Cat Financial provides loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use, the majority of which operate in construction-related industries. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. The average original term of Cat Financial's customer finance receivable portfolio was approximately 50 months with an average remaining term of approximately 27 months as of September 30, 2021.

Cat Financial typically maintains a security interest in financed equipment and requires physical damage insurance coverage on the financed equipment, both of which provide Cat Financial with certain rights and protections. If Cat Financial's collection efforts fail to bring a defaulted account current, Cat Financial generally can repossess the financed equipment, after satisfying local legal requirements, and sell it within the Caterpillar dealer network or through third-party auctions.

Cat Financial estimates the allowance for credit losses related to its customer finance receivables based on loss forecast models utilizing probabilities of default and the estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.

During the three and nine months ended September 30, 2021, Cat Financial's forecasts for the markets in which it operates reflected a general improvement in economic conditions, which had deteriorated due to the COVID-19 pandemic, resulting from a growing economy, improved unemployment rates and a decrease in delinquencies. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

Cat Financial provides financing to Caterpillar dealers in the form of wholesale financing plans. Cat Financial's wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, Cat Financial provides a variety of secured and unsecured loans to Caterpillar dealers.

In general, Cat Financial's Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to its close working relationships with the dealers and their financial strength. Therefore, Cat Financial made no adjustments to historical loss rates during the three and nine months ended September 30, 2021.

Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. Cat Financial's classes, which align with management reporting for credit losses, are as follows:

•Caterpillar Power Finance - Finance receivables originated worldwide related to marine vessels with Caterpillar engines and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.

Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). The amount of the write-off is determined by comparing the fair value of the collateral, less cost to sell, to the amortized cost. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.



(Millions of dollars)	Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
Allowance for Credit Losses:	Customer		Dealer		Total		Customer		Dealer		Total
Beginning balance	$	354	$	44	$	398	$	467	$	45	$	512
Write-offs	(91)		—		(91)		(139)		—		(139)
Recoveries	15		—		15		14		—		14
Provision for credit losses	17		38		55		67		—		67
Other	(3)		—		(3)		3		—		3
Ending balance	$	292	$	82	$	374	$	412	$	45	$	457

	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
Allowance for Credit Losses:	Customer		Dealer		Total		Customer		Dealer		Total
Beginning balance	$	431	$	44	$	475	$	375	$	45	$	420
Adjustment to adopt new accounting guidance 1	—		—		—		12		—		12
Write-offs	(193)		—		(193)		(212)		—		(212)
Recoveries	39		—		39		27		—		27
Provision for credit losses	20		38		58		213		—		213
Other	(5)		—		(5)		(3)		—		(3)
Ending balance	$	292	$	82	$	374	$	412	$	45	$	457

Individually evaluated	$	118	$	78	$	196	$	172	$	39	$	211
Collectively evaluated	174		4		178		240		6		246
Ending Balance	$	292	$	82	$	374	$	412	$	45	$	457

Finance Receivables:
Individually evaluated	$	374	$	78	$	452	$	612	$	78	$	690
Collectively evaluated	19,593		1,853		21,446		17,967		2,975		20,942
Ending Balance	$	19,967	$	1,931	$	21,898	$	18,579	$	3,053	$	21,632
1 Adjustment to adopt new accounting guidance related to credit losses.

At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, Cat Financial monitors credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, Cat Financial considers the entire finance receivable past due when any installment is over 30 days past due.



(Millions of dollars)	December 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	3,777	$	2,423	$	1,344	$	522	$	212	$	27	$	89	$	8,394
31-60 days past due	52		49		33		16		7		2		—		159
61-90 days past due	22		25		16		9		2		1		—		75
91+ days past due	14		35		31		20		9		4		2		115


EAME
Current	1,605		931		501		203		60		18		—		3,318
31-60 days past due	5		15		3		2		—		—		—		25
61-90 days past due	1		1		2		1		—		—		—		5
91+ days past due	7		7		12		4		39		43		—		112


Asia/Pacific
Current	1,375		745		321		61		10		3		—		2,515
31-60 days past due	12		22		13		6		—		—		—		53
61-90 days past due	7		11		7		1		—		—		—		26
91+ days past due	4		10		9		3		—		—		—		26


Mining
Current	490		571		287		152		92		151		137		1,880
31-60 days past due	5		—		5		1		—		—		—		11
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		11		8		2		—		—		1		22


