Note 6 – Allowance for Credit Losses

The following table provides information related to our allowance for credit losses on finance receivables and investments in operating leases:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2015			2014			2015			2014
Allowance for credit losses at beginning of period	$	473		$	445		$	485		$	454
Provision for credit losses		128			103			278			220
Transferred to held-for-sale¹		-			-			(7	)		-
Charge-offs, net of recoveries		(115	)		(98	)		(270	)		(224	)
Allowance for credit losses at end of period	$	486		$	450		$	486		$	450

¹	Amount relates to the commercial finance business which was sold on October 1, 2015.

Charge-offs are shown net of recoveries of $15 million and $54 million for the three and nine months ended December 31, 2015, respectively, and recoveries of $21 million and $63 million for the three and nine months ended December 31, 2014.

Allowance for Credit Losses and Finance Receivables by Portfolio Segment

The following tables provide information related to our allowance for credit losses and finance receivables by portfolio segment:

	Three Months Ended December 31, 2015
	Retail Loan			Commercial			Dealer Products			Total
Allowance for Credit Losses for Finance Receivables:
Beginning balance, October 1, 2015	$	263		$	-		$	114		$	377
Charge-offs		(95	)		-			-			(95	)
Recoveries		10			-			-			10
Provisions		80			-			9			89
Ending balance, December 31, 2015	$	258		$	-		$	123		$	381

	Nine Months Ended December 31, 2015
Beginning balance, April 1, 2015	$	299		$	2		$	108		$	409
Charge-offs		(237	)		(1	)		-			(238	)
Recoveries		37			-			-			37
Provisions		159			1			19			179
Transferred to held-for-sale		-			(2	)		(4	)		(6	)
Ending balance, December 31, 2015	$	258		$	-		$	123		$	381

Ending balance: Individually evaluated for impairment	$	-		$	-		$	59		$	59
Ending balance: Collectively evaluated for impairment	$	258		$	-		$	64		$	322

Finance Receivables:
Ending balance, December 31, 2015	$	51,207		$	-		$	15,176		$	66,383
Ending balance: Individually evaluated for impairment	$	-		$	-		$	502		$	502
Ending balance: Collectively evaluated for impairment	$	51,207		$	-		$	14,674		$	65,881

Note 6 – Allowance for Credit Losses (Continued)

The ending balance of finance receivables collectively evaluated for impairment in the table above includes approximately $237 million of finance receivables within the retail loan segment that are specifically identified as impaired. These amounts are aggregated with their respective portfolio segments when determining the allowance for credit losses as of December 31, 2015, as they are deemed to be insignificant for individual evaluation and we have determined that the allowance for credit losses would not be materially different if the amounts had been individually evaluated for impairment. The ending balance of finance receivables for the dealer products portfolio segment collectively evaluated for impairment as of December 31, 2015 includes $979 million in receivables, which are guaranteed by Toyota Motor Sales, U.S.A., Inc. (“TMS”) and $140 million in receivables, which are guaranteed by third party private Toyota distributors. These receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMS or such private distributors.

	Three Months Ended December 31, 2014
	Retail Loan			Commercial			Dealer Products			Total
Allowance for Credit Losses for Finance Receivables:
Beginning balance, October 1, 2014	$	299		$	1		$	81		$	381
Charge-offs		(89	)		-		$	(1	)		(90	)
Recoveries		14			1			1			16
Provisions		72			-			(2	)		70
Ending balance, December 31, 2014	$	296		$	2		$	79		$	377

	Nine Months Ended December 31, 2014
Beginning balance, April 1, 2014	$	296		$	2		$	88		$	386
Charge-offs		(217	)		(1	)		(1	)		(219	)
Recoveries		45			1			1			47
Provisions		172			-			(9	)		163
Ending balance, December 31, 2014	$	296		$	2		$	79		$	377

Ending balance: Individually evaluated for impairment	$	-		$	-		$	28		$	28
Ending balance: Collectively evaluated for impairment	$	296		$	2		$	51		$	349

Finance Receivables:
Ending balance, December 31, 2014	$	50,637		$	503		$	16,060		$	67,200
Ending balance: Individually evaluated for impairment	$	-		$	-		$	209		$	209
Ending balance: Collectively evaluated for impairment	$	50,637		$	503		$	15,851		$	66,991

The ending balance of finance receivables collectively evaluated for impairment in the table above includes approximately $277 million and $1 million of finance receivables within the retail loan and commercial portfolio segments, respectively, that are specifically identified as impaired. These amounts are aggregated with their respective portfolio segments when determining the allowance for credit losses as of December 31, 2014, as they are deemed to be insignificant for individual evaluation and we have determined that the allowance for credit losses would not be materially different if the amounts had been individually evaluated for impairment. The ending balance of finance receivables for the dealer products portfolio segment collectively evaluated for impairment as of December 31, 2014 includes $913 million in receivables, which are guaranteed by TMS and $131 million in receivables, which are guaranteed by third party private Toyota distributors. These receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMS or such private distributors.

Note 6 – Allowance for Credit Losses (Continued)

Past Due Finance Receivables and Investments in Operating Leases

The following table shows aggregate balances of finance receivables and investments in operating leases 60 or more days past due:

	December 31,		March 31,
	2015		2015
Aggregate balances 60 or more days past due
Finance receivables	$	258	$	153
Investments in operating leases		98		52
Total	$	356	$	205

Substantially all finance and operating lease receivables do not involve recourse to the dealer in the event of customer default. Finance and operating lease receivables 60 or more days past due include accounts in bankruptcy and accounts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell. Accounts for which vehicles have been repossessed are excluded.

Past Due Finance Receivables by Class

The following tables summarize the aging of finance receivables by class:

	As of December 31, 2015
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Finance Receivables		90 Days or Greater Past Due and Accruing
Retail loan	$	743	$	176	$	82	$	1,001	$	50,206	$	51,207	$	53
Wholesale		-		-		-		-		8,508		8,508		-
Real estate		-		-		-		-		4,744		4,744		-
Working capital		-		-		-		-		1,924		1,924		-
Total	$	743	$	176	$	82	$	1,001	$	65,382	$	66,383	$	53

	As of March 31, 2015
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Finance Receivables		90 Days or Greater Past Due and Accruing
Retail loan	$	467	$	100	$	51	$	618	$	49,684	$	50,302	$	32
Commercial		8		2		-		10		511		521		-
Wholesale		-		-		-		-		9,226		9,226		-
Real estate		-		-		-		-		4,665		4,665		-
Working capital		-		-		-		-		1,853		1,853		-
Total	$	475	$	102	$	51	$	628	$	65,939	$	66,567	$	32