Finance Assets and Lessor Operating Leases

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Finance Assets and Lessor Operating Leases

Finance Assets and Lessor Operating Leases

Finance Assets

Finance receivables are comprised of sales-type lease receivables, secured loans and unsecured loans. Sales-type leases and secured loans are from financing options for the purchase or lease of Pitney Bowes equipment or other manufacturers' equipment and are generally due in installments over periods ranging from three to five years. Unsecured loans comprise revolving credit lines offered to our clients for postage, supplies and working capital purposes. These revolving credit lines are generally due monthly; however, clients may rollover outstanding balances. Interest is recognized on finance receivables using the effective interest method. Annual fees are recognized ratably over the period covered and client acquisition costs are expensed as incurred. All finance receivables are in our SendTech Solutions segment and we segregate finance receivables into a North America portfolio and an International portfolio.

Finance receivables consisted of the following:

	March 31, 2023						December 31, 2022
	North America		International		Total		North America		International		Total
Sales-type lease receivables
Gross finance receivables	$	971,663	$	149,227	$	1,120,890	$	967,298	$	158,167	$	1,125,465
Unguaranteed residual values	38,688		8,628		47,316		38,832		8,798		47,630
Unearned income	(242,564)		(47,243)		(289,807)		(239,238)		(48,334)		(287,572)
Allowance for credit losses	(13,458)		(2,873)		(16,331)		(14,131)		(2,893)		(17,024)
Net investment in sales-type lease receivables	754,329		107,739		862,068		752,761		115,738		868,499
Loan receivables
Loan receivables	313,945		17,426		331,371		311,887		16,636		328,523
Allowance for credit losses	(5,423)		(150)		(5,573)		(4,787)		(139)		(4,926)
Net investment in loan receivables	308,522		17,276		325,798		307,100		16,497		323,597
Net investment in finance receivables	$	1,062,851	$	125,015	$	1,187,866	$	1,059,861	$	132,235	$	1,192,096

Maturities of gross finance receivables at March 31, 2023 were as follows:

	Sales-type Lease Receivables						Loan Receivables
	North America		International		Total		North America		International		Total
Remainder 2023	$	279,986	$	52,333	$	332,319	$	229,683	$	17,426	$	247,109
2024	299,265		44,812		344,077		31,141		—		31,141
2025	207,186		28,061		235,247		24,666		—		24,666
2026	126,392		16,005		142,397		15,966		—		15,966
2027	55,014		6,320		61,334		10,122		—		10,122
Thereafter	3,820		1,696		5,516		2,367		—		2,367
Total	$	971,663	$	149,227	$	1,120,890	$	313,945	$	17,426	$	331,371

Aging of Receivables

The aging of gross finance receivables was as follows:

	March 31, 2023
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Past due amounts 0 - 90 days	$	963,890	$	146,958	$	310,819	$	17,321	$	1,438,988
Past due amounts > 90 days	7,773		2,269		3,126		105		13,273
Total	$	971,663	$	149,227	$	313,945	$	17,426	$	1,452,261

	December 31, 2022
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Past due amounts 0 - 90 days	$	959,203	$	155,596	$	308,872	$	16,503	$	1,440,174
Past due amounts > 90 days	8,095		2,571		3,015		133		13,814
Total	$	967,298	$	158,167	$	311,887	$	16,636	$	1,453,988

Allowance for Credit Losses

We provide an allowance for credit losses based on historical loss experience, the nature of our portfolios, adverse situations that may affect a client's ability to pay and current economic conditions and outlook based on reasonable and supportable forecasts. We continually evaluate the adequacy of the allowance for credit losses and adjust as necessary. The assumptions used in determining an estimate of credit losses are inherently subjective and actual results may differ significantly from estimated reserves.

We established credit approval limits based on the credit quality of the client and the type of equipment financed. We cease financing revenue recognition for lease receivables and for unsecured loan receivables that are more than 90 days past due. Revenue recognition is resumed when the client's payments reduce the account aging to less than 60 days past due. Finance receivables are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We believe that our credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients.

