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Cat Financial Financing Activities Detail C
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Cat Financial Financing Activities Cat Financial financing activities
 
Allowance for credit losses

Portfolio segments
A portfolio segment is the level at which Cat Financial develops a systematic methodology for determining its allowance for credit losses. Cat Financial's portfolio segments and related methods for estimating expected credit losses are as follows:

Customer
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 26 months as of September 30, 2022.

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, 2022, Cat Financial's forecasts for the markets in which it operates reflected a continuation of the trend of relatively low unemployment rates and delinquencies. However, high inflation rates and consequent central bank actions are weakening global economic growth. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

Dealer
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.
    
Cat Financial estimates the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

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, 2022.

Classes of finance receivables
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:

•North America - Finance receivables originated in the United States and Canada.
•EAME - Finance receivables originated in Europe, Africa, the Middle East and the Commonwealth of Independent States.
•Asia/Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.
•Mining - Finance receivables related to large mining customers worldwide.
•Latin America - Finance receivables originated in Mexico and Central and South American countries.
•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.

An analysis of the allowance for credit losses was as follows:
   
 (Millions of dollars)Three Months Ended September 30, 2022Three Months Ended September 30, 2021
CustomerDealerTotalCustomerDealerTotal
Beginning balance$290 $82 $372 $354 $44 $398 
Write-offs(30)— (30)(91)— (91)
Recoveries17 — 17 15 — 15 
Provision for credit losses 1
(2)(17)(19)17 38 55 
Other(5)— (5)(3)— (3)
Ending balance$270 $65 $335 $292 $82 $374 
   
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Allowance for Credit Losses:CustomerDealerTotalCustomerDealerTotal
Beginning balance$251 $82 $333 $431 $44 $475 
Write-offs(68)— (68)(193)— (193)
Recoveries47 — 47 39 — 39 
Provision for credit losses 1
46 (17)29 20 38 58 
Other(6)— (6)(5)— (5)
Ending balance$270 $65 $335 $292 $82 $374 
Finance Receivables$19,363 $1,737 $21,100 $19,967 $1,931 $21,898 
1 Excludes provision for credit losses on unfunded commitments and other miscellaneous receivables.
Credit quality of finance receivables
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.
Customer
The tables below summarize the aging category of Cat Financial's amortized cost of finance receivables in the Customer portfolio segment by origination year:
      
 (Millions of dollars)September 30, 2022
20222021202020192018PriorRevolving
Finance
Receivables 		Total Finance Receivables
North America      
Current$3,151 $3,632 $1,765 $811 $289 $64 $233 $9,945 
31-60 days past due18 25 19 13 6 2 4 87 
61-90 days past due5 9 4 2 1 1 2 24 
91+ days past due5 16 13 8 5 5 5 57 
EAME
Current873 1,014 511 309 179 81 — 2,967 
31-60 days past due6 12 5 4 — — — 27 
61-90 days past due2 4 5 1 1 — — 13 
91+ days past due3 21 11 5 2 1 — 43 
Asia/Pacific
Current805 765 385 95 23 4 — 2,077 
31-60 days past due5 13 11 2 1 — — 32 
61-90 days past due1 6 6 2 — — — 15 
91+ days past due1 8 6 6 1 — — 22 
Mining
Current568 625 240 203 117 112 79 1,944 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — 3 — 3 
91+ days past due— — 1 — 3 1 — 5 
Latin America
Current584 443 176 86 24 14 — 1,327 
31-60 days past due5 9 5 2 12 — — 33 
61-90 days past due4 4 2 1 — — — 11 
91+ days past due— 14 14 5 4 17 — 54 
Caterpillar Power Finance
Current40 91 145 75 30 170 118 669 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — — — — 
91+ days past due— — — — — 8 — 8 
Totals by Aging Category
Current$6,021 $6,570 $3,222 $1,579 $662 $445 $430 $18,929 
31-60 days past due34 59 40 21 19 2 4 179 
61-90 days past due12 23 17 6 2 4 2 66 
91+ days past due9 59 45 24 15 32 5 189 
Total Customer$6,076 $6,711 $3,324 $1,630 $698 $483 $441 $19,363 
      
