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Finance Receivables, Net
 9 Months Ended
Dec. 31, 2021
Receivables [Abstract]  
Finance Receivables, Net

Note 3 – Finance Receivables, Net

Finance receivables, net consists of the retail loan and dealer products portfolio segments, and includes deferred origination costs, deferred income, and allowance for credit losses.  Finance receivables, net also includes securitized retail receivables, which represent retail receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements, as discussed further in Note 8 – Variable Interest Entities.  Cash flows from these securitized retail receivables are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions.  They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Finance receivables, net consisted of the following:

 

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2021

 

Retail receivables 1

 

$

71,727

 

 

$

66,991

 

Dealer financing

 

 

10,254

 

 

 

13,642

 

 

 

 

81,981

 

 

 

80,633

 

 

 

 

 

 

 

 

 

 

Deferred origination costs

 

 

1,305

 

 

 

1,145

 

Deferred income

 

 

(1,176

)

 

 

(1,408

)

Allowance for credit losses

 

 

 

 

 

 

 

 

Retail receivables

 

 

(1,140

)

 

 

(1,075

)

Dealer financing

 

 

(45

)

 

 

(103

)

Total allowance for credit losses

 

 

(1,185

)

 

 

(1,178

)

Finance receivables, net

 

$

80,925

 

 

$

79,192

 

1

Includes securitized retail receivables of $21.9 billion and $22.1 billion as of December 31, 2021 and March 31, 2021, respectively.

Accrued interest related to finance receivables is presented in Other assets on the Consolidated Balance Sheets and was $214 million and $187 million at December 31, 2021 and March 31, 2021, respectively.


 

Note 3 – Finance Receivables, Net (Continued)

Credit Quality Indicators

We are exposed to credit risk on our finance receivables.  Credit risk is the risk of loss arising from the failure of customers or dealers to meet the terms of their contracts with us or otherwise fail to perform as agreed.

Retail Loan Portfolio Segment

The retail loan portfolio segment consists of one class of finance receivables.  While we use various credit quality metrics to develop our allowance for credit losses on the retail loan portfolio segment, we primarily utilize the aging of the individual accounts to monitor the credit quality of these finance receivables.  Based on our experience, the payment status of borrowers is the strongest indicator of the credit quality of the underlying receivables.  Payment status also impacts charge-offs.

Individual borrower accounts within the retail loan portfolio segment are segregated into aging categories based on the number of days past due.  The aging of finance receivables is updated monthly.

The following tables present the amortized cost basis of our retail loan portfolio by origination fiscal year by credit quality indicator based on number of days past due:

 

 

 

Amortized Cost Basis by Origination Fiscal Year at December 31, 2021

 

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017 and Prior

 

 

Total

 

Aging of finance receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

25,098

 

 

$

24,373

 

 

$

10,913

 

 

$

5,626

 

 

$

3,390

 

 

$

1,057

 

 

$

70,457

 

30-59 days past due

 

 

215

 

 

 

341

 

 

 

177

 

 

 

119

 

 

 

81

 

 

 

52

 

 

 

985

 

60-89 days past due

 

 

54

 

 

 

97

 

 

 

49

 

 

 

36

 

 

 

22

 

 

 

16

 

 

 

274

 

90 days or greater past due

 

 

29

 

 

 

51

 

 

 

23

 

 

 

15

 

 

 

11

 

 

 

11

 

 

 

140

 

Total

 

$

25,396

 

 

$

24,862

 

 

$

11,162

 

 

$

5,796

 

 

$

3,504

 

 

$

1,136

 

 

$

71,856

 

 

 

 

Amortized Cost Basis by Origination Fiscal Year at March 31, 2021

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016 and Prior

 

 

Total

 

Aging of finance receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

32,026

 

 

$

16,047

 

 

$

8,972

 

 

$

5,977

 

 

$

2,435

 

 

$

496

 

 

$

65,953

 

30-59 days past due

 

 

147

 

 

 

145

 

 

 

114

 

 

 

83

 

 

 

46

 

 

 

27

 

 

 

562

 

60-89 days past due

 

 

37

 

 

 

39

 

 

 

28

 

 

 

21

 

 

 

11

 

 

 

8

 

 

 

144

 

90 days or greater past due

 

 

18

 

 

 

18

 

 

 

13

 

 

 

9

 

 

 

5

 

 

 

6

 

 

 

69

 

Total

 

$

32,228

 

 

$

16,249

 

 

$

9,127

 

 

$

6,090

 

 

$

2,497

 

 

$

537

 

 

$

66,728

 

The amortized cost of retail loan portfolio excludes accrued interest of $193 million and $160 million at December 31, 2021 and March 31, 2021, respectively.  The previous tables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy.


