Note 5. Allowance for Credit Losses and Credit Quality of Receivables

Delinquencies

Past due balances of 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.

The Company monitors the credit quality of Receivables as either performing or non-performing monthly. Non-performing Receivables represent loans for which the Company has ceased accruing finance income. Generally, when retail notes are approximately 120 days delinquent, accrual of finance income is suspended, the collateral is repossessed or the account is designated for litigation and the estimated uncollectible amount, after charging the dealer’s withholding account, if any, is written off to the allowance for credit losses. Revolving charge accounts are generally deemed to be uncollectible and written off to the allowance for credit losses when delinquency reaches 120 days. Generally, when a wholesale receivable becomes 60 days delinquent, the Company determines whether the accrual of finance income on interest-bearing wholesale receivables should be suspended, the collateral should be repossessed or the account should be designated for litigation and the estimated uncollectible amount written off to the allowance for credit losses. Generally, when a financing lease account becomes 120 days delinquent, the accrual of lease revenue is suspended, the equipment is repossessed or the account is designated for litigation, and the estimated uncollectible amount, after charging the dealer’s withholding account, if any, 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 collections are reasonably assured.

An age analysis of past due Receivables that are still accruing interest and non-performing Receivables at October 31, 2014 was as follows (in millions of dollars):

	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due
Retail notes:
Agriculture and turf equipment	$	85.0	$	30.8	$	24.0	$	139.8
Construction and forestry equipment	53.6		15.6		7.0		76.2
Revolving charge accounts:
Agriculture and turf equipment	11.3		3.7		.9		15.9
Construction and forestry equipment	2.4		1.2		.3		3.9
Wholesale receivables:
Agriculture and turf equipment	4.1		3.4		4.5		12.0
Construction and forestry equipment	.2				1.5		1.7
Financing leases:
Agriculture and turf equipment	7.5		5.1		.6		13.2
Construction and forestry equipment	2.5		.8		.2		3.5
Total Receivables	$	166.6	$	60.6	$	39.0	$	266.2

	Total Past Due		Total Non- Performing		Current		Total Receivables
Retail notes:
Agriculture and turf equipment	$	139.8	$	41.8	$	17,023.9	$	17,205.5
Construction and forestry equipment	76.2		14.3		2,165.3		2,255.8
Revolving charge accounts:
Agriculture and turf equipment	15.9		1.1		2,437.0		2,454.0
Construction and forestry equipment	3.9		.1		77.9		81.9
Wholesale receivables:
Agriculture and turf equipment	12.0		1.1		6,961.0		6,974.1
Construction and forestry equipment	1.7				943.3		945.0
Financing leases:
Agriculture and turf equipment	13.2		11.5		396.0		420.7
Construction and forestry equipment	3.5		1.3		164.1		168.9
Total Receivables	$	266.2	$	71.2	$	30,168.5	$	30,505.9

An age analysis of past due Receivables that are still accruing interest and non-performing Receivables at October 31, 2013 was as follows (in millions of dollars):

	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due
Retail notes:
Agriculture and turf equipment	$	67.8	$	23.3	$	17.1	$	108.2
Construction and forestry equipment	38.4		14.4		8.6		61.4
Revolving charge accounts:
Agriculture and turf equipment	14.6		4.5		2.2		21.3
Construction and forestry equipment	2.3		1.0		.5		3.8
Wholesale receivables:
Agriculture and turf equipment	10.0		4.9		3.0		17.9
Construction and forestry equipment	.3		.1		.9		1.3
Financing leases:
Agriculture and turf equipment	10.2		4.0		2.3		16.5
Construction and forestry equipment	2.2		.5				2.7
Operating loans:
Agriculture and turf equipment	.1						.1
Total Receivables	$	145.9	$	52.7	$	34.6	$	233.2

