FINANCING RECEIVABLES

9 Months Ended

Jul. 30, 2023

FINANCING RECEIVABLES

FINANCING RECEIVABLES

(8) Financing Receivables

The Company monitors the credit quality of financing receivables based on delinquency status. Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent receivables for which the Company has ceased accruing finance income. The Company ceases accruing finance income when these receivables are generally 90 days delinquent. Generally, when receivables are 120 days delinquent the estimated uncollectible amount from the customer is written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collection is reasonably assured.

The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer receivables) by year of origination was as follows in millions of dollars:


		July 30, 2023
		2023			2022			2021			2020			2019			Prior Years			Revolving Charge Accounts			Total
Retail customer receivables:
Agriculture and turf
Current		$	10,554		$	9,701		$	5,792		$	2,779		$	1,080		$	402		$	4,388		$	34,696
30-59 days past due			59			85			53			26			13			4			21			261
60-89 days past due			19			30			17			10			5			1			7			89
90+ days past due						1																		1
Non-performing			19			80			71			36			24			27			8			265
Construction and forestry
Current			2,167			2,200			1,284			449			124			39			114			6,377
30-59 days past due			39			46			38			13			5			2			4			147
60-89 days past due			12			23			16			8			2			1			1			63
90+ days past due						2			1			1												4
Non-performing			20			83			61			26			11			5			1			207
Total		$	12,889		$	12,251		$	7,333		$	3,348		$	1,264		$	481		$	4,544		$	42,110


		October 30, 2022
		2022			2021			2020			2019			2018			Prior Years			Revolving Charge Accounts			Total
Retail customer receivables:
Agriculture and turf
Current		$	13,500		$	7,984		$	4,091		$	1,875		$	785		$	200		$	4,111		$	32,546
30-59 days past due			46			63			36			17			7			3			19			191
60-89 days past due			14			25			13			6			2			1			5			66
90+ days past due			1																					1
Non-performing			27			60			44			28			18			19			8			204
Construction and forestry
Current			2,964			1,974			842			292			73			12			108			6,265
30-59 days past due			53			52			23			9			2			1			3			143
60-89 days past due			19			16			7			3			1						1			47
90+ days past due			1			4			1			3						1						10
Non-performing			25			61			34			19			7			3						149
Total		$	16,650		$	10,239		$	5,091		$	2,252		$	895		$	240		$	4,255		$	39,622


		July 31, 2022
		2022			2021			2020			2019			2018			Prior Years			Revolving Charge Accounts			Total
Retail customer receivables:
Agriculture and turf
Current		$	9,161		$	9,169		$	4,713		$	2,234		$	935		$	378		$	3,962		$	30,552
30-59 days past due			40			70			38			23			8			4			18			201
60-89 days past due			15			24			15			7			3			1			5			70
90+ days past due
Non-performing			17			62			48			37			19			27			7			217
Construction and forestry
Current			2,336			2,249			1,004			382			106			20			102			6,199
30-59 days past due			47			54			26			12			4			1			3			147
60-89 days past due			14			14			12			4			1						1			46
90+ days past due						11			3			1						3						18
Non-performing			13			63			49			25			9			4			1			164
Total		$	11,643		$	11,716		$	5,908		$	2,725		$	1,085		$	438		$	4,099		$	37,614

The credit quality analysis of wholesale receivables by year of origination was as follows in millions of dollars:


		July 30, 2023
		2023			2022			2021			2020			2019			Prior Years			Revolving			Total
Wholesale receivables:
Agriculture and turf
Current		$	449		$	139		$	28		$	7		$	1		$	1		$	4,940		$	5,565
30+ days past due
Non-performing															1									1
Construction and forestry
Current			20			6			23			1						1			752			803
30+ days past due
Non-performing
Total		$	469		$	145		$	51		$	8		$	2		$	2		$	5,692		$	6,369


		October 30, 2022
		2022			2021			2020			2019			2018			Prior Years			Revolving			Total
Wholesale receivables:
Agriculture and turf
Current		$	387		$	64		$	27		$	4					$	2		$	2,371		$	2,855
30+ days past due
Non-performing												1												1
Construction and forestry
Current			7			29			2			1						1			377			417
30+ days past due
Non-performing
Total		$	394		$	93		$	29		$	6					$	3		$	2,748		$	3,273


		July 31, 2022
		2022			2021			2020			2019			2018			Prior Years			Revolving			Total
Wholesale receivables:
Agriculture and turf
Current		$	289		$	99		$	34		$	6		$	1		$	1		$	2,022		$	2,452
30+ days past due
Non-performing												1												1
Construction and forestry
Current			11			32			3			1						1			283			331
30+ days past due																		1						1
Non-performing
Total		$	300		$	131		$	37		$	8		$	1		$	3		$	2,305		$	2,785

An analysis of the allowance for credit losses and investment in financing receivables in millions of dollars during the periods follows:


		Retail Notes			Revolving
		& Financing			Charge			Wholesale
		Leases			Accounts			Receivables			Total
Three Months Ended July 30, 2023
Allowance:
Beginning of period balance		$	157		$	19		$	4		$	180
Provision			14			11						25
Write-offs			(23)			(18)						(41)
Recoveries			5			6						11
Translation adjustments			1									1
End of period balance		$	154		$	18		$	4		$	176

Nine Months Ended July 30, 2023
Allowance:
Beginning of period balance		$	299		$	22		$	4		$	325
Provision			59			15			1			75
Provision transferred to held for sale			(142)									(142)
Provision (credit) subtotal			(83)			15			1			(67)
Write-offs			(60)			(36)						(96)
Recoveries			15			17						32
Translation adjustments			(17)						(1)			(18)
End of period balance		$	154		$	18		$	4		$	176
Financing receivables:
End of period balance		$	37,566		$	4,544		$	6,369		$	48,479


		Retail Notes			Revolving
		& Financing			Charge			Wholesale
		Leases			Accounts			Receivables			Total
Three Months Ended July 31, 2022
Allowance:
Beginning of period balance		$	168		$	17		$	5		$	190
Provision (credit)			14			3			(1)			16
Write-offs			(12)			(10)						(22)
Recoveries			8			7						15
Translation adjustments			3									3
End of period balance		$	181		$	17		$	4		$	202

Nine Months Ended July 31, 2022
Allowance:
Beginning of period balance		$	138		$	21		$	7		$	166
Provision (credit)			66			(4)			(3)			59
Write-offs			(47)			(22)						(69)
Recoveries			17			22						39
Translation adjustments			7									7
End of period balance		$	181		$	17		$	4		$	202
Financing receivables:
End of period balance		$	33,515		$	4,099		$	2,785		$	40,399

In the first quarter of 2023, the Company determined that the financial services business in Russia met the held for sale criteria. The financing receivables in Russia were reclassified to “Other assets” and the associated allowance for credit losses was reversed in the first quarter of 2023. These operations were sold in the second quarter of 2023 (see Note 20).

The allowance for credit losses decreased slightly in the third quarter of 2023 as strong fundamentals within the agriculture market continued to benefit the portfolio. Excluding the portfolio in Russia, the allowance for the first nine months of 2023 increased slightly as higher portfolio balances and higher expected losses on turf and construction customer accounts offset the favorable benefits in the agricultural customer accounts. The Company continues to monitor the economy as part of the allowance setting process, including potential impacts of inflation and interest rates, among other factors, and qualitative adjustments to the allowance are incorporated as necessary.