 

Note 3 – Finance Receivables, Net (Continued)

Dealer Products Portfolio Segment

The dealer products portfolio segment consists of three classes of finance receivables: wholesale, real estate and working capital.  All loans outstanding for an individual dealer or dealer group, which includes affiliated entities, are aggregated and evaluated collectively by dealer or dealer group.  This reflects the interconnected nature of financing provided to our individual dealer and dealer group customers, and their affiliated entities.

When assessing the credit quality of the finance receivables within the dealer products portfolio segment, we segregate the finance receivables account balances into four categories representing distinct credit quality indicators based on internal risk assessments.  The internal risk assessments for all finance receivables within the dealer products portfolio segment are updated on a monthly basis.

The four credit quality indicators are:

 

•

Performing – Account not classified as either Credit Watch, At Risk or Default;

 

•

Credit Watch – Account designated for elevated attention;

 

•

At Risk – Account where there is an increased likelihood that default may exist based on qualitative and quantitative factors; and

 

•

Default – Account is not currently meeting contractual obligations or we have temporarily waived certain contractual requirements.

 

The following tables present the amortized cost basis of our dealer products portfolio by credit quality indicator based on internal risk assessments by origination fiscal year:

 

 

 

Amortized Cost Basis by Origination Fiscal Year at December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017 and Prior

 

 

Revolving loans

 

 

Total

 

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

2,852

 

 

$

2,852

 

Credit Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12

 

 

 

12

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

 

 

2

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Wholesale total

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

2,866

 

 

$

2,866

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

1,164

 

 

$

1,316

 

 

$

280

 

 

$

568

 

 

$

292

 

 

$

1,434

 

 

$

-

 

 

$

5,054

 

Credit Watch

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12

 

 

 

-

 

 

 

14

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

8

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Real estate total

 

$

1,164

 

 

$

1,318

 

 

$

280

 

 

$

568

 

 

$

292

 

 

$

1,454

 

 

$

-

 

 

$

5,076

 

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

519

 

 

$

368

 

 

$

216

 

 

$

162

 

 

$

40

 

 

$

183

 

 

$

823

 

 

$

2,311

 

Credit Watch

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Working capital total

 

$

519

 

 

$

369

 

 

$

216

 

 

$

162

 

 

$

40

 

 

$

183

 

 

$

823

 

 

$

2,312

 

Total

 

$

1,683

 

 

$

1,687

 

 

$

496

 

 

$

730

 

 

$

332

 

 

$

1,637

 

 

$

3,689

 

 

$

10,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 3 – Finance Receivables, Net (Continued)

 

 

 

Amortized Cost Basis by Origination Fiscal Year at March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016 and Prior

 

 

Revolving loans

 

 

Total

 

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,893

 

 

$

5,893

 

Credit Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

218

 

 

 

218

 

At Risk

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35

 

 

 

35

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11

 

 

 

11

 

Wholesale total

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

6,157

 

 

$

6,157

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

1,874

 

 

$

320

 

 

$

596

 

 

$

356

 

 

$

312

 

 

$

1,493

 

 

$

-

 

 

$

4,951

 

Credit Watch

 

 

8

 

 

 

49

 

 

 

3

 

 

 

20

 

 

 

9

 

 

 

99

 

 

 

-

 

 

 

188

 

At Risk

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12

 

 

 

17

 

 

 

-

 

 

 

42

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

22

 

Real estate total

 

$

1,895

 

 

$

369

 

 

$

599

 

 

$

389

 

 

$

342

 

 

$

1,609

 

 

$

-

 

 

$

5,203

 

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

503

 

 

$

334

 

 

$

200

 

 

$

41

 

 

$

106

 

 

$

176

 

 

$

878

 

 

$

2,238

 

Credit Watch

 

 

1

 

 

 

-

 

 

 

6

 

 

 

1

 

 

 

-

 

 

 

19

 

 

 

9

 

 

 

36

 

