Finance receivables

Finance receivables are receivables of our financial services operations, which generally can be repaid without penalty prior to contractual maturity. Finance receivables generally consist of retail and wholesale accounts and retail and wholesale notes. Total finance receivables reported on the Consolidated Balance Sheets are net of an allowance for doubtful accounts. Total on-balance sheet assets of our financial services operations net of intercompany balances are $3.1 billion and $3.5 billion as of January 31, 2012 and October 31, 2011, respectively. Included in total assets are on-balance sheet finance receivables of $2.6 billion and $2.9 billion as of January 31, 2012 and October 31, 2011, respectively. We have two portfolio segments of finance receivables based on the type of financing inherent to each portfolio. The retail portfolio segment represents loans or leases to end-users for the purchase or lease of vehicles. The wholesale portfolio segment represents loans to dealers to finance their inventory.

Our finance receivables by major classification are as follows:



	January 31, 2012			October 31, 2011
(in millions)
Retail portfolio	$	1,382		$	1,613
Wholesale portfolio	1,265			1,334
Total finance receivables	2,647			2,947
Less: Allowance for doubtful accounts	(31		)	(34		)
Total finance receivables, net	2,616			2,913
Less: Current portion, net^(A)	(1,955		)	(2,198		)
Noncurrent portion, net	$	661		$	715

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(A)	The current portion of finance receivables is computed based on contractual maturities. Actual cash collections typically vary from the contractual cash flows because of prepayments, extensions, delinquencies, credit losses, and renewals.

Securitizations

Our financial services operations transfer wholesale notes, retail accounts receivable, retail notes, finance leases, and operating leases through special purpose entities ("SPE"), which generally are only permitted to purchase these assets, issue asset-backed securities, and make payments on the securities. In addition to servicing receivables, our continued involvement in the SPEs includes an economic interest in the transferred receivables and, historically, managing exposure to interest rates using interest rate swaps, interest rate caps, and forward contracts. Some of these transactions may qualify as sales of financial assets and are accounted for off-balance sheet. For sales that do qualify for off-balance sheet treatment, an initial gain (loss) is recorded at the time of the sale while servicing fees and excess spread income are recorded as revenue when earned over the life of the finance receivables. For transactions that are accounted for as secured borrowings, we record the interest revenue earned on the finance receivables and the interest expense paid on secured borrowings issued in connection with the finance receivables sold.

There were no transfers of finance receivables that qualified for sale accounting treatment during the three month periods ended January 31, 2012 and 2011. Securitization income for the three months ended January 31, 2011 relates to the excess spread received and fair value changes on retail accounts sold prior to November 1, 2010. For more information on assets and liabilities of consolidated VIEs and other securitizations accounted for as secured borowings by our Financial Services segment, see Note 1, Summary of significant accounting policies.

Our Financial Services segment securitizes wholesale notes through an SPE, which has in place a revolving wholesale note trust ("Master Trust") that provides for funding of eligible wholesale notes. The Master trust’s assets and liabilities are consolidated into the assets and liabilities of the Company. Components of available wholesale note trust funding facilities were as follows:



	Maturity	January 31, 2012		October 31, 2011
(in millions)
Variable funding notes ("VFN")	July 2012	$	500	$	500
Investor notes	October 2012	350		350
Investor notes	October 2013	224		—
Investor notes	January 2012	—		250
Total wholesale note funding		$	1,074	$	1,100

Unutilized funding related to the variable funding facilities was $280 million and $170 million at January 31, 2012 and October 31, 2011, respectively.

On November 2, 2011, NFC completed the sale of $224 million of two year investor notes within the wholesale note trust funding facility.

Our Financial Services segment securitizes retail notes through Truck Retail Accounts Corporation ("TRAC"), a consolidated SPE, which utilizes a $100 million funding facility arrangement that provides for the funding of eligible retail accounts receivables. The facility is secured by $104 million of retail accounts and $26 million of cash equivalents as of January 31, 2012, as compared to $174 million of retail accounts and $33 million of cash equivalents as of October 31, 2011. There were $53 million and $9 million of unutilized funding at January 31, 2012 and October 31, 2011, respectively. The TRAC funding facility has a maturity date of March 2012.

Finance Revenues

Finance revenues consist of the following:



	Three Months Ended January 31,
	2012			2011
(in millions)
Retail notes and finance leases revenue	$	26		$	37
Operating lease revenue	9			7
Wholesale notes interest	23			25
Retail and wholesale accounts interest	10			6
Securitization income	—			(2		)
Gross finance revenues	68			73
Less: Intercompany revenues	(24		)	(23		)
Finance revenues	$	44		$	50