 (Millions of dollars)December 31, 2021
20212020201920182017PriorRevolving
Finance
Receivables 		Total Finance Receivables
North America      
Current$4,792 $2,596 $1,426 $630 $182 $32 $182 $9,840 
31-60 days past due27 32 20 12 4 1 5 101 
61-90 days past due7 8 5 3 1 1 5 30 
91+ days past due9 17 12 13 5 4 5 65 
EAME
Current1,499 836 577 352 140 26 — 3,430 
31-60 days past due5 4 3 1 1 — — 14 
61-90 days past due3 3 3 1 — — — 10 
91+ days past due3 11 2 2 — 2 — 20 
Asia/Pacific
Current1,271 803 307 71 16 2 — 2,470 
31-60 days past due10 14 10 2 — — — 36 
61-90 days past due3 7 4 1 — — — 15 
91+ days past due2 10 10 3 — — — 25 
Mining
Current851 347 307 193 36 161 36 1,931 
31-60 days past due6 — — — — — — 6 
61-90 days past due1 — — — 4 — — 5 
91+ days past due— 1 8 9 3 1 — 22 
Latin America
Current617 299 160 70 17 18 — 1,181 
31-60 days past due4 7 3 3 1 — — 18 
61-90 days past due3 3 1 1 — — — 8 
91+ days past due4 9 9 7 7 14 — 50 
Caterpillar Power Finance
Current117 145 97 70 180 104 101 814 
31-60 days past due— — — — — — — — 
61-90 days past due— — — — — — — — 
91+ days past due— — — — — 44 — 44 
Totals by Aging Category
Current$9,147 $5,026 $2,874 $1,386 $571 $343 $319 $19,666 
31-60 days past due52 57 36 18 6 1 5 175 
61-90 days past due17 21 13 6 5 1 5 68 
91+ days past due18 48 41 34 15 65 5 226 
Total Customer$9,234 $5,152 $2,964 $1,444 $597 $410 $334 $20,135 

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.
Dealer

As of September 30, 2022 and December 31, 2021, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $58 million and $78 million, respectively, that were 91+ days past due in Latin America, all of which were originated in 2017.


Non-accrual finance receivables

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 collection 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.

In Cat Financial's Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:
   
September 30, 2022December 31, 2021
 Amortized CostAmortized 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 $5 $10 $47 $9 $12 
EAME42 — 4 18 1 2 
Asia/Pacific15 — 7 19 — 7 
Mining6 1 — 8 1 14 
Latin America57 — — 52 4 1 
Caterpillar Power Finance9 11 — 40 11 — 
Total$183 $17 $21 $184 $26 $36 

There was $2 million and $1 million of interest income recognized during the three months ended September 30, 2022 and 2021, respectively, for customer finance receivables on non-accrual status. There was $11 million and $9 million of interest income recognized during the nine months ended September 30, 2022 and 2021, respectively, for customer finance receivables on non-accrual status.

As of September 30, 2022 and December 31, 2021, finance receivables in Cat Financial's Dealer portfolio segment on non-accrual status were $58 million and $78 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, 2022 and December 31, 2021 and no interest income was recognized on dealer finance receivables on non-accrual status during the three and nine months ended September 30, 2022 and 2021.


Troubled debt restructurings

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.
There were no finance receivables modified as TDRs during the three and nine months ended September 30, 2022 and 2021 for the Dealer portfolio segment. Cat Financial’s finance receivables in the Customer portfolio segment modified as TDRs were as follows:
  
(Millions of dollars)Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost		Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost
Customer   
North America$3 $3 $1 $1 
EAME— — 1 1 
Asia/Pacific— — 4 4 
Mining15 15 — — 
Latin America— — 4 4 
Caterpillar Power Finance
11 11 7 3 
Total$29 $29 $17 $13 
 Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
 Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost		Pre-TDR
Amortized Cost		Post-TDR
Amortized Cost
North America$4 $4 $5 $5 
EAME1 1 1 1 
Asia/Pacific— — 4 4 
Mining15 15 11 5 
Latin America— — 10 10 
Caterpillar Power Finance20 19 23 19 
Total 
$40 $39 $54 $44 

The Post-TDR amortized costs in the Customer portfolio segment with a payment default (defined as 91+ days past due) which had been modified within twelve months prior to the default date, were as follows:

(Millions of dollars)Three Months Ended September 30Nine Months Ended September 30
Customer2022202120222021
North America$— $— $— $1 
Asia/Pacific— — — 6 
Mining— — 5 — 
Latin America— — — 15 
Caterpillar Power Finance— — — 5 
Total$— $— $5 $27