At Risk

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

8

 

Default

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Working capital total

 

$

505

 

 

$

334

 

 

$

206

 

 

$

42

 

 

$

113

 

 

$

195

 

 

$

887

 

 

$

2,282

 

Total

 

$

2,400

 

 

$

703

 

 

$

805

 

 

$

431

 

 

$

455

 

 

$

1,804

 

 

$

7,044

 

 

$

13,642

 

 

The amortized cost of the dealer products portfolio excludes accrued interest of $21 million and $27 million at December 31, 2021 and March 31, 2021, respectively.  As of December 31, 2021 and March 31, 2021, the amount of line-of-credit arrangements that are converted to term loans in each reporting period was insignificant, respectively.


 

Note 3 – Finance Receivables, Net (Continued)

Past Due Finance Receivables by Class

Substantially all finance receivables do not involve recourse to the dealer in the event of customer default.  Finance receivables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy.  Contracts for which vehicles have been repossessed are excluded.  For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 30 days past the contractual due date. For any customer who is granted a payment extension under an extension program, the aging of the receivable is adjusted for the number of days of the extension granted.

The following tables summarize the aging of the amortized cost basis of our finance receivables by class:

 

 

 

December 31, 2021

 

 

 

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

 

$

985

 

 

$

274

 

 

$

140

 

 

$

1,399

 

 

$

70,457

 

 

$

71,856

 

 

$

89

 

Wholesale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,866

 

 

 

2,866

 

 

 

-

 

Real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,076

 

 

 

5,076

 

 

 

-

 

Working capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,312

 

 

 

2,312

 

 

 

-

 

Total

 

$

985

 

 

$

274

 

 

$

140

 

 

$

1,399

 

 

$

80,711

 

 

$

82,110

 

 

$

89

 

 

 

 

 

March 31, 2021

 

 

 

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

 

$

562

 

 

$

144

 

 

$

69

 

 

$

775

 

 

$

65,953

 

 

$

66,728

 

 

$

39

 

Wholesale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,157

 

 

 

6,157

 

 

 

-

 

Real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,203

 

 

 

5,203

 

 

 

-

 

Working capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,282

 

 

 

2,282

 

 

 

-

 

Total

 

$

562

 

 

$

144

 

 

$

69

 

 

$

775

 

 

$

79,595

 

 

$

80,370

 

 

$

39

 

 


 

Note 3 – Finance Receivables, Net (Continued)

Troubled Debt Restructuring

For accounts not under bankruptcy protection, the amount of finance receivables modified as a troubled debt restructuring during the three and nine months ended December 31, 2021 and 2020 was not significant for each class of finance receivables.  Troubled debt restructurings for accounts not under bankruptcy protection within the retail loan class of finance receivables are comprised exclusively of contract term extensions that reduce the monthly payment due from the customer.  For the three classes of finance receivables within the dealer products portfolio segment, troubled debt restructurings include contract term extensions, interest rate adjustments, waivers of loan covenants, or any combination of the three.  Troubled debt restructurings of accounts not under bankruptcy protection did not include forgiveness of principal or interest rate adjustments during the three and nine months ended December 31, 2021 and 2020.

We consider finance receivables under bankruptcy protection within the retail loan class to be troubled debt restructurings as of the date we receive notice of a customer filing for bankruptcy protection, regardless of the ultimate outcome of the bankruptcy proceedings.  The bankruptcy court may impose modifications as part of the proceedings, including interest rate adjustments and forgiveness of principal.  For the three and nine months ended December 31, 2021 and 2020, the financial impact of troubled debt restructurings related to finance receivables under bankruptcy protection was not significant to our Consolidated Statements of Income and Consolidated Balance Sheets. 

For a limited time during fiscal 2021, we offered several programs to provide relief to customers during the COVID-19 pandemic.  These programs, which were broadly available to our customers, included retail loan payment extensions and lease payment deferrals.  We concluded that these programs did not meet troubled debt restructuring criteria due to the short-term nature of the modifications with no change in the contractual interest rate.  To provide relief for our dealers we offered certain temporary interest reductions, interest payment deferrals, and interest waivers on dealer floorplan financing, and principal payment deferrals on dealer floorplan financing, dealer real estate and working capital loans.  We also concluded that these programs did not meet troubled debt restructuring criteria as the finance receivables from the dealers were current.