Activity in the allowance for credit losses for finance receivables was as follows:

	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Balance at January 1, 2023	$	14,131	$	2,893	$	4,787	$	139	$	21,950
Amounts charged to expense	395		238		1,097		55		1,785
Write-offs	(1,683)		(267)		(1,109)		(46)		(3,105)
Recoveries	614		111		648		—		1,373
Other	1		(102)		—		2		(99)
Balance at March 31, 2023	$	13,458	$	2,873	$	5,423	$	150	$	21,904
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Balance at January 1, 2022	$	19,546	$	3,246	$	3,259	$	167	$	26,218
Amounts charged to expense	297		47		616		143		1,103
Write-offs	(1,640)		(360)		(1,341)		(117)		(3,458)
Recoveries	744		—		761		—		1,505
Other	13		(143)		2		(9)		(137)
Balance at March 31, 2022	$	18,960	$	2,790	$	3,297	$	184	$	25,231

The table below shows write-offs of gross finance receivables by year of origination.

	March 31, 2023
	Sales Type Lease Receivables										Loan Receivables		Total
	2022		2021		2020		2019		Prior
Write-offs	$	455	$	675	$	412	$	250	$	158	$	1,155	$	3,105

Credit Quality

The extension of credit and management of credit lines to new and existing clients uses a combination of a client's credit score, where available, a detailed manual review of their financial condition and payment history, or an automated process. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes to ensure that our global strategy is executed, collection resources are allocated and enhanced tools and processes are implemented as needed.

Over 85% of our finance receivables are within the North American portfolio. We use a third-party to score the majority of this portfolio on a quarterly basis using a proprietary commercial credit score. The relative scores are determined based on a number of factors, including financial information, payment history, company type and ownership structure. We stratify the third party's credit scores of our clients into low, medium and high-risk accounts. Due to timing and other issues, our entire portfolio may not be scored at period end. We report these amounts as "Not Scored"; however, absence of a score is not indicative of the credit quality of the account. The third-party credit score is used to predict the payment behaviors of our clients and the probability that an account will become greater than 90 days past due during the subsequent 12-month period.

•Low risk accounts are companies with very good credit scores and a predicted delinquency rate of less than 5%.

•Medium risk accounts are companies with average to good credit scores and a predicted delinquency rate between 5% and 10%.

•High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent. The predicted delinquency rate would be greater than 10%.

We do not use a third-party to score our International portfolio because the cost to do so is prohibitive as there is no single credit score model that covers all countries. Accordingly, the entire International portfolio is reported in the Not Scored category. This portfolio comprises less than 15% of total finance receivables. Most of the International credit applications are small dollar applications (i.e. below $50 thousand) and are subjected to an automated review process. Larger credit applications are manually reviewed, which includes obtaining client financial information, credit reports and other available financial information.

The table below shows gross finance receivables by relative risk class and year of origination based on the relative scores of the accounts within each class.

	March 31, 2023
	Sales Type Lease Receivables												Loan Receivables		Total
	2023		2022		2021		2020		2019		Prior
Low	$	77,542	$	266,461	$	193,093	$	127,566	$	81,723	$	32,032	$	243,405	$	1,021,822
Medium	15,687		49,635		36,497		27,075		18,527		8,744		55,282		211,447
High	1,251		5,104		3,358		2,806		1,326		996		6,080		20,921
Not Scored	40,595		58,689		38,828		19,716		10,064		3,575		26,604		198,071
Total	$	135,075	$	379,889	$	271,776	$	177,163	$	111,640	$	45,347	$	331,371	$	1,452,261
	December 31, 2022
	Sales Type Lease Receivables												Loan Receivables		Total
	2022		2021		2020		2019		2018		Prior
Low	$	286,297	$	206,511	$	140,800	$	95,485	$	34,721	$	12,674	$	239,635	$	1,016,123
Medium	53,419		40,669		27,013		19,668		6,751		3,441		56,048		207,009
High	6,492		3,840		3,119		1,942		750		508		6,800		23,451
Not Scored	71,435		53,831		29,957		19,232		5,889		1,021		26,040		207,405
Total	$	417,643	$	304,851	$	200,889	$	136,327	$	48,111	$	17,644	$	328,523	$	1,453,988

Lease Income

Lease income from sales-type leases, excluding variable lease payments, was as follows:

	Three Months Ended March 31,
	2023		2022
Profit recognized at commencement	$	31,822	$	35,040
Interest income	38,931		42,283
Total lease income from sales-type leases	$	70,753	$	77,323

Lessor Operating Leases

We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as follows:

Remainder 2023	$	15,217
2024	17,812
2025	19,591
2026	5,808
2027	2,205
Thereafter	434
Total	$	61,067