	Total Past Due		Total Non- Performing		Current		Total Receivables
Retail notes:
Agriculture and turf equipment	$	108.2	$	34.1	$	16,359.3	$	16,501.6
Construction and forestry equipment	61.4		11.4		1,672.1		1,744.9
Revolving charge accounts:
Agriculture and turf equipment	21.3		.9		2,438.0		2,460.2
Construction and forestry equipment	3.8				70.9		74.7
Wholesale receivables:
Agriculture and turf equipment	17.9		.3		6,541.1		6,559.3
Construction and forestry equipment	1.3				904.1		905.4
Financing leases:
Agriculture and turf equipment	16.5		11.0		379.0		406.5
Construction and forestry equipment	2.7		2.0		144.1		148.8
Operating loans:
Agriculture and turf equipment	.1		.3		31.5		31.9
Total Receivables	$	233.2	$	60.0	$	28,540.1	$	28,833.3

Allowance for Credit Losses

Allowances for credit losses on Receivables are maintained in amounts considered to be appropriate in relation to the Receivables outstanding based on historical loss experience by product category, portfolio duration, delinquency trends, economic conditions and credit risk quality.

An analysis of the allowance for credit losses and investment in Receivables was as follows (in millions of dollars):

	Retail Notes			Revolving Charge Accounts			Wholesale Receivables			Other			Total Receivables
2014
Allowance:
Beginning of year balance	$	50.7		$	39.7		$	6.4		$	14.6		$	111.4
Provision (credit) for credit losses	13.2			10.5			9.0			(5.4		)	27.3
Write-offs	(12.7		)	(24.6		)	(7.7		)	(.7		)	(45.7		)
Recoveries	5.5			14.3			.1			.3			20.2
Other changes (primarily translation adjustments)	(.6		)				(.2		)				(.8		)
End of year balance	$	56.1		$	39.9		$	7.6		$	8.8		$	112.4
Balance individually evaluated *	$	1.7		$	.2		$	.1					$	2.0

Receivables:
End of year balance	$	19,461.3		$	2,535.9		$	7,919.1		$	589.6		$	30,505.9
Balance individually evaluated *	$	24.5		$	.2		$	1.2					$	25.9

* Remainder is collectively evaluated.

2013
Allowance:
Beginning of year balance	$	56.4		$	40.2		$	5.9		$	11.5		$	114.0
Provision (credit) for credit losses	(1.9		)	4.0			.1			4.2			6.4
Write-offs	(9.4		)	(19.8		)	(.3		)	(1.9		)	(31.4		)
Recoveries	5.9			15.3			.2			1.1			22.5
Other changes (primarily translation adjustments)	(.3		)				.5			(.3		)	(.1		)
End of year balance	$	50.7		$	39.7		$	6.4		$	14.6		$	111.4
Balance individually evaluated *							$	.1		$	3.7		$	3.8

Receivables:
End of year balance	$	18,246.5		$	2,534.9		$	7,464.7		$	587.2		$	28,833.3
Balance individually evaluated *	$	21.3		$	.3		$	.1		$	32.3		$	54.0

* Remainder is collectively evaluated.

2012
Allowance:
Beginning of year balance	$	67.8		$	39.7		$	6.0		$	12.8		$	126.3
Provision (credit) for credit losses	(10.4		)	7.9			.9			1.4			(.2		)
Write-offs	(7.4		)	(28.8		)	(1.0		)	(3.5		)	(40.7		)
Recoveries	6.8			21.4			.1			.8			29.1
Other changes (primarily translation adjustments)	(.4		)				(.1		)				(.5		)
End of year balance	$	56.4		$	40.2		$	5.9		$	11.5		$	114.0
Balance individually evaluated *				$	.5		$	.1					$	.6

Receivables:
End of year balance	$	15,728.8		$	2,427.7		$	6,483.1		$	564.7		$	25,204.3
Balance individually evaluated *	$	10.6		$	.5		$	.2		$	.3		$	11.6

* Remainder is collectively evaluated.

Investments in non-performing Receivables at October 31, 2014 and 2013 were $71 million and $60 million, respectively. These Receivables as a percentage of total Receivables outstanding were .23 percent and .21 percent at October 31, 2014 and 2013, respectively. Total Receivable amounts 30 days or more past due and still accruing finance income were $266 million at October 31, 2014, compared with $233 million at October 31, 2013. These past due amounts represented .87 percent and .81 percent of total Receivables outstanding at October 31, 2014 and 2013, respectively. The allowance for credit losses represented .37 percent and .39 percent of Receivables outstanding at October 31, 2014 and 2013, respectively. In addition, at October 31, 2014 and 2013, the Company had $167 million and $174 million, respectively, of deposits primarily withheld from John Deere dealers and merchants available for potential credit losses.