Latin America
Current	561		348		151		48		13		34		—		1,155
31-60 days past due	3		6		4		3		—		—		—		16
61-90 days past due	1		7		6		3		2		—		—		19
91+ days past due	2		14		11		24		5		4		—		60


Caterpillar Power Finance
Current	217		172		111		273		99		117		119		1,108
31-60 days past due	—		—		6		—		—		—		—		6
61-90 days past due	—		—		—		—		—		9		—		9
91+ days past due	2		—		20		3		25		79		—		129

Total Customer	$	8,162	$	5,403	$	2,901	$	1,357	$	575	$	492	$	348	$	19,238

Finance receivables in the Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other machinery. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the machinery.

As of September 30, 2021, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $78 million that was 91+ days past due in Latin America, all of which was originated in 2017. As of December 31, 2020, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $81 million that was 91+ days past due in Latin America. Of these past due receivables, $78 million were originated in 2017 and $3 million were originated prior to 2016.

Recognition of income is suspended and the finance receivable is placed on non-accrual status when management determines that collection of future income is not probable. Contracts on non-accrual status are generally more than 120 days past due or have been restructured in a troubled debt restructuring (TDR). Recognition is resumed and previously suspended income is recognized when the collection of remaining amounts is considered probable. Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms. Interest earned but uncollected prior to the receivable being placed on non-accrual status is written off through Provision for credit losses when, in the judgment of management, it is considered uncollectible.



	September 30, 2021						December 31, 2020
	Amortized Cost						Amortized Cost
(Millions of dollars)	Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing		Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing

North America	$	54	$	7	$	17	$	86	$	1	$	34
EAME	50		1		4		113		1		1
Asia/Pacific	21		—		9		13		—		13
Mining	9		1		—		21		1		—
Latin America	42		—		1		63		—		1
Caterpillar Power Finance	75		—		—		170		17		—
Total	$	251	$	9	$	31	$	466	$	20	$	49

There was $1 million and $2 million of interest income recognized during the three months ended September 30, 2021 and 2020, respectively, for customer finance receivables on non-accrual status. There was $9 million and $8 million of interest income recognized during the nine months ended September 30, 2021 and 2020, respectively, for customer finance receivables on non-accrual status.

As of September 30, 2021 and December 31, 2020, finance receivables in Cat Financial's Dealer portfolio segment on non-accrual status were $78 million and $81 million, respectively, all of which was in Latin America. There were no finance receivables in Cat Financial's Dealer portfolio segment more than 90 days past due and still accruing income as of September 30, 2021 and December 31, 2020 and no interest income was recognized on dealer finance receivables on non-accrual status during the three and nine months ended September 30, 2021 and 2020.

A restructuring of a finance receivable constitutes a TDR when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties. Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, payment deferrals and reduction of principal and/or accrued interest. Cat Financial individually evaluates TDR contracts and establishes an allowance based on the present value of expected future cash flows discounted at the receivable's effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable.



(Millions of dollars)	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
	Pre-TDR Amortized Cost		Post-TDR Amortized Cost		Pre-TDR Amortized Cost		Post-TDR Amortized Cost
Customer
North America	$	1	$	1	$	1	$	1
EAME	1		1		—		—
Asia/Pacific	4		4		4		4
Mining	—		—		5		5
Latin America	4		4		16		16
Caterpillar Power Finance	7		3		50		50
Total	$	17	$	13	$	76	$	76

	Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	Pre-TDR Amortized Cost		Post-TDR Amortized Cost		Pre-TDR Amortized Cost		Post-TDR Amortized Cost
North America	$	5	$	5	$	10	$	10
EAME	1		1		—		—
Asia/Pacific	4		4		12		12
Mining	11		5		22		22
Latin America	10		10		18		18
Caterpillar Power Finance	23		19		87		87
Total	$	54	$	44	$	149	$	149



	Three Months Ended September 30				Nine Months Ended September 30
Customer	2021		2020		2021		2020
North America	$	—	$	6	$	1	$	6
EAME	—		—		—		10
Asia/Pacific	—		—		6		—
Mining	—		1		—		1
Latin America	—		—		15		1
Caterpillar Power Finance	—		18		5		18
Total	$	—	$	25	$	27	$	36