	6,098	$	16,138	$	10,730	$	5,747	$	2,502	$	1,007	$	282	$	42,504	100.0	%

The accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $735 million and $875 million at March 31, 2020 and December 31, 2019.

TDRs The outstanding amortized cost of retail finance receivables that are considered TDRs was $2.3 billion at March 31, 2020, including $290 million in nonaccrual loans. Additional TDR activity is presented below:



	Three Months Ended March 31,
	2020		2019		2018
Number of loans classified as TDRs during the period	15,268		16,532		13,336
Outstanding amortized cost of loans classified as TDRs during the period	$	287	$	308	$	251

The unpaid principal balances, net of recoveries, of loans charged off during the reporting period within 12 months of being modified as a TDR were $20 million, $21 million, and $18 million for three months ended March 31, 2020, 2019 and 2018.

Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for dealer inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary.

Effective January 1, 2020, we updated our commercial risk model and our risk rating categories as follows:



Dealer Risk Rating		Description
I		Performing accounts with strong to acceptable financial metrics with at least satisfactory capacity to meet financial commitments.
II		Performing accounts experiencing potential weakness in financial metrics and repayment prospects resulting in increased monitoring.
III		Non-Performing accounts with inadequate paying capacity for current obligations and that have the distinct possibility of creating a loss if deficiencies are not corrected.
IV		Non-Performing accounts with inadequate paying capacity for current obligations and inherent weaknesses that make collection or liquidation in full highly questionable or improbable.

Dealers with III and IV risk ratings are subject to additional monitoring and restrictions on funding, including suspension of lines of credit and liquidation of assets. The following table summarizes the credit risk profile by dealer risk rating of commercial finance receivables at March 31, 2020.



	Year of Origination^(a)
Dealer Risk Rating	Revolving		2020		2019		2018		2017		2016		2015		Prior		Total		Percent
I	$	10,351	$	101	$	253	$	124	$	128	$	118	$	77	$	9	$	11,161	90.9	%
II	632		—		9		12		33		23		13		23		745		6.1
III	325		—		8		10		14		—		1		—		358		2.9
IV	14		—		—		—		—		—		4		—		18		0.1
Balance at end of period	$	11,322	$	101	$	270	$	146	$	175	$	141	$	95	$	32	$	12,282	100.0	%

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(a) Floorplan advances comprise 98% of the total revolving balance. Dealer term loans are presented by year of origination.

At March 31, 2020, substantially all of our commercial finance receivables were current with respect to payment status and activity in the allowance for commercial loan losses was insignificant for the three months ended March 31, 2020, 2019 and 2018. Commercial finance receivables classified as TDRs and amounts on non-accrual status were insignificant at March 31, 2020.