Impaired Receivables

Receivables are considered impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables, which are impaired, are generally classified as non-performing.

An analysis of impaired Receivables at October 31, 2014 and 2013 was as follows (in millions of dollars):

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Recorded Investment
2014 *
Receivables with specific allowance:
Retail notes	$	7.0	$	6.9	$	1.7	$	8.4
Revolving charge accounts	.2		.2		.2		.2
Wholesale receivables	.1		.1		.1		.1
Total with specific allowance	7.3		7.2		2.0		8.7

Receivables without specific allowance:
Retail notes	5.9		5.7				6.1
Total without specific allowance	5.9		5.7				6.1
Total	$	13.2	$	12.9	$	2.0	$	14.8

Agriculture and turf	$	11.7	$	11.4	$	2.0	$	13.0
Construction and forestry	1.5		1.5				1.8
Total	$	13.2	$	12.9	$	2.0	$	14.8

2013 *
Receivables with specific allowance:
Wholesale receivables	$	.1	$	.1	$	.1	$	.2
Operating loans	18.0		17.9		3.7		18.8
Total with specific allowance	18.1		18.0		3.8		19.0

Receivables without specific allowance:
Retail notes	7.2		7.1				8.0
Total without specific allowance	7.2		7.1				8.0
Total	$	25.3	$	25.1	$	3.8	$	27.0

Agriculture and turf	$	23.2	$	23.0	$	3.8	$	24.6
Construction and forestry	2.1		2.1				2.4
Total	$	25.3	$	25.1	$	3.8	$	27.0

* Finance income recognized was not material.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During 2014, 2013 and 2012, the Company identified 66, 92 and 138 Receivable contracts, primarily operating loans and retail notes, as troubled debt restructurings with aggregate balances of $3 million, $16 million and $5 million pre-modification and $2 million, $15 million and $4 million post-modification, respectively. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 31, 2014, the Company had no commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.

Write-offs

Total Receivable write-offs and recoveries, by product, and as a percentage of average balances held during the year, were as follows (in millions of dollars):

	2014					2013					2012
	Dollars			Percent		Dollars			Percent		Dollars			Percent
Write-offs:
Retail notes:
Agriculture and turf equipment	$	(6.1	)	(.04	)%	$	(4.3	)	(.03	)%	$	(3.4	)	(.03	)%
Construction and forestry equipment	(6.6		)	(.33	)	(5.1		)	(.33	)	(4.0		)	(.32	)
Total retail notes	(12.7		)	(.07	)	(9.4		)	(.06	)	(7.4		)	(.05	)
Revolving charge accounts	(24.6		)	(1.11	)	(19.8		)	(.89	)	(28.8		)	(1.29	)
Wholesale receivables	(7.7		)	(.09	)	(.3		)	(.00	)	(1.0		)	(.02	)
Financing leases	(.5		)	(.09	)	(1.8		)	(.34	)	(1.6		)	(.34	)
Operating loans	(.2		)	(1.45	)	(.1		)	(.25	)	(1.9		)	(3.12	)
Total write-offs	(45.7		)	(.16	)	(31.4		)	(.12	)	(40.7		)	(.18	)
Recoveries:
Retail notes:
Agriculture and turf equipment	3.3			.02		3.6			.03		3.9			.03
Construction and forestry equipment	2.2			.11		2.3			.15		2.9			.23
Total retail notes	5.5			.03		5.9			.04		6.8			.05
Revolving charge accounts	14.3			.65		15.3			.69		21.4			.96
Wholesale receivables	.1			.00		.2			.00		.1			.00
Financing leases	.2			.04		.5			.09		.3			.06
Operating loans	.1			.73		.6			1.50		.5			.82
Total recoveries	20.2			.07		22.5			.09		29.1			.13
Total net write-offs	$	(25.5	)	(.09	)	$	(8.9	)	(.03	)	$	(11.6	)	(.05	)