Finance Receivables

Finance receivables, net at December 31 for the past five years were as follows (in thousands):



	2018			2017			2016			2015			2014
Wholesale
United States	$	1,007,956		$	939,621		$	961,150		$	965,379		$	903,380
Canada	75,659			77,336			65,440			58,481			48,941
Total wholesale	1,083,615			1,016,957			1,026,590			1,023,860			952,321
Retail
United States	6,103,378			5,901,002			5,769,410			5,803,071			5,398,006
Canada	224,823			239,598			212,801			188,400			209,918
Total retail	6,328,201			6,140,600			5,982,211			5,991,471			5,607,924
	7,411,816			7,157,557			7,008,801			7,015,331			6,560,245
Allowance for credit losses	(189,885		)	(192,471		)	(173,343		)	(147,178		)	(127,364		)
Total finance receivables, net	$	7,221,931		$	6,965,086		$	6,835,458		$	6,868,153		$	6,432,881

The Company offers wholesale financing to the Company’s independent dealers. Wholesale loans to dealers are generally secured by financed inventory or property and are originated in the U.S. and Canada. Wholesale finance receivables are related primarily to motorcycles and related parts and accessories sales.

The Company provides retail financial services to customers of the Company’s independent dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment contracts and are primarily related to sales of motorcycles to the dealers’ customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts. As of December 31, 2018 and 2017, approximately 11% of gross outstanding retail finance receivables were originated in Texas; there were no other states that accounted for more than 10% of gross outstanding retail finance receivables.

Unused lines of credit extended to the Company's wholesale finance customers totaled $1.21 billion and $1.27 billion at December 31, 2018 and 2017, respectively. Approved but unfunded retail finance loans totaled $154.8 million and $166.3 million at December 31, 2018 and 2017, respectively.

Wholesale finance receivables are generally contractually due within one year. On December 31, 2018, contractual maturities of finance receivables were as follows (in thousands):



	United States		Canada		Total
2019	$	2,132,189	$	122,684	$	2,254,873
2020	1,209,886		49,746		1,259,632
2021	1,289,673		53,916		1,343,589
2022	1,418,813		58,437		1,477,250
2023	1,051,626		15,699		1,067,325
Thereafter	9,147		—		9,147
Total	$	7,111,334	$	300,482	$	7,411,816

The allowance for credit losses on finance receivables is comprised of individual components relating to wholesale and retail finance receivables. Changes in the allowance for credit losses on finance receivables by portfolio for the year ended December 31 were as follows (in thousands):



	2018
	Retail			Wholesale			Total
Balance, beginning of period	$	186,254		$	6,217		$	192,471
Provision for credit losses	105,292			1,578			106,870
Charge-offs	(154,433		)	(8		)	(154,441		)
Recoveries	44,985			—			44,985
Balance, end of period	$	182,098		$	7,787		$	189,885



	2017
	Retail			Wholesale			Total
Balance, beginning of period	$	166,810		$	6,533		$	173,343
Provision for credit losses	132,760			(316		)	132,444
Charge-offs	(160,972		)	—			(160,972		)
Recoveries	47,656			—			47,656
Balance, end of period	$	186,254		$	6,217		$	192,471



	2016
	Retail			Wholesale			Total
Balance, beginning of period	$	139,320		$	7,858		$	147,178
Provision for credit losses	137,942			(1,325		)	136,617
Charge-offs	(148,566		)	—			(148,566		)
Recoveries	41,405			—			41,405
Other ^(a)	(3,291		)	—			(3,291		)
Balance, end of period	$	166,810		$	6,533		$	173,343


(a)	Related to the sale of finance receivables during the second quarter of 2016 with a principal balance of $301.8 million through an off-balance sheet asset-backed securitization transaction (see Note 12 for additional information).

There were no finance receivables individually evaluated for impairment on December 31, 2018 or 2017. The allowance for credit losses and finance receivables by portfolio, collectively evaluated for impairment, at December 31 was as follows (in thousands):



	2018
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	182,098		7,787		189,885
Total allowance for credit losses	$	182,098	$	7,787	$	189,885
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	6,328,201		1,083,615		7,411,816
Total finance receivables	$	6,328,201	$	1,083,615	$	7,411,816
	2017
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	186,254		6,217		192,471
Total allowance for credit losses	$	186,254	$	6,217	$	192,471
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	6,140,600		1,016,957		7,157,557
Total finance receivables	$	6,140,600	$	1,016,957	$	7,157,557

Finance receivables are considered impaired when management determines it is probable that the Company will be unable to collect all amounts due according to the loan agreement. As retail finance receivables are collectively and not individually reviewed for impairment, this portfolio does not have specifically impaired finance receivables. At December 31, 2018 and 2017, there were no wholesale finance receivables that were on non-accrual status or individually deemed to be impaired under ASC Topic 310, “Receivables.”

An analysis of the aging of past due finance receivables at December 31 was as follows (in thousands):



	2018
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	6,100,186	$	136,945	$	49,825	$	41,245	$	228,015	$	6,328,201
Wholesale	1,081,729		522		273		1,091		1,886		1,083,615
Total	$	7,181,915	$	137,467	$	50,098	$	42,336	$	229,901	$	7,411,816



	2017
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	5,913,473	$	139,629	$	47,539	$	39,959	$	227,127	$	6,140,600
Wholesale	1,016,000		595		245		117		957		1,016,957
Total	$	6,929,473	$	140,224	$	47,784	$	40,076	$	228,084	$	7,157,557

The recorded investment of retail and wholesale finance receivables, excluding non-accrual status finance receivables, that were contractually past due 90 days or more at December 31 for the past five years was as follows (in thousands):



	2018		2017		2016		2015		2014
United States	$	41,285	$	39,051	$	39,399	$	31,677	$	27,800
Canada	1,051		1,025		1,326		1,192		1,118
Total	$	42,336	$	40,076	$	40,725	$	32,869	$	28,918

A significant part of managing the Company's finance receivable portfolios includes the assessment of credit risk associated with each borrower. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit risk indicators for each portfolio.

The Company manages retail credit risk through its credit approval policy and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. Retail loans with a FICO score of 640 or above at origination are considered prime, and loans with a FICO score below 640 are considered sub-prime. These credit quality indicators are determined at the time of loan origination and are not updated subsequent to the loan origination date.

The recorded investment of retail finance receivables, by credit quality indicator, at December 31 was as follows (in thousands):



	2018		2017
Prime	$	5,183,754	$	4,966,193
Sub-prime	1,144,447		1,174,407
Total	$	6,328,201	$	6,140,600

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk, for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon management’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis.

The recorded investment of wholesale finance receivables, by internal credit quality indicator, at December 31 was as follows (in thousands):



	2018		2017
Doubtful	$	2,210	$	688
Substandard	9,660		3,837
Special Mention	10,299		26,866
Medium Risk	25,802		9,917
Low Risk	1,035,644		975,649
Total	$	1,083,615	$	1,016,957