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, 2019 and 2018, 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.

The Company offers wholesale financing to the Company’s independent dealers. Wholesale loans to independent 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.



	2019			2018			2017			2016			2015
Retail finance receivables:
United States	$	6,180,236		$	6,103,378		$	5,901,002		$	5,769,410		$	5,803,071
Canada	236,192			224,823			239,598			212,801			188,400
	6,416,428			6,328,201			6,140,600			5,982,211			5,991,471
Wholesale finance receivables:
United States	1,067,880			1,007,956			939,621			961,150			965,379
Canada	88,639			75,659			77,336			65,440			58,481
	1,156,519			1,083,615			1,016,957			1,026,590			1,023,860
	7,572,947			7,411,816			7,157,557			7,008,801			7,015,331
Allowance for credit losses	(198,581		)	(189,885		)	(192,471		)	(173,343		)	(147,178		)
	$	7,374,366		$	7,221,931		$	6,965,086		$	6,835,458		$	6,868,153

Approved but unfunded retail finance loans totaled $160.4 million and $154.8 million at December 31, 2019 and 2018, respectively. Unused lines of credit extended to the Company's wholesale finance customers totaled $1.14 billion and $1.21 billion at December 31, 2019 and 2018, respectively.



	United States		Canada		Total
2020	$	2,177,277	$	138,251	$	2,315,528
2021	1,188,915		52,390		1,241,305
2022	1,329,148		56,629		1,385,777
2023	1,486,564		61,211		1,547,775
2024	1,061,450		16,350		1,077,800
Thereafter	4,762		—		4,762
	$	7,248,116	$	324,831	$	7,572,947

The provision for credit losses on finance receivables is charged or credited to earnings in amounts that the Company believes are sufficient to maintain the allowance for credit losses at a level that is adequate to cover estimated losses inherent in the existing portfolio. The allowance for credit losses represents management’s estimate of probable losses inherent in the finance receivable portfolio as of the balance sheet date.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a periodic and systematic collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes loss forecast models which consider a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates and current economic conditions including items such as unemployment rates. Retail finance receivables are not evaluated individually for impairment prior to charge-off and therefore are not reported as impaired loans

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review. A specific allowance for credit losses is established for wholesale finance receivables determined to be individually impaired when management concludes that the borrower will not be able to make full payment of contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive, discounted at the loan’s original interest rate or the fair value of the collateral, if the loan is collateral-dependent. Finance receivables in the wholesale portfolio that are not considered impaired on an individual basis are segregated, based on similar risk characteristics, according to the Company’s internal risk rating system and collectively evaluated for impairment. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company's past loan loss experience, current economic conditions and the value of the underlying collateral.

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):



	2019
	Retail			Wholesale		Total
Balance, beginning of period	$	182,098		$	7,787	$	189,885
Provision for credit losses	132,243			2,293		134,536
Charge-offs	(173,358		)	—		(173,358		)
Recoveries	47,518			—		47,518
Balance, end of period	$	188,501		$	10,080	$	198,581



	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

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 terms of the loan agreement. Portions of the allowance for credit losses are established to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance for credit losses covers estimated losses on finance receivables which are collectively reviewed for impairment.

Impaired finance receivables also include loans that have been modified in troubled debt restructurings as a concession to borrowers experiencing financial difficulty. Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize the economic loss, the Company may modify certain finance receivables in troubled debt restructurings. Total restructured finance receivables are not significant.

The allowance for credit losses and finance receivables by portfolio, segregated by those amounts that are individually evaluated for impairment and those that are collectively evaluated for impairment, at December 31, was as follows (in thousands):



	2019
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	2,100	$	2,100
Collectively evaluated for impairment	188,501		7,980		196,481
	$	188,501	$	10,080	$	198,581
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	4,601	$	4,601
Collectively evaluated for impairment	6,416,428		1,151,918		7,568,346
	$	6,416,428	$	1,156,519	$	7,572,947
	2018
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	182,098		7,787		189,885
	$	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
	$	6,328,201	$	1,083,615	$	7,411,816



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Wholesale:
No related allowance recorded	$	—	$	—	$	—	$	—	$	—
Related allowance recorded	4,994		4,601		2,100		4,976		—
	$	4,994	$	4,601	$	2,100	$	4,976	$	—

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the finance receivable is otherwise deemed uncollectible. All retail finance receivables accrue interest until either collected or charged-off.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the finance receivable becomes uncollectible and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. The recorded investment of non-accrual status wholesale finance receivables at December 31, 2019 was $5.0 million. At December 31, 2019, $2.6 million of wholesale finance receivables were over 90 days or more past due and on non-accrual status. There were no wholesale receivables on non-accrual status at December 31, 2018.



	2019
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail finance receivables	$	6,171,930	$	142,479	$	53,995	$	48,024	$	244,498	$	6,416,428
Wholesale financial receivables	1,152,416		1,145		384		2,574		4,103		1,156,519
	$	7,324,346	$	143,624	$	54,379	$	50,598	$	248,601	$	7,572,947



	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 finance receivables	$	6,100,186	$	136,945	$	49,825	$	41,245	$	228,015	$	6,328,201
Wholesale financial receivables	1,081,729		522		273		1,091		1,886		1,083,615
	$	7,181,915	$	137,467	$	50,098	$	42,336	$	229,901	$	7,411,816

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 generally considered prime, and loans with a FICO score below 640 are generally 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 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